Acct Which of the Following Requires Recording for Contingent Liabilities

The outcome is probable and the potential liability can be estimated. To record a potential or contingent liability in the financial statements it needs to clear two basic criteria based on the probability of occurrence and its related value as discussed below.

Define And Apply Accounting Treatment For Contingent Liabilities Principles Of Accounting Volume 1 Financial Accounting

A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1 an expense or loss on the income statement and 2 a liability on the balance sheet.

. The outcome is probable but an estimate cannot be given. Disclosure in note form only. Recording of Contingent liability help management to utilize cash accordingly.

The liability is remote. If a contingent liability is deemed probable it must be directly reported in the financial statements. Which of the following contingent liabilities would require a company to record a note to the financial statements.

All contingent liabilities must be included in reporting. The outcome is possible. Disclosing a Contingent Liability A loss contingency which is possible but not probable will not be recorded in the accounts as a liability and a loss.

If a law suit is expected to go against the company and it will attract a penalty of 500000 then the management will set aside this amount and utilize the remaining cash in the business. The outcome is probable but an estimate cannot be given. The liability is possible and cannot be reasonably estimated.

B Journalize the contingent liability only if the amount can be estimated and the probability of loss is reasonably possible. Record liability disclose in notes or no disclosure. Instead firms typically disclose.

4 Nevertheless generally accepted accounting principles or. A contingent asset is thus also known as a potential asset. The liability is probable and estimated to be 40000.

5 if the liability is probable and the amount can be reasonably estimated companies should record contingent liabilities in the accounts. Accounting for Contingent Liabilities Accounting for contingent liabilities depends on the likelihood that a future event will occur and the ability to estimate the future amount owed if this event occurs. In order for a contingent liability to be recorded as a journal entry in the financial statements it must be probablereasonably possibleremote and reasonably estimable.

Which of the following requires recording for contingent liabilities. A contingent asset is a potential economic benefit that is dependent on some future event s largely out of a companys control. The liability is probable and estimable.

A Journalize the contingent liability even though you will probably win the lawsuit. Which of the following circumstances would require a contingent liability to be recorded under generally accepted accounting principles. Check all that apply Answer The liability is possible and is estimated to be 35000.

Accounting questions and answers. According to FASB when should a company journalize a contingent liability. The likelihood of occurrence of contingent liability is high ie more than 50 and.

In order for a contingent liability to be recorded as a journal entry in the financial statements it must be probablereasonably possibleremote and reasonably estimable. If the liability is likely to occur and the amount can be reasonably estimated the liability should be recorded in the accounting records of a. Chapter 8 and 9 Quiz answers in bold Which of the following requires recording for contingent liabilities.

Three different possibilities are identified in the following chart. Recognition of a loss and creation of a liability for the value of the land. C Journalize the contingent liability if it is probable that the loss will occur and the amount of the.

The liability is possible. Creation of a liability only. Brown appears inclined to accept the Railroads offer.

Estimation of the value of the contingent liability is possible. The liability is possible and cannot be reasonably estimated. According to FASB Statement No.

The liability is possible and cannot be reasonably estimated. Angela Bennett is an employee of Marks Co. The outcome is probable and the potential liability can be estimated.

A written promise to repay the amount borrowed plus interest Loss is probable and amount is. Which of the following contingent liabilities would require a company to record a note to the financial statements. However since most contingent liabilities may not occur and the amount often cannot be reasonably estimated the accountant usually does not record them in the accounts.

The Railroads 2014 financial statements should include the following related to the incident. Choose all that apply a. Rules to Record Contingent Liabilities as per IFRS.

The liability is probable and cannot be reasonably estimated. This past year Angela received 1 of. Recognition of a loss only.

All contingent liabilities must be included in reporting The outcome is possible. Recording of contingent liability is extremely useful to companies but should be audited properly by. Which of the following contingent liabilities would require a company to record a note to the financial statements.

Pters 7-9 Match the following Current portion of long-term debt Notes payable Recording a contingent liability Disclosure of a contingent liability Deferred revenues Match each of the options above to the Items below. Probable Which of the following situations is a contingent liability. The liability is probable and cannot be reasonable estimated.

The liability is remote and estimated to be 15000. In order for a contingent liability to be recorded as a journal entry in the financial statements it must be probablereasonably possibleremote and reasonably estimable.

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