Chapter 13 Day 2-4 - Brief Exercise 1312 This is a loss...

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Brief Exercise 13–12 This is a loss contingency and the estimated warranty liability is credited and warranty expense is debited in the period in which the products under warranty are sold. Right will report a liability of $130,000: Warranty Liability __________________________________________ 150,000Warranty expense (1% x $15,000,000) Actual expenditures 20,000 130,000Balance Brief Exercise 13–16 Only the third situation’s costs should be accrued. A liability should be accrued for a loss contingency if it is both probable that the confirming event will occur and the amount can be at least reasonably estimated. If one or both of these criteria is not met, but there is at least a reasonable possibility that the loss will occur, a disclosure note should describe the contingency. Both criteria are met only for the warranty costs.
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Exercise 13–15
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Requirement 1 This is a loss contingency. There may be a future sacrifice of economic benefits (cost of satisfying the warranty) due to an existing circumstance (the
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