Question

State whether you believe each of the liabilities listed below is determinable, estimable, or contingent.

1.		An automobile company recalled a particular car model because of a possible problem with the brakes. The company will pay to replace the brakes.		ContingentDeterminableEstimable
2.		A large retail store has a policy of refunding purchases to dissatisfied customers under a widely advertised "money-back, no questions asked" guarantee.		DeterminableContingentEstimable
3.		A manufacturer offers a three-year warranty at the time of sale.		EstimableDeterminableContingent
4.		To promote sales, a company offers prizes (such as a chance to win a trip) in return for a specific type of bottle cap.		EstimableContingentDeterminable
5.		A local community has filed suit against a chemical company for contamination of drinking water. The community is demanding compensation, and the amount is uncertain. The company is vigorously defending itself.

Answer 1

1. Determinable. Because the Company must be having data for that particular model. And based upon that data, the cost to replace the break computation is possible.

2. Estimable. Since the Company can estimate the amount based upon data of previous years. And that percentage can be applied as an estimate for current year.

3. Estimable. The Company can estimate the amount of warranty on the basis of past experience.

4. Estimable. The Company can estimate the amount of promotional expenses based upon budgets available and target achieved by the customers.

5. Contingent. Since the Company is fighting the case and the matter is still under dispute. Based upon court's verdict it will move to determinable or waive off.