Question

Classify the following transactions and economic events for Sayabec Ltd. as commitments, subsequent events, or contingent liabilities. Some may fit more than one classification. Indicate 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. On December 15, 2018, Sayabec signed a three-year contract with a supplier to provide raw materials. The contract is the largest ever agreed to by Sayabec. The contract goes into effect in May 2018.
b. In May 2017, Sayabec guaranteed a $1,000,000 bank loan made to a company owned by a major shareholder. Sayabec is responsible for paying the principal and any outstanding interest in case the company is unable to make its payments. So far, the company has made all payments as required.
c. On January 10, 2018, a large customer declared bankruptcy. The customer had been in financial difficulty for some time. Sayabec expects to receive no more than 25 per cent of the amount owed by the customer.
d. On January 20, 2018, Sayabec announced that the board of directors had declared a dividend of $0.25 per share. The dividend is 20 percent higher than the last dividend.
e. In November 2017, Sayabec was notified by the Canada Revenue Agency that it owed $459,000 in taxes related to the taxation years 2014 and 2015. Sayabec's ac countants say that the reassessment has no basis in fact. Sayabec is appealing the reassessment and plans to take it to court if necessary.



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  • CreatedFebruary 26, 2015
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