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tate whether you believe each of the liabilities listed below is determinable, estimable, or contingent. 1. An automobile company recalled a particular car model because
tate whether you believe each of the liabilities listed below is determinable, estimable, or contingent.
1. | An automobile company recalled a particular car model because of a possible problem with the brakes. The company will pay to replace the brakes. | ContingentDeterminableEstimable | ||
2. | A large retail store has a policy of refunding purchases to dissatisfied customers under a widely advertised "money-back, no questions asked" guarantee. | DeterminableContingentEstimable | ||
3. | A manufacturer offers a three-year warranty at the time of sale. | EstimableDeterminableContingent | ||
4. | To promote sales, a company offers prizes (such as a chance to win a trip) in return for a specific type of bottle cap. | EstimableContingentDeterminable | ||
5. | A local community has filed suit against a chemical company for contamination of drinking water. The community is demanding compensation, and the amount is uncertain. The company is vigorously defending itself. |
If you identify the liability as contingent in part (a), indicate if it should be recorded, disclosed, or neither recorded nor disclosed in the financial statements.
1. | An automobile company recalled a particular car model because of a possible problem with the brakes. The company will pay to replace the brakes. | DisclosedNot requiredRecordedNeither recorded nor disclosed | ||
2. | A large retail store has a policy of refunding purchases to dissatisfied customers under a widely advertised "money-back, no questions asked" guarantee. | RecordedNot requiredDisclosedNeither recorded nor disclosed | ||
3. | A manufacturer offers a three-year warranty at the time of sale. | Neither recorded nor disclosedDisclosedNot requiredRecorded | ||
4. | To promote sales, a company offers prizes (such as a chance to win a trip) in return for a specific type of bottle cap. | Neither recorded nor disclosedDisclosedNot requiredRecorded | ||
5. | A local community has filed suit against a chemical company for contamination of drinking water. The community is demanding compensation, and the amount is uncertain. The company is vigorously defending itself. | RecordedDisclosedNeither recorded nor disclosedNot required |
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