Existing Claims Related to Product Warranties and Litigation as of December

question 56

Multiple Choice

Existing claims related to product warranties and litigation as of December 31, 2010, indicate that it is probable that a liability has been incurred.However, as of December 31, 2010, the exact amount of the obligation cannot be reasonably estimated, but a range of possible amounts has been determined.Based on these facts, an estimated loss contingency should be

• A)accrued
• B)disclosed but not accrued
• C)neither accrued nor disclosed
• D)classified as an appropriation of retained earnings

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Definitions:

Top-level Managers

Executives responsible for overseeing the strategic direction of an organization and making long-range decisions.

Adaptation

The process of adjusting or changing to fit new conditions or environments.

Top-down Change

Organizational change initiatives that are initiated and managed by top-level management, often requiring changes to be implemented through various levels of the organization.

Lower-level Personnel

Employees who occupy positions at the bottom tiers of an organizational hierarchy, typically involved in operational or support roles.