Contingent liability : It is a potential liability of a company that depends on a future event. The recording of contingent liability is based on the following likelihoods of the event occur in future: Remote Reasonably possible Probable To identify : The correct reporting place of contingent liability.

Question

Want to see the full answer?

Answer 1

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 9QC

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To identify: The correct reporting place of contingent liability.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

For each separate situation, indicate whether Cruz Company should (a) record a liability, (b) disclose in notes, or (c) have no disclosure.

A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. Required: 1. Give an example of one company that experienced an expected loss due to a lawsuit and one company that had an expected gain. Provide the exact disclosure in their financial statements for both gains and losses.

Determine if the following situation should be : BOOKED as a Liability, DISCLOSED in the notes of the financial statements, or NO ACTION needed. A produce company is being sued for selling bad spinach and causing hospitalization for some customers. The Company's legal team determined their negligence most likely (probably) will result in a loss of the lawsuit and damages of approximately $300,000. No Action Disclosed in the notes O Booked as a liability

Answer 2

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 9QC

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To identify: The correct reporting place of contingent liability.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

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 9QC

To determine

Contingent liability: It is a potential liability of a company that depends on a future event. The recording of contingent liability is based on the following likelihoods of the event occur in future:

Remote

Reasonably possible

Probable

To identify: The correct reporting place of contingent liability.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

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 9QC

To determine