ACCY 303 January 25, 2023 Class #3: Contingencies; Subsequent Events; Unasserted Claims • Loss contingencies review • Warranties • Gain contingencies • Subsequent events • Unasserted claims Connect homeworkdue Monday,1/30,8 am
Loss Contingencies (Review) • Aloss contingencyis anexisting,uncertain situation involving apotential lossdepending on a future event. Two factors determine the accounting treatment: • Likelihood: Probable (=likely) Reasonably possible Remote (=slight) • Amount:Reasonably estimable Cannot estimate
Contingent Liabilities: Warranties Whydo werecognizewarranties? Whenshould warranties be recognized? Matching principle
Warranty Example Smith Inc. introduced a new line of doors in 2018. The doors carry atwo-yearwarranty against manufacturer's defects. Warranty costs are expected to approximate2% of sales in the first year and3%in the second year. Sales and actual warranty expenditures for thefirst yearof selling the product were: SalesActual Warranty Expenditures $5,000,000$130,000 Required: What amount should Smith report as a warranty reserve liability on 12/31/2018?
Expert's Answer
Chat with our Experts
Want to contact us directly? No Problem. We are always here for you
Your future, our responsibilty submit your task on time.
Order Now
Get Online
Assignment Help Services
