CH. 12 - Liabilities

Question 1

Contingent Liabilities

Answer 1

Probable and Estimable and must be recorded with an Accrual in the Financial Statements AND Disclose on the F/S.

Question 2

Refinance a short-term obligation to a long term obligation _________________.

Answer 2

Obligation is then classified to long-term if the intent and ability to refinance can be demonstrated.

Question 3

Troubled debt restructuring options

Answer 3

1) Transfer of Property
2) Transfer of Equity Interest in Debtor
3) Modification of Debt Terms

Question 4

What are Subsequent events?

Answer 4

Conditions or Transactions that occur after the Financial Statement dates BUT before they are issued.

Two Types
Type 1 = Events provide evidence of conditions that existed as of the F/S date and must be recognized and recorded in the F/S

Type 2 = Events not related to any condition that existed as of the F/S date and are not recognized but may require note disclosure if material.

Question 5

Accrual for a Contingent Loss

Answer 5

1) The Probability of an unfavorable outcome
2) Ability to make a reasonable estimate of the loss
3) The Period in which the underlying cause of the potential liability occurred.