Medlen Models has the following account balances at December 31, 2021: Notes payable ($60,000 due after 12/31/22)

Question:

Medlen Models has the following account balances at December 31, 2021:
Notes payable ($60,000 due after 12/31/22) ............................. $100,000
Unearned service revenue ............................................................... 70,000
Mortgage payable ($90,000 due in 2022) ..................................... 250,000
Salaries payable ................................................................................. 32,000
Accounts payable .............................................................................. 63,000

In addition, Medlen is involved in a lawsuit. Legal counsel feels it is probable Medlen will pay damages of $25,000 in 2022. Medlen records contingent liabilities in the account Litigation Liability.

Instructions

Prepare the current liabilities section of Medlen’s December 31, 2021, balance sheet.

Contingent liabilities
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a...

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