A Company Has a Contingent Loss That Can Be Estimated

question 69

Multiple Choice

A company has a contingent loss that can be estimated and has a reasonably possible chance of occurrence. What reporting does the FASB require regarding this contingency?

• A)It should be accrued and reported on the financial statements.
• B)It should be put into a memo until the actual loss materializes
• C)It should be accrued and reported on the financial statements and reported in the notes to the financial statements.
• D)It should be reported in the notes to the financial statements.

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Definitions:

Perishable Products

Goods that deteriorate over a short period or have a limited shelf life, requiring timely sale and use.

Credit Periods

The length of time that a lender or supplier allows for payment after a purchase or loan is made.

Credit Terms

The conditions under which credit will be extended to a borrower, including the repayment schedule, interest rate, and duration of the loan.

ACP

Average Collection Period, measuring the average number of days it takes a company to collect its accounts receivable.