EX 10-24 Contingent liabilities Total$9,701$9,279Assume that GM's sales were $166.380 million in the current year and that the total paid onwarranty claims during the current year was $3,710 million.а.why are short- and long-term estimated warranty liabilities separately disclosed?b. Provide the journal entry for the current year product warranty expense.C. What two conditions must be met in order for a product warranty liability to be reported in thefinancial statements?EX 10-24 Contingent liabilitiesSeveral months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of itsplants. As a result, the Environmental Protection Agency (EPA) fined the company $240,000. Thecompany is contesting the fine. In addition, an employee is seeking $220,000 in damages related tothe spill. Lastly, a homeowner has sued the company for $310,000. The homeowner lives 35 milesfrom the plant but believes that the incident has reduced the home's resale value by $310,000.Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counselindicates that an out-of-court settlement of $125,000 has recently been reached with the employee.The final papers will be signed next week. Counsel believes that the homeowner's case is muchweaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, butthe damage amounts are uncertain.a. Journalize the contingent liabilities associated with the hazardous materials spill. Use theaccount "Damage Awards and Fines" to recognize the expense for the period.Obj. 6b.Prepare a note disclosure relating to this incident.t000 0Uns: Series APR 10-1A Liability transactionsThe following items were selected from among the transactions completed by Sherwood Co. duringObj. 1,5the current year:Purchased merchandise ọn account from Kirkwood Co., $225,000, terms n/30.Mar

Contingent Liability: Contingent liability refers to any potential liability that can occur…

Answered: a. Journalize the contingent…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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EX 10-24 Contingent liabilities

Total
$9,701
$9,279
Assume that GM's sales were $166.380 million in the current year and that the total paid on
warranty claims during the current year was $3,710 million.
а.
why are short- and long-term estimated warranty liabilities separately disclosed?
b. Provide the journal entry for the current year product warranty expense.
C. What two conditions must be met in order for a product warranty liability to be reported in the
financial statements?
EX 10-24 Contingent liabilities
Several months ago, Ayers Industries Inc. experienced a hazardous materials spill at one of its
plants. As a result, the Environmental Protection Agency (EPA) fined the company $240,000. The
company is contesting the fine. In addition, an employee is seeking $220,000 in damages related to
the spill. Lastly, a homeowner has sued the company for $310,000. The homeowner lives 35 miles
from the plant but believes that the incident has reduced the home's resale value by $310,000.
Ayers' legal counsel believes that it is probable that the EPA fine will stand. In addition, counsel
indicates that an out-of-court settlement of $125,000 has recently been reached with the employee.
The final papers will be signed next week. Counsel believes that the homeowner's case is much
weaker and will be decided in favor of Ayers. Other litigation related to the spill is possible, but
the damage amounts are uncertain.
a. Journalize the contingent liabilities associated with the hazardous materials spill. Use the
account "Damage Awards and Fines" to recognize the expense for the period.
Obj. 6
b.
Prepare a note disclosure relating to this incident.
t000 0U
ns: Series A
PR 10-1A Liability transactions
The following items were selected from among the transactions completed by Sherwood Co. during
Obj. 1,5
the current year:
Purchased merchandise ọn account from Kirkwood Co., $225,000, terms n/30.
Mar

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.

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