COMPLETION STATEMENTS
37. A ________________ liability that may become an actual liability in the future, is called a ________________ liability.
38. A lease may be classified as an ______________ lease or as a ____________ lease.
MATCHING
39. Match the items below by entering the appropriate code letter in the space provided.
A.Finance leaseD.Provision
B.Contingent liability E.Defined-contribution plan
C.Operating lease
____1.A contractual arrangement that gives the lessee temporary use of property.
____2.The cash paid by the employer to the pension plan is defined.
____3.A contractual arrangement which is in effect a purchase of property.
____4.A liability of uncertain timing or amount.
____5.A potential liability that may become an actual liability in the future.
SHORT-ANSWER ESSAY
S-A E 40
A company will incur product repair costs in the future if products that it sells currently under warranty are brought in for repair during the warranty period. The company will also incur bad debt expense in the future if customers who buy on credit currently are unable to pay their accounts. Are the accounting procedures for these two contingent costs (warranty expense and bad debt expense) related to or guided by the same accounting principle? Briefly explain.