Pros and cons should be carefully measured to minimize the impact he financial statements by the possibility of losing the lawsuit. References Financial Accounting Standards Board. (2013, April 17). Summary of FASAB Guidance Difference between FASAB Standards and Other Standards. Retrieved from http://www.fasb.org fasb.org.
It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss. b. The amount of loss can be reasonably estimated.” Therefore, they should disclose the most likely amount of loss which is $17 million as a liability. Furthermore, they also need to disclose “a. The nature of the contingency, b.
5. (TCO D) A contingency can be accrued when (Points : 5) it is certain that funds are available to settle the disputed amount. an asset may have been impaired. the amount of the loss can be reasonably estimated, and it is probable that an asset has been impaired or a liability incurred. it is probable that an asset has been impaired or a liability incurred, even though the amount of the loss cannot be reasonably estimated.
The retained earnings statement reconciles the beginning and ending balances of the retained earnings. Some organizations sometimes combine it with the income statement. The final amount of the retained earnings is the ending balance, which indicates why the earnings may have increased or decreased for that period. If there is a net loss, the loss is deducted from the dividends in the retained earnings (Weygandt, 2008). As for the balance sheet, it shows the assets, liabilities, and stockholder’s equity for a specified date.
Robbin Industries is jeopardizing itself by not properly reporting the advertising costs. As an operating company, they must understand the generally accepted accounting principles and adhere to them (Weygandt, Kieso, & Kimmel, 2010). (c) What would you do if you were Wayne Terrago? Wayne Terrago should try to report the financial condition and results of operations fairly and in accordance with the generally accepted accounting principles. As controller, Wayne should inform management and understand what is acceptable according to the GAAP.
We denote the probability of solvency Pr(S) by p > 1/2 and the probability of default Pr(F) by 1– p. In addition, the bank can conduct a special audit leading to a forecast f or s. The forecast reflects the true state with precision Pr(s|S) = Pr(f|F) = q. (a) What is the overall probability that the auditor will forecast a failure? (b) What is the probability that a bank is solvent, but the auditor forecasts a failure? (A better wording is "What is the probability that the auditor forecasts failure when the bank is solvent?") (c) What is the probability that after an auditor's forecasts of a failure, the bank turns out to be solvent?
a. They are recorded at cost and adjusted for inflation. b. They are recorded at market value for financial reporting because historical cost is arbitrary. c. Accounting principles require that companies report assets on the income statement.
Going concern principle: The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless the evidence shows that it will not continue. Objectivity principle: The accounting guideline that requires financial statement information to be supported by independent , unbiased evidence rather than someone’s opinion; objectivity adds to the reliability, verifiability, and usefulness of accounting information. Cost principle: The accounting principle that requires financial statement information to be based on actual costs incurred in business transactions; it requires assets and services to be recorded initially at the cash or cash equivalent amount given in exchange. Revenue recognition principle: Provides guidance on when revenue should be reflected on the income statement; the rule states that revenue is recorded at the same time it is earned regardless of whether cash or another asset has been exchanged. Business Organizations Single proprietorship: A business owned by one individual, which is not organized as a corporation; also called a sole
Corporate FInancial Management | Aspeon Sparkling Water, Inc. Case | Capital Structure | | | 11/20/2013 | | 1 a. Business risk and financial risks are two primary risks that all the companies face in their day-to-day operations. The following table highlights their differences: | Business Risk | Financial Risk | Definition | Business risk is the risk firm’s common stockholders face if the firm had no debt. It is the risk inherent in the firm’s operations, which arises from uncertainty about future operating profits and capital requirements. | Financial risk is the additional risk that common stockholders face as a result of the decision to finance with debt.
Liquidity measures a company’s ability to pay off short-term obligations. This is done by comparing their assets to their short-term liabilities. These ratios can tell if a company is able to pay its short-term liabilities and still be able to cover operating expenses. One ratio that is important to look at is the current ratio. This ratio is calculated by dividing a company’s current assets by their current liabilities.