Purchase Solution

Liabilities and Owners Equity

Not what you're looking for?

Ask Custom Question

1. Discuss the difficulties in accounting for estimated liabilities. Does accounting for estimated liabilities create problems or opportunities for financial statement prepares? Explain.

2. Define what is meant by contingent liability? Why do contingent liabilities create such difficult problems for financial statement users and prepares?

3. Identify the differences between common stock and preferred stock. As a manager, what are the factors that you might consider in deciding to raise capital by issuing capital stock versus issuing preferred stock? As an investor, would you invest in a firm's common stock or preferred stock? Explain.

4. What makes accounting for convertible bonds and convertible preferred stock so controversial? Do you think that convertible bonds should be accounted for as debt or as equity? Explain.

Purchase this Solution
Solution Summary

Estimated liabilities are the services of the obligation which the business or organization has to pay but the amount of the obligation is not known but that can be reasonably estimated. For example, taxes, which needs to be paid by the company, but the actual amount that need to be paid is not known. It has to be estimated and accounted for in the books as an estimate.
FASB statement 5 states that an estimated liability may be accrued if both the following conditions exist:

Detailed answer attached.

Solution Preview

Estimated liabilities are the services of the obligation which the business or organization has to pay but the amount of the ...

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
Recent Feedback
  • "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect.  It looks like you've mistaken the Debt ratio for the Equity Multiplier.  You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already.  You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount.  Equity multiplier is not provided for us and we need to calculate it.  I really hope this is helpful to you.  "
  • "Very attentive to detail. Answers are designed in easy to understand format."
  • "Fast response and thorough answer"
  • "thank you very much! "
  • "thank you so much !!!!!!!"
Purchase this Solution
Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Introduction to Finance

This quiz test introductory finance topics.

View More Free Quizzes
Related BrainMass Solutions

  • Ratio of liablilities to stockholders equity

    Feb 2nd 2003 liabilities= 10,209 stock owners equity= 19,802 Therefore total liabilities /stock owners equity = 0.52 =10209/19802 Feb 3rd 2002 liabilities= 8,312 stock owners equity= 18,082

  • Ratio of liabilites to stockholders equity

    liabilities= 7,062 stock owners equity= 6,674 Therefore total liabilities /stock owners equity = 1.06 =7062/6674 c.

  • Balance Sheet Preparation - Simon Company

    First, we understand that Total Assets = Total Liabilities + Owners' Equity Therefore, with the given information, we will have the total assets and total liabilities.

  • Classified Balance Sheet

    and Owners Equity Current Liabilities Accounts Payable 62,500 Total Current Liabilities 62,500 Mortgage Payable 479,500 Total Liabilities 542,000 Owners Equity 313,000 Total Liabilities and Owners Equity 855,000 Calculation

  • Roloflex Company

    First, we know that Assets = Liabilities + Total Owners' Equity So, we need to determine the Total Owners' Equity for January 1 as follows: - Assets = Liabilities + Total Owners' Equity 76,000 = 26,000 + Total Owners' Equity Total Owners'

  • Classified balance sheet for Simon Company

    and Owners Equity Current Liabilities Accounts Payable 62,500 Total Current Liabilities 62,500 Mortgage Payable 479,500 Total Liabilities 542,000 Owners Equity 313,000 Total Liabilities and Owners Equity 855,000 Calculation

  • Classified balance sheet for Simon Company

    and Owners Equity Current Liabilities Accounts Payable 62,500 Total Current Liabilities 62,500 Mortgage Payable 479,500 Total Liabilities 542,000 Owners Equity 313,000 Total Liabilities and Owners Equity 855,000 Calculation

  • Accounting Equation

    If current assets equal $25,000, liabilities equal $40,000, and owners equity equals $55,000, the noncurrent assets equal _____?. 2.

  • Simon Company: Balance Sheet Preparation

    Owners' Equity Opening capital, January 1, 2006 210,000 Add: Net income for 2006 124,750 Less: Distributions to owners (21,750) 313,000 Total liabilities and owners' equity 855,000 Without an income statement

  • Compute total assets, total liabilities, total equity

    Compute total liabilities 2-3 Total Owners' Equity Refer to data in 2-1. Compute total owners' equity 2-4 The Accounting Equation For the following cases, use the accounting equation to compute the missing quantity.

View More Related Solutions