The question to be resolved is what kind of treatment should be provided if the loss confirmation is probable and the amount can be reasonably estimated. In establishing its framework for reporting contingencies, GAAP recognizes two kinds of subsequent events…
The company would record this warranty liability of $120 ($1,200 × 10%) to Warranty Liability and Warranty Expense accounts. Since this condition does not meet the requirement of likelihood, it should not be journalized or financially represented within the financial…
Since all profits and losses flow through retained earnings, any change in the income statement item would impact the net profit/net loss part of the retained earnings formula. The statement of retained earnings is one of four main financial statements,…
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