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Chapter 11: 13RQ (page 604)
What is contingent liability? Provide some examples of contingencies.
Contingent liabilities are potential but not actual and depend upon some future event.
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Question:The income statement for Vermont Communications follows. Assume VermontCommunications signed a 3-month, 3%, \(6,000 note on June 1, 2018, and that thiswas the only note payable for the company.
Vermont Communications | ||
Income Statement | ||
Year Ended July 31, 2018 | ||
Net Sales Revenue | \) 26,500 | |
Cost of Goods Sold | 12,200 | |
Gross Profit | 14,300 | |
Operating Expenses: | ||
Selling Expenses | \( 690 | |
Administrative Expenses | 1,550 | |
Total Operating Expenses | 2,240 | |
Operating Income | 12,060 | |
Other Income and (Expenses): | ||
Interest Expense | ? | |
Total Other Income and (Expenses) | ? | |
Net Income before Income Tax Expense | ? | |
Income Tax Expense | 2,410 | |
Net Income | \) ? | |
Requirements
1. Fill in the missing information for Vermont’s year ended July 31, 2018, incomestatement. Round to the nearest dollar.
2. Compute the times-interest-earned ratio for the company. Round to twodecimals.
Watson Publishing completed the following transactions during 2018: Oct. 1 Sold a six-month subscription (starting on November 1), collecting cash of $240, plus sales tax of 8%. Nov. 15 Remitted (paid) the sales tax to the state of Tennessee. Dec. 31 Made the necessary adjustment at year-end to record the amount of subscription revenue earned during the year. Journalize the transactions (explanations are not required). Round to the nearest dollar.
What do short-term notes payable represent?
What is a contingent liability? Provide some examples of contingencies.
Rios Raft Company had the following liabilities.
a. Accounts Payable
b. Note Payable due in 3 years
c. Salaries Payable
d. Note Payable due in 6 months
e. Sales Tax Payable
f. Unearned Revenue due in 8 months
g. Income Tax Payable
Determine whether each liability would be considered a current liability (CL) or a long-term liability (LTL).
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