A Foreign Subsidiary of a U

question 42

Multiple Choice

A foreign subsidiary of a U.S.-based company has been notified of a loss contingency with an estimated cost ranging between $250,000 and $275,000 which is probable of resulting in an actual loss. Each dollar amount within this range of cost is equally likely of being the actual outcome.According to U.S. GAAP, what is the amount recognized as a provision for loss contingency?

• A) No amount will be recorded but an amount will be disclosed in the notes to the financial statements.
• B) $25,000
• C) $250,000
• D) $262,500
• E) $275,000

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Definitions:

Labeling Theory

A theory that interprets the responses of others as most significant in understanding deviant behavior.

Conflict Theory

A sociological perspective that views conflict as an inherent and fundamental aspect of social life, often driving social change.

Incarceration

The detention of individuals in prison or another facility as a legal punishment for committing crimes.

Altruistic Suicide

The type of suicide that can occur when there is excessive regulation of individuals by social forces.