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. To describe: Whether excerpt describes contingent liability.

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Dow Chemical Company provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of Dow’s annual report.DOW CHEMICALNotes to the Financial Statements (excerpt)Dow Chemical had accrued obligations of $381 million for environmental remediation and restoration costs, including $40 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although the ultimate cost with respect to these particular matters could range up to twice that amount. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration.Required: 1. Does the excerpt describe a contingent liability? 2. Under what…

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 8, Problem 8.14E

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.

To describe: Whether excerpt describes contingent liability.

2

To determine

To Provide: Conditions that would record such a contingency.

3

To determine

To Provide: journal entry to record the $381 million.

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Dow Chemical Company provides chemical, plastic, and agricultural products and services to various consumer markets. The following excerpt is taken from the disclosure notes of Dow’s annual report.DOW CHEMICALNotes to the Financial Statements (excerpt)Dow Chemical had accrued obligations of $381 million for environmental remediation and restoration costs, including $40 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although the ultimate cost with respect to these particular matters could range up to twice that amount. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration.Required: 1. Does the excerpt describe a contingent liability? 2. Under what…

New Planet Structures, Inc., builds environmentally sensitive structures. The company's 2021 revenues totaled $2,785 million. At December 31, 2021, and 2020, the company had, respectively, $646 million and $576 million in current assets. The December 31, 2021, and 2020, balance sheets and income statements reported the following amounts: (Click the icon to view the amounts.) Read the requirements. Requirement 1. Describe each of New Planet Structures, Inc.'s liabilities and state how the liability arose. Choose the correct liability from the list that best fits the description provided. es Accounts payable Accrued employee compensation and benefits Accrued expenses Current portion of long-term debt Long-term debt Other liabilities Post-retirement benefits The amount of long-term notes and bonds payable that the company expects to pay after the coming year. Get more help. Requirements 1. Describe each of New Planet Structures, Inc.'s liabilities and state how the liability arose. Print…

a Determine cost of plant acquisitions. E9.1 (LO 1), C Writing The following expenditures relating to plant assets were made by Glenn Company during the first 2 months of 2022. 1. Paid $7,000 of accrued taxes at the time the plant site was acquired. 2. Paid $200 insurance to cover a possible accident loss on new factory machinery while the machinery was in transit. 3. Paid $850 sales taxes on a new delivery truck. 4. Paid $21,000 for parking lots and driveways on the new plant site. 5. Paid $250 to have the company name and slogan painted on the new delivery truck. 6. Paid $8,000 for installation of new factory machinery. 7. Paid $900 for a 2-year accident insurance policy on the new delivery truck. 8. Paid $75 motor vehicle license fee on the new truck. Instructions a. Explain the application of the historical cost principle in determining the acquisition cost of plant assets. b. List the numbers of the transactions, and opposite each indicate the account title to which each…

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 8, Problem 8.14E

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.

To describe: Whether excerpt describes contingent liability.

2

To determine

To Provide: Conditions that would record such a contingency.

3

To determine

To Provide: journal entry to record the $381 million.

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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 8, Problem 8.14E

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.

To describe: Whether excerpt describes contingent liability.

2

To determine

To Provide: Conditions that would record such a contingency.

3

To determine

To Provide: journal entry to record the $381 million.

Expert Solution & Answer

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Answer 4

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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 8, Problem 8.14E

1

To determine