In the opinion of management there was not at least a

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Unformatted text preview: ated...In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss...management considers the likelihood of a loss to be remote... From Apple’s 2011 10K Contingent Liabilities • What if a company is able to estimate a range, but not a specific dollar value? (FASB) - If management judges one amount in the range of potential losses to be more likely than other amounts we record that amount. - If management judges no one amount within the range to be more likely than other amounts, we record the minimum amount and disclose information about the range. Contingent Liabilities • Warranty payable is a loss contingency that is usually classified as a current liability. • Warranty payable is an estimate of warranty services that a company will have to provide on products sold this period. Why estimate the warranty liability this period? Matching principle Contingent Liabilities Hincapie Corporation sells $400 worth of merchandise to customers on credit. Hincapie estimates that it will have to provide warranty services equal to 1% of sales. Record the sale (OK to leave off COGS entry) and warranty...
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This note was uploaded on 02/17/2014 for the course ACCTG 215 taught by Professor Wells during the Spring '08 term at University of Washington.

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