Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 13: Question 19Q (page 691)

Distinguish between a determinable current liability and a contingent liability. Give two examples of each type.

Short Answer

Expert verified

Determination of current liability is a near-term debt obligation that is accurately measured, whereas a contingent liability is a liability that may or may not be contingent on the occurrence of an uncertain future event.

Step by step solution

01

Meaning of Contingent liability

A liability that is not likely to happen is known as contingent liability. A business is required to report such liability in order to protect itself from future losses.

02

Comparing and differentiating Determinable current liability and contingent liability.

BASIS

Determinable current liability

Contingent liability

Definition

Obligations that are measured exactly due for payable within a year

Liability that may occur depending upon an uncertain future event

Accountability

Under current liabilities

Disclosed as notes usually but loss/expense if any is accounted as part of prudence

Measurability

It can be measured exactly.

It may or may not be estimated since the happening of the event is uncertain.

Examples

Accounts payable, commercial paper, dividends payable

Potential Lawsuits, product warranties, pending investigations

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: What factors must be considered in determining whether or not to record a liability for pending litigation? For threatened litigation?

Under what conditions is an employer required to accrue a lability for sick pay? Under what conditions is an employer permitted but not required to accrue a liability for sick pay?

Question: (Lessee-Lessor Entries, Operating Lease) Cleveland Inc. leased a new crane to Abriendo Construction under a 5-year noncancelable contract starting January 1, 2017. Terms of the lease require payments of \(33,000 each January 1, starting January 1, 2017. Cleveland will pay insurance, taxes, and maintenance charges on the crane, which has an estimated life of 12 years, a fair value of \)240,000, and a cost to Cleveland of \(240,000. The estimated fair value of the crane is expected to be \)45,000 at the end of the lease term. No bargain-purchase or -renewal options are included in the contract. Both Cleveland and Abriendo adjust and close books annually at December 31. Collectibility of the lease payments is reasonably certain, and no uncertainties exist relative to unreimbursable lessor costs. Abriendo’s incremental borrowing rate is 10%, and Cleveland’s implicit interest rate of 9% is known to Abriendo.

Instructions

  1. Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor.

Faith Battle operates a health food store, and she has been the only employee. Her business is growing, and she is considering hiring some additional staff to help her in the store. Explain to her the various payroll deductions that she will have to account for, including their potential impact on her financial statements, if she hires additional staff.

Consider the bond investment by Lady Gaga in IFRS17-5. Discuss the accounting for this investment if Lady Gaga’s

Business model is to hold the investment to collect interest while outstanding and to receive the principal at maturity.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Development

Read Explanation

Managers

Read Explanation

Strategic Analysis

Read Explanation

Introduction to Business

Read Explanation

Influences On Business

Read Explanation

Business Operations

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free