Which of the following is most likely a contingent liability

Which of the following is most likely a contingent liability that would require a liability to be recognized on the balance sheet? Risk of storm damage Warranties Risk of hurricane damage Possible violations of EPA standards

Solution

Q1. Answer is Warranties Q2. Answer is When the product is sold in Income statement and When obligation is paid for the Statement of Cash flows. Q9. Answer is B. Explanation: Total cash collected is 73500 of which liability to be paid to state is $3500 and income is $70000. Q13. Answer is $ 510000 Explanation: Issue price: $102 Bonds issues at (500000*102%): $ 510000 Q14. Answer is $15000 Explanation: Bonds value: $ 500,000 Semi interst rate: 3% Semi annual interest: 500,000 *3% = 15000 Q17. Answer is 2015: 10000; 2016-($10600) Explanation: Cash received on borrowing: inflow $10000 in 2015 Cash paid wiith interest (@6% i.e. 600): outflows $10600 in 2016 Q18. Answer is 2015: 500; 2016: 100 Explanation: Interest of $600 for 10 month in 2015: 500 Interest of $600 for 2 months in 2016: $ 100 Q Answer is $9740 Explanation: Principal amount outstanding: 150000 Less: Principal paid in 1st 10857 (21357 - 150000*7%) Principal oustanding in beg 2017 139143 Interest expense for 2017 (139143*7%) 9740.01 Q Answer is $ 16000; $ 14896 Explanation: Principal amount outstanding in beg. 200000 Less: Principal amount paid in 1st (29806 -200000*8%) 13806 Principal Oustanding in beg of 2nd year 186194 Interest of 2nd year (186194*8%) 14896 Interest of 1st year (200000*8%) 16000