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    ESBates's Avatar
    ESBates Posts: 3, Reputation: 1
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    #1

    May 1, 2007, 05:58 AM
    Warranties and Liabilities
    Hello,

    Is a two year free maintenance warranty on a vehicle considered a liability?

    Also, is the purchase of land with common stock when the land is to be stated at more than the par value of the stock considered a liability?

    Thanks,

    Eric
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    May 1, 2007, 01:49 PM
    Quote Originally Posted by ESBates
    Hello,
    Is a two year free maintenance warranty on a vehicle considered a liability?
    Yes, but only to the person who is GIVING the warranty. So if you bought the car from me, the liability is to me.


    Quote Originally Posted by ESBates
    Also, is teh purchase of land with common stock when the the land is to be stated at more than the par value of the stock considered a liability?
    What?
    ESBates's Avatar
    ESBates Posts: 3, Reputation: 1
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    #3

    May 1, 2007, 07:20 PM
    Thank you for the help.

    Please disregard the second question (the idea was I buy land with stock, the land turns our to be worth more than th par value of the stock, etc... does this create a liability).
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #4

    May 1, 2007, 07:54 PM
    You're welcome.

    As for question 2

    You record the land at what you pay for it.

    So it you give $10,000 in common shares for the land, you record the land at $10,000, even if everyone else in the world would have paid $80,000 for the land, since the land only cost you $10,000
    ESBates's Avatar
    ESBates Posts: 3, Reputation: 1
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    #5

    May 1, 2007, 08:01 PM
    Makes sense.

    May I ask another question.

    When it comes to journal entries for marketable securities, what is the difference between an entry for a holding as avialable for sale versus a holding that is a trading security.

    So I want to detail, over a couple of years, my journal entries for buyind and selling of securities as well as highligting unrealized gains and losses.

    I want to do this for marketable securities that are available for sale and those that are trading securities.

    I am not sure what difference this kind of classificaiton would make--if any. Do you have any initial thoughts on this?

    Thanks.

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