Information Obtained Prior to the Issuance of the Current Period's

question 31

Multiple Choice

Information obtained prior to the issuance of the current period's financial statements of a company indicates that it is probable that,at the date of the financial statements,a liability will be incurred for obligations related to product warranties on products sold during the current period.During the past three years,product warranty costs have been approximately 1 1/2 percent of annual sales revenue. An estimated loss contingency should be

• A) neither accrued nor disclosed in the financial statements.
• B) recognized as an appropriation of retained earnings.
• C) accrued in the accounts and reported in the financial statements.
• D) disclosed in the financial statements but not accrued.

---

Definitions:

Precipitation

Any form of water, liquid or solid (rain, sleet, snow, or hail), that falls from the atmosphere and reaches the ground.

Acre-Foot

An acre-foot is a unit of volume commonly used in the United States to measure large-scale water resources, such as in reservoirs and lakes, equating to the volume of water needed to cover one acre of land to a depth of one foot.

Football Field

A playing surface, typically measuring 100 yards (91.44 meters) long and 53.3 yards (48.77 meters) wide, used for American football games.

Gallons

A unit of fluid volume measurement used in the US and the British imperial system, equal to 3.785 liters in the US.