Cress Company Is Involved in a Lawsuit

question 80

Multiple Choice

Cress Company is involved in a lawsuit. Note disclosure of the contingent liability which could arise does NOT have to be presented if the probability of Cress owing money as a result of the lawsuit is which of the following?

• A) Reasonably possible and the amount cannot be reasonably estimated.
• B) Probable and the amount cannot be reasonably estimated.
• C) Remote and the amount cannot be reasonably estimated.
• D) Reasonably possible and the amount can be reasonably estimated.

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Definitions:

Profit Center

A business unit or department within an organization that is treated as a separate entity for the purpose of calculating its profitability.

Transfer Prices

Prices charged for the sale of goods or services between divisions or subsidiaries within the same company.

Variable Production Costs

Costs that vary in direct proportion to changes in production volume or levels, such as materials and labor.

Special Parts

Unique or custom components used in manufacturing processes or product assembly that are not commonly available or require specific production.