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 1: The accounting treatment to be followed in the given situation

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Answer 1

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

To determine

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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Answer 2

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Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

To determine

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

Expert Solution & Answer

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See solution

Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

To determine

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

Expert Solution & Answer

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See solution

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

To determine

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

Expert Solution & Answer

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See solution

Answer 5

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

To determine

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

Answer 6

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

Answer 7

Chapter 11, Problem 14E

To determine

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 1:

The accounting treatment to be followed in the given situation

Answer 8

To determine

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

Answer 9

To determine

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

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 11 - Prob. 1DQ Ch. 11 - Prob. 2DQ Ch. 11 - Prob. 3DQ Ch. 11 - Prob. 4DQ Ch. 11 - Prob. 5DQ Ch. 11 - Prob. 6DQ Ch. 11 - Prob. 7DQ Ch. 11 - Prob. 8DQ Ch. 11 - Prob. 9DQ Ch. 11 - Prob. 10DQ

Concept explainers

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Chapter 11 Solutions