Identify Whether the Following December 31, 2012 Information from Jessica

question 4

Essay

Identify whether the following December 31, 2012 information from Jessica Industries would be a known, estimated, or contingent liability:
1. Salary expense for the last payroll for the year was $52,000. It is expected to be paid out January 2, 2013.
2. The company's December taxable sales were $253,000. Jessica Industries is required to collect HST (13%) on its sales which is to be remitted January 5, 2013.
3. Jessica Industries extends its customers a one-year warranty on its product sold. The rate of warranty repairs is 2% of sales.
4. The company had waste which polluted a nearby lake. The clean-up is likely to cost $325,000-$350,000.
5. Issued $100,000, 8%, five-year bond when the market rate of interest was 10%.

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Definitions:

Common Shares

Equities representing ownership interests in a company, entitling holders to a share in the company's profits and voting rights in certain decisions.

Straight-Line Depreciation

An accounting method that allocates the cost of an asset evenly over its useful life.

Voting Stock

Shares in a company that give the shareholder the right to vote on company matters, such as electing the board of directors.

Fair Value Option

An election that allows companies to report specific financial assets and liabilities at their fair values, with changes in fair value recognized in the income statement.