
Concept explainers
Concept Introduction:
Contingent liabilities:
Contingent liabilities may be defined as the liabilities which arise out of occurrence or non-occurrence of uncertain future event e.g. lawsuit filed against the company, guarantees made by the company etc. In order to be recorded as a liability in the books, the future event should be probable and a reliable estimate of the liability should be made. When the event is probable but estimate of the liability cannot be made with certainty and if the event is reasonable possible, they should be reported in the notes to financial statements as
Requirement 1:
The accounting treatment to be followed in the given situation
Concept Introduction:
Contingent liabilities:
Contingent liabilities may be defined as the liabilities which arise out of occurrence or non-occurrence of uncertain future event e.g. lawsuit filed against the company, guarantees made by the company etc. In order to be recorded as a liability in the books, the future event should be probable and a reliable estimate of the liability should be made. When the event is probable but estimate of the liability cannot be made with certainty and if the event is reasonable possible, they should be reported in the notes to financial statements as contingent liability. When the occurrence of the event is remote, no disclosure is required to be made.
Requirement 2:
The accounting treatment to be followed in the given situation

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Chapter 11 Solutions
Loose Leaf For Fundamental Accounting Principles Format: Loose-leaf
- Nonearrow_forwardThe trial balance of Summit Industries included the following account balances on December 31, 2021: • • Accounts payable: $21,000 Bond payable, due 2031: $60,000 Wages payable: $18,000 . Note payable, due 2022: $30,000 • Note payable, due 2028: $45,000 What amount should be included in the current liability section of Summit's December 31, 2021, balance sheet? a) $69,000 b) $39,000 c) $48,000 d) $65,000arrow_forwardSales made by valente Corporation during 2015arrow_forward
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