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

question 63

Multiple Choice

Information obtained prior to the issuance of the current period's financial statements of KG 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)Accrued in the accounts and reported in the financial statements.
• C)Disclosed in the financial statements but not accrued.
• D)Recognized as an appropriation of retained earnings.

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Definitions:

Greater Expertise

A high level of skill or knowledge in a particular area, acquired through education, practice, and experience.

Nonexperts

Individuals who do not have specialized knowledge, training, or skill in a particular area or subject.

Affective Component

Part of an attitude related to emotion and feeling, influencing how individuals feel about an object, person, or situation.

Situational

Pertaining to or dependent upon the context or specific circumstances in which an event occurs.