Brite Corp. had the following liabilities at December 31, 2006:
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|
Accounts payable |
$55,000 |
|
Unsecured notes, 8%, due 7/1/07 |
400,000 |
|
Accrued expenses |
35,000 |
|
Contingent liability |
450,000 |
|
Deferred income tax liability |
25,000 |
|
Senior bonds, 7%, due 3/31/07 |
1,000,000 |
The contingent liability is an accrual for possible losses on a $1,000,000 lawsuit filed against Brite. Brite’s legal counsel expects the suit to be settled in 2008, and has estimated that Brite will be liable for damages in the range of $450,000 to $750,000.
The deferred income tax liability is not related to an asset for financial reporting and is expected to reverse in 2008.
What amount should Brite report in its December 31, 2006 balance sheet for current liabilities?
- $ 515,000
- $ 940,000
- $1,490,000
- $1,515,000