Contingent Liability Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies: Income tax disputes Discounted notes receivable Lawsuits Debt guarantees Failure to follow government regulations To obtain: a relevant authoritative literature on recognition of contingent losses.

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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 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

(2)

To determine

To list: the guidelines

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Access the FASB Accounting Standards Codification at the FASB website ( asc.fasb.org ) Required: Determine the specific citation for accounting for each of the following items: 1. If it is only reasonably possible that a contingent loss will occur, the contingent loss should be disclosed. 2. Criteria allowing short-term liabilities expected to be refinanced to be classified as long-term liabilities. 3. Accounting for the revenue from separately priced extended warranty contracts. 4. The criteria to determine if an employer must accrue a liability for vacation pay.

Access the FASB Accounting Standards Codification at the FASB website (www.fasb.org).Required:Determine the specific citation for accounting for each of the following items:1. If it is only reasonably possible that a contingent loss will occur, the contingent loss should be disclosed.2. Criteria allowing short-term liabilities expected to be refinanced to be classified as long-term liabilities.3. Accounting for the revenue from separately priced extended warranty contracts.4. The criteria to determine if an employer must accrue a liability for vacation pay

Knowledge Check 01 Which of the following describes the criteria that must be met for a contingent liability to be reported as a liability on the balance sheet?

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 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

(2)

To determine

To list: the guidelines

Expert Solution & Answer

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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 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

(2)

To determine

To list: the guidelines

Expert Solution & Answer

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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 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

(2)

To determine

To list: the guidelines

Expert Solution & Answer

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Answer 5

Chapter 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

(2)

To determine

To list: the guidelines

Answer 6

Chapter 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

Answer 7

Chapter 13, Problem 13.14E

(1)

To determine

Contingent Liability

Contingent liability is one form of liability that arises based on a particular outcome of a specific event. They are possible obligation that might arise or might not arise based on the future events. It is otherwise called as probable liability or eventual liability. Following are examples of contingencies:

Income tax disputes

Discounted notes receivable

Lawsuits

Debt guarantees

Failure to follow government regulations

To obtain: a relevant authoritative literature on recognition of contingent losses.

Answer 8

(2)

To determine

To list: the guidelines

Answer 9

(2)

To determine

To list: the guidelines

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 13 - What are the essential characteristics of...Ch. 13 - Prob. 13.2Q Ch. 13 - Bronson Distributors owes a supplier 100,000 on...Ch. 13 - Bank loans often are arranged under existing lines...Ch. 13 - Prob. 13.5Q Ch. 13 - Prob. 13.6Q Ch. 13 - Salaries of 5,000 have been earned by employees by...Ch. 13 - Prob. 13.8Q Ch. 13 - Prob. 13.9Q Ch. 13 - Prob. 13.10Q

Solution Summary: The author explains the guidelines for accruing loss contingencies.

To list: the guidelines

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Chapter 13 Solutions