Should this contingent liability be reported

Assignment Help Finance Basics

Reference no: EM131521571

Question: Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2012 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $3 million. The fiscal year ends on December 31.

Required: 1. Should this contingent liability be reported, disclosed in a note only, or neither? Explain.

2. What loss, if any, should Top Sound report in its 2012 income statement?

3. What liability, if any, should Top Sound report in its 2012 balance sheet?

4. What entry, if any, should be recorded?

Reference no: EM131521571

Questions Cloud

Record cash sales and related sales tax for western travel : Two competing travel agencies provide similar services, but they record sales using different methods. 1. Eastern Travel records sales and sales tax.

Why a third party candidate has never been successful : Discuss two (2) political reasons why a third party candidate has never been successful in winning a presidential election.

How a hiring system would improve internal communications : Explain how a hiring system would improve internal and external communications. Explain how a hiring system would improve collaboration internally within CIC.

Create a three-pronged plan : Create a three-pronged plan to recommend that promotes crime reduction for each specific area to present to the city's stakeholders.

Should this contingent liability be reported : Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2012 of a circuit flaw.

Weighted average cost of capital : What is enterprise value (EV) in millions if the weighted average cost of capital (WACC) is 10.3 percent?

Explain two ways theory and research are related : Post an explanation of the importance and purpose of theory and research in the criminal justice field, and explain two ways theory and research are related.

Calculate the current ratio and the acid-test ratio : Selected financial data regarding current assets and current liabilities for Royal Caribbean Cruises, Ltd., a leader in the cruise line industry.

An employee versus an independent contractor : Explain the pros and cons of hiring someone as an employee versus an independent contractor.

User Account

All Pages