The Rugby Corp

question 29

Multiple Choice

The Rugby Corp. is trying to decide how to record a loss contingency. It believes the likelihood of a payment is probable, but it believes that there is a range of possible amounts it will have to pay, from $10 million to $20 million. Each amount in the range is equally likely. Under GAAP, the accrual must be

• A) $10 million
• B) $15 million
• C) $20 million
• D) Any figure it wants between $10 and $20 million

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Definitions:

Variation

The degree to which data points in a statistical distribution or data set diverge from the average or mean.

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution, minus the number of parameters estimated.

Number of Treatments

The total count of distinct experimental conditions applied in research to assess their effects on outcomes.

MSB

Marginal Social Benefit; the additional benefit to society from one more unit of a good or service being produced and consumed.