A Company Should Accrue a Loss Contingency Only If the Likelihood

question 104

Multiple Choice

A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:

• A) More likely than not and the amount of the loss is known.
• B) At least reasonably possible and the amount of the loss is known.
• C) At least reasonably possible and the amount of the loss can be reasonably estimated.
• D) Probable and the amount of the loss can be reasonably estimated.

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Definitions:

Relative Efficiency

A measure of how effectively an entity (such as a firm or economy) utilizes its resources compared to another, often used to identify opportunities for improvement.

Absolute Efficiency

A state where resources are allocated in the most effective way possible, achieving maximum output with given inputs.

Natural Endowment

Resources found in nature that have economic value or utility, such as minerals, forests, and water.

Merchandise Trade Deficit

A situation where a country's imports of goods exceed its exports of goods, leading to a negative balance of trade.