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Concept explainers
Provide an example for known liability, estimated liability, and
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Explanation of Solution
Liabilities: Liabilities are debt and obligations of a business. These are the claims against the resources that a business owes to outsiders of the company. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors.
Known liability: The estimated amount of a transaction which is occurred in the past is called as known liability.
Example: Accounts payable
Estimated liability: The obligation that a business needs to pay to the employees, or customer, or government is called as estimated liability.
Example: Estimated warranty expense
Contingent liability: Contingent liability is a potential liability of a company that depends on a future event. It is the result of an uncertain event. For paying a contingent liability, some event should happen in the future.
Example: Lawsuit
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Chapter 9 Solutions
Financial Accounting (5th Edition) (What's New in Accounting)
- Year 0123 Cash Flow -$ 19,000 11,300 10,200 6,700 a. What is the profitability index for the set of cash flows if the relevant discount rate is 11 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. b. What is the profitability index for the set of cash flows if the relevant discount rate is 16 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. c. What is the profitability index for the set of cash flows if the relevant discount rate is 23 percent? Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161. a. Profitability index b. Profitability index c. Profitability indexarrow_forwardSol This question answerarrow_forwardRecently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What is the impact on Abercrombie & Fitch's financial statements from the write-down of its logo-adorned merchandise…arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
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