Liabilities are obligations of the business which it need to pay in future. Liabilities can be categories into current or noncurrent liabilities. A business would like to minimize its liabilities to show a better credit position. Contingent liabilities are the future probable liabilities which are highly expected to become actual liabilities, for example; highly probable penalties on losing a legal matter. To choose: The way auditor will use to identify the contingent liability .

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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 17, Problem 17.13MCQ

To determine

Concept Introduction:

Liabilities are obligations of the business which it need to pay in future. Liabilities can be categories into current or noncurrent liabilities. A business would like to minimize its liabilities to show a better credit position.

Contingent liabilities are the future probable liabilities which are highly expected to become actual liabilities, for example; highly probable penalties on losing a legal matter.

To choose: The way auditor will use to identify the contingent liability.

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Estefan Industies has a new project available that requires an initial investment of sex million. The project will provide unlevered cash flows of $925,000 per year for the next 20 years. The company will finance the project with a debt-value ratio of 35. The company's bonds have a YTM of 5.9 percent. The companies with operations comparable to this project have unlevered betas of 1.09, 1.17, 1.28, and 1.20. The risk-free rate is 3.6 percent, and the market risk premium is 7 percent. The tax rate is 21 percent. What is the NPV of this project?

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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 17, Problem 17.13MCQ

To determine

Concept Introduction:

Liabilities are obligations of the business which it need to pay in future. Liabilities can be categories into current or noncurrent liabilities. A business would like to minimize its liabilities to show a better credit position.

Contingent liabilities are the future probable liabilities which are highly expected to become actual liabilities, for example; highly probable penalties on losing a legal matter.

To choose: The way auditor will use to identify the contingent liability.

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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 17, Problem 17.13MCQ

To determine

Concept Introduction:

Liabilities are obligations of the business which it need to pay in future. Liabilities can be categories into current or noncurrent liabilities. A business would like to minimize its liabilities to show a better credit position.

Contingent liabilities are the future probable liabilities which are highly expected to become actual liabilities, for example; highly probable penalties on losing a legal matter.

To choose: The way auditor will use to identify the 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 17, Problem 17.13MCQ

To determine