- 29. It is possible to settle a liability by a. transfer of an asset, including but not limited to cash. b. delivery of goods or services. c. creation of another liability, d. all of the above. - 30. An oil company purchased 10,000 acres of land on January 1, 2019, for $5,000,000, on which it developed an underground oil site. The company spent $11,000,000 to prepare the site for operation but believes that 500,000 barrels of oil can be extracted from the site over 5 years after drilling begins. The land has a residual value of $250,000. Assuming 50,000 barrels of oil were extracted from the land in 2021, how much depletion would be recorded? a. $1,600,000 b. $1,575,000 c. $160,000 d. $157,500 31. German Auto Parts is a defendant in a multi-million dollar lawsuit that was filed in a prior year. The lawsuit was not previously disclosed in the financial statements or accompanying footnotes, as the company has vigorously defended its position and its attomeys initially indicated that the claim was not valid. During the current year, however, the facts and circumstances have changed such that the likelihood of a loss approximating $5 million is now considered reasonably possible. How should the company recognize this lawsuit in its current year financial statements? a. Do nothing, since it was not recognized in previous periods. b. Do nothing until the matter is settled or a judgment or verdict is obtained. c. Disclose the matter in the footnotes accompanying the financial statements. d. Record a contingent liability in the amount of S5 million. General Lighting During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6% 32. Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries? a. Accounts Receivable 636,000 Sales Revenue 600,000 Sales Tax Payable 36,000 b. Accounts Receivable 600,000 Sales Revenue 600,000 c. Accounts Receivable 600,000 Sales Revenue 564,000 Sales Tax Payable 36,000 d. Accounts Receivable 636,000 Sales Revenue 636,000