Higgins Company Gathered the Following Reconciling Information in Preparing Its

question 220

Multiple Choice

Higgins Company gathered the following reconciling information in preparing its October bank reconciliation: The adjusted cash balance per books on October 31 is

• A) $14,130.
• B) $12,030.
• C) $8,580.
• D) $14,580.

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Definitions:

Provisions

Liabilities of uncertain timing or amount, recorded to account for future obligations or potential losses.

Contingent Liabilities

Possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent Assets

Possible assets that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of certain future events not wholly within the control of the company.

Constructive Obligation

An obligation that derives from an entity’s actions where: (a) by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and (b) as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.