1) The matching objective requires that a company record warranty expense at the time the repair is made.
2) Sales for the current year amount to $900,000. The company estimates warranty expense to be 5% of sales. The journal entry to accrue the estimated warranty expense includes a debit to estimated warranty payable for $45,000.
3) A corporation's journal entry to accrue income tax owed at year end includes a debit to income tax payable.
4) A contingent liability is a potential liability that depends on a future event arising out of a past transaction.
5) Businesses do not accrue contingent gains but do report actual gains.
6) Corporations and individuals both pay income tax.
7) The law requires all employers to provide paid vacations to their employees.
8) Because contingent liabilities are not real liabilities, they are easy to overlook.
9) The law requires most employers to provide a minimum number of weeks holiday per year.
10) A contingent liability is an actual liability that is estimated when things go wrong.