Darwin Corporation's Attorney Has Provided the Following Summaries of Three

question 7

Multiple Choice

Darwin Corporation's attorney has provided the following summaries of three lawsuits against Darwin: • Lawsuit A: The loss is probable and the loss can be reasonably estimated.
• Lawsuit B: The loss is reasonably possible and the loss cannot be reasonably estimated.
• Lawsuit C: The loss is reasonably possible and the loss can be reasonably estimated.
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Which of the following statements is incorrect?

• A)There is a 70% chance that lawsuit A will result in a future economic sacrifice for Darwin.
• B)A disclosure note is required for lawsuit C.
• C)A disclosure note is not required for lawsuit B.
• D)Lawsuit A is reported on the balance sheet as a liability.

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Definitions:

Materials Used

The raw components or supplies consumed during the manufacturing process to produce goods.

Work in Process Inventory

Goods that are in the process of being produced but are not yet finished in a manufacturing company.

Actual Overhead

The real costs incurred for overhead in production processes, as opposed to budgeted or estimated costs.

Overhead Applied

The portion of overhead costs allocated to individual products or services based on a predetermined rate.