1. Sir Ariel, a star college basketball player, received a contract from the Western Timberlines to play professional basketball. The contract calls for a salary of $300,000 a year for four years, dependent on his making the team in each of those years. Should his contract be considered a liability and recorded on the books of the basketball team?
2. Is increasing payables turnover good or bad for a company? Why or why not?
4. When would a commitment be recognized in the accounting records?
1. A liability is recorded only when it is determinable. A liability arises when the benefits are taken and the payment is yet to be made. In this case the contract is signed and the benefits from the player are yet to be taken and so is not a liability to be recorded. The company may disclose the signing of the contract in the notes to the ...
The solution explains some theory questions in accounting