Contingent liability : A contingent liability is capable of becoming an actual liability on the occurrence or non-occurrence of an event. A contingent liability is recorded in the books when it is probable or most likely to happen and the amount associated with the liability can be reasonably ascertained, else it is disclosed in the notes to the financial statement. To determine: The reporting of the given situation by the company

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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 14RQ

To determine

Contingent liability:

A contingent liability is capable of becoming an actual liability on the occurrence or non-occurrence of an event. A contingent liability is recorded in the books when it is probable or most likely to happen and the amount associated with the liability can be reasonably ascertained, else it is disclosed in the notes to the financial statement.

To determine:

The reporting of the given situation by the company

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During its first month of operation, Peter's Auto Supply Corporation, which specializes the sale of auto equipment and supplies, completed the following transactions. July Transactions July 1 Issued Common Stock in exchange for $100,000 cash. July 1 Paid $4,000 rent for the months of July and August July 2 Paid the insurance company $2,400 for a one year insurance policy, beginning July 1. July 5 Purchased inventory on account for $35,000 (Assume that the perpetual inventory system is used.) July 6 Borrowed $36,500 from a local bank and signed a note. The interest rate is 10%, and principal and interest is due to be repaid in six months. July 8 Sold inventory on account for $17,000. The cost of the inventory is $7,000. July 15 Paid employees $6,000 salaries for the first half of the month. July 18 Sold inventory for $15,000 cash. The cost of the inventory was $6,000. July 20 Paid $15,000 to suppliers for the inventory purchased on January 5. July 26…

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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 14RQ

To determine

Contingent liability:

A contingent liability is capable of becoming an actual liability on the occurrence or non-occurrence of an event. A contingent liability is recorded in the books when it is probable or most likely to happen and the amount associated with the liability can be reasonably ascertained, else it is disclosed in the notes to the financial statement.

To determine:

The reporting of the given situation by the company

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Answer 3

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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 14RQ

To determine

Contingent liability:

A contingent liability is capable of becoming an actual liability on the occurrence or non-occurrence of an event. A contingent liability is recorded in the books when it is probable or most likely to happen and the amount associated with the liability can be reasonably ascertained, else it is disclosed in the notes to the financial statement.

To determine:

The reporting of the given situation by the company

Expert Solution & Answer

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Check out a sample textbook solution

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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 14RQ

To determine