Exercise 8-70 Recognition and Reporting of Contingent Liabilities A list of alternative accounting treatments is followed by a list of potential contingent liabilities Alternative Accounting Treatments a. Estimate the amount of liability and record. b. Do not record as a liability but discose in a footnote to the financial statements. c. Neither record as a liability nor disclose in a footnote to the financial statements. a Required: Match the appropriate alternative accounting treatment with each of the potential contingent liabilities listed below. Potential Contingent Liabilities 1. Income taxes related to revenue induded in net income this year but taxable in a future year. 2. Potential costs in future periods associated with performing warranty services on products sold this period 3. Estimated cost of future services under a product warranty related to past sales. 4. Estimated cost of future services under a product warranty related to future sales. 5. Estimated cost of pension benefits related to past employee services that has yet to be funded. Previous Next 3. Estimated cost of future services under a product warranty related to past sales. 4. Estimated cost of future services under a product warranty related to future sales. 5. Estimated cost of pension benefits related to past employee services that has yet to be funded. 6. Potential loss on environmental deanup suit against company; a court judgment against the company is considered less than probable but more than remotely likely 7. Potential loss under dass action suit by a group of customers; during the current year, the likelihood of a judgment against the company has increased from remote to possible but less than probable 8. Potential loss under an affirmative action sult by a former employee: the likelihood of a judgment against the company is considered to be remote. 9. Potential loss from a downturn in future economic activity 10. Loss from out-of-court settlement of lawsuit that is likely to occur toward the end of next year. Next Previous