Contingency problems associated with FAR

.docx
School
Henderson State University **We aren't endorsed by this school
Course
ACC 3063
Subject
Accounting
Date
Oct 28, 2023
Pages
1
Uploaded by LieutenantGalaxyKangaroo40 on coursehero.com
1. The balance in Ashwood Company's Accounts Payable account at December 31, 2019, was $1,200,000 before any necessary year-end adjustment relating to the following: · Goods were in transit from a vendor to Ashwood on December 31, 2019. The invoice cost was $85,000, and the goods were shipped FOB shipping point on December 29, 2019. The goods were received on January 2, 2020. · Goods shipped FOB shipping point on December 20, 2019, from a vendor to Ashwood were lost in transit. The invoice cost was $40,000. On January 5, 2020, Ashwood filed a $40,000 claim against the common carrier. · Goods shipped FOB destination on December 22, 2019, from a vendor to Ashwood were received on January 6, 2020. The invoice cost was $20,000. What amount should Ashwood report as accounts payable on its December 31, 2019, balance sheet? a. $1,285,000 b. $1,345,000 c. $1,325,000 d. $1,260,000 c. $1,325,000 1. Far Out Producers is involved in two product liability lawsuits and a third lawsuit that the company brought against a competitor for patent infringement. At December 31, Year 1, the company's attorneys informed management of the following: It is probable that Far Out will lose one of the product liability lawsuits, although the actual settlement could be as low as $800,000 and as high as $2,000,000. It is possible that the company could lose $1,000,000 in the second product liability lawsuit. It is probable that Far Out will win $500,000 in the patent infringement case. What should Far Out report on its December 31, Year 1 balance sheet for these contingencies? a. $800,000 contingent liability. b. $3,000,000 contingent liability. c. $1,800,000 contingent liability. d. $300,000 contingent liability. a. $800,000 contingent liability.
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