Identify Whether Each of the Below Items Would Be a Known

question 69

Essay

Identify whether each of the below items would be a known, estimated, or contingent liability:
1. A manufacturing company offers a one-year warranty on their product.
2. A lawsuit has been filed against Voltage Energy, a private company, for polluting a creek in a local community. The amount is estimated at $125,000 and there is a 70%-95% likelihood of the obligation occurring.
3. ABC Co. purchased machinery for $125,000 paying $75,000 in cash and borrowing the remainder by signing a one-year 5% note payable.

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Definitions:

Spleen

An organ adjacent to the stomach that filters blood, disposes of worn-out red blood cells, and helps fight infection.

Lymph Node

Encapsulated mass of lymph tissue found among lymph vessels.

Thymus Gland

An immune system gland located behind the sternum that produces T-cells for the adaptive immune response.

Lymphatic Nodule

Small accumulation of lymph tissue lacking a distinct boundary.