The following is a partial list of account balances from the books of Ellsworth

ID: 2489719 • Letter: T

Question

The following is a partial list of account balances from the books of Ellsworth Enterprise at the end of 20D. (All of the liabilities are due within one year, except where noted.); Based solely upon these balances, the amount of current liabilities appearing on Ellsworth's 20D year-end balance sheet should be $26,300. $31,300. $25,500. $30,500. None of the above is correct. A contingent liability that is "reasonably possible" but "cannot reasonably be estimated" must be recorded and reported as a liability. does not need to be recorded or reported as a liability. must only be disclosed as a note to the financial statements. must be reported as a liability, but not recorded None of the above is correct. Andrews Company is involved in a law suit. The liability which could arise as a result of this law suit should be recorded on the books if the probability of Andrews owing money as a result of the lawsuit is remote and the amount can be reasonably estimated. probable and the amount can be reasonably estimated. reasonably possible and the amount can be reasonably estimated. probable and the amount cannot be reasonably estimated. None of the above is correct.

Explanation / Answer

Accounts payable 22,500

Accrued vacation liability – current 1,800

Deferred revenue 800

Income tax payable 1,200

Total 26,300

Hence option A

6)c) must only be disclosed as a note to the financial statements

This is because the amount cannot be estimated

7)B) Probable and the amount can be reasonable estimated

If the event is probable and amount can be estimated it should be recorded as liability