contingent Lia

Question 1

accrue if

Answer 1

probable and estimable

Question 2

probable and cannot be estimated

Answer 2

disclose

Question 3

possible

Answer 3

disclose

Question 4

remote

Answer 4

no disclosure

Question 5

if there is a range of values and no value is more likely to be accrued then the others then accrue the

Answer 5

lowest value

Question 6

gain contingencies are not_____ only_____ . you must wait until you know.

Answer 6

recognized

footnoted

Question 7

if lawsuit was estimated to be 5 m but it turns d out to be 6 million. what’s the je?

Answer 7

est lawsuit loss 5m
lawsuit lia 5m

lawsuit loss 1m
lawsuit lia 5m
cash 6m

Question 8

if lawsuit was estimated to be 30 m but it turns out to be 5 million. what’s the je?

Answer 8

est lawsuit loss 30m
lawsuit lia 30m

lawsuit lia 30m
gain 25m
cash 5m

Question 9

regular warranty on products for 3 years
warranty costs average 6% of selling price
year after sale costs average
1% first yr
2% second yr
3% third yr
current yr sales 4 million
during current yr 230 k was spent on actual warranty claims.
whats the JE?

Answer 9

warranty expense                    240k
     warranty Lia (.06*4m)                    240k

warranty lia 230k
cash, parts, inv 230k

Question 10

warranty lia can be current and non current. T or F

Answer 10

True

Question 11

rebates

Answer 11

rebates are cash payments after the sale

Question 12

premiums

Answer 12

inventory item i am going to give to the customer after the sale

Question 13

as a promotion for laptop sales there is a coupon for $50 rebate and to receive one case ($20 cost of case).
80% customers usually submit coupon
1m laptops were sold in the year
600k coupons were submitted by year end

Answer 13

promotional expense 56m
rebate and premium lia 56m
1m.8(50+20)

premium and rebate lia (600k70) 42m
cash( 600k50) 30m
carry case inventory(600k*20) 12m
(when coupon is redeemed)