Which Statement Is Not Correct About Commitments

question 50

Multiple Choice

Which statement is not correct about commitments?

• A)A commitment to buy equipment must be disclosed if the contract is partially executed.
• B)A commitment to buy equipment must be disclosed even if the contract is unexecuted.
• C)Onerous contracts must be disclosed if they can be reliably measured.
• D)Onerous contract must be recognized in the accounting records.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered.

Model 220 Machine

a specific model or type of machinery, often referenced in manufacturing or industrial contexts, but without additional context, the exact nature or use cannot be determined.

Contribution Approach

A managerial accounting method that separates fixed costs from variable costs to determine the contribution margin per unit and overall contribution towards fixed costs and profits.

Differential Cost

The difference in total cost that will result from selecting one alternative over another.