Question: Classify the following transactions and economic events for Langham Ltd

Classify the following transactions and economic events for Langham Ltd. (Langham) as commitments, subsequent events, or contingent liabilities. Some may fit more than one classification. Show how each should be reflected in the December 31, 2017 financial statements and explain your reasoning. In responding, consider the usefulness of the information to different stakeholders.
a. In January 2018, signed a contract with a supplier that will provide Langham with an important raw material over the next five years. Langham will pay prevailing market prices for the guaranteed supply.
b. In May 2017, Langham filed a $10,000,000 claim against a competitor for theft of intellectual property rights. The claims statement was that the competitor profited from the use of Langham's patents without obtaining the rights to use them.
c. On November 15, 2017, Langham signed a contract for new heavy equipment. The equipment is in the development phase by the manufacturer and is expected to be delivered in late 2020. The contract specifies the price Langham will pay. Payment is due on delivery.
d. On January 18, 2018, one of Langham's customer's production facilities was de stroyed in a fire. As a result, the customer declared bankruptcy. Langham doesn't expect to receive any of the amount owed by the customer.

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  • CreatedFebruary 26, 2015
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