9.3 Account for liabilities of an uncertain amount 1) Even liabilities of unknown amounts are required to be placed on the balance sheet. 2) A warranty is an example of a(n): A) contingent...

9.3 Account for liabilities of an uncertain amount

1) Even liabilities of unknown amounts are required to be placed on the balance sheet.

2) A warranty is an example of a(n):

A) contingent liability.

B) known liability.

C) estimated liability.

D) settled liability.

E) unknown obligation.

3) Are estimated liabilities generally classified as current or long-term liabilities?

4) Casey Company purchases inventory for $100,000, paying $40,000 in cash and signing a 3-year, 5% note payable for the remainder. The company has $90,000 sales in the month of March and estimates that 5% of product sales will require warranty repairs. Journalize the transactions below and identify which accounts are known liabilities and which are estimated liabilities.

Inventory purchase

Sales for March (25% on account, 75% in cash).

Estimated dollars for warranties.