Questions -
Q1. ABC Company is being by a competitor. According to the lawyer, it is reasonably possible that ABC will lose the lawsuit and pay between $500,000 and $1,000,000. What amount that ABC accrue as a contingent liability in its balance sheet? Should ABC disclose the contingency in its note?
|
Amount
|
Disclosure in the note
|
|
1
|
0
|
No
|
|
2
|
0
|
Yes
|
|
3
|
$ 500,000.00
|
No
|
|
4
|
$ 500,000.00
|
Yes
|
|
5
|
$ 800,000.00
|
No
|
Q2. On January 1, 2007, ABC Company issued $100,000 of 8 % bond for $108,425 maturing in 5 years. The bond yield 6% and interest is payable annually on December 31. The premium of the bond is being amortized by effective interest method.
What amount of interest expense should ABC report in its 2007 Income Statement?
1. $6,400
2. $6,450
3. $6,506
4. $6,600
5. $8,000