Outside the Situation Where Specific Types of Provisions Are Covered

question 43

Multiple Choice

Outside the situation where specific types of provisions are covered in standards,a provision exists when and only when:

• A) The entity has a present legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events; and the amount or timing of the future sacrifice of economic benefits that will be made to satisfy the present obligation is uncertain.
• B) There is a legal or constructive obligation to make a future sacrifice of economic benefits within the entity as a result of past transactions or other past events, the amount or timing of which is uncertain.
• C) The entity has a present legal obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events; and the amount or timing of the future sacrifice of economic benefits that will be made to satisfy the present obligation is uncertain.
• D) The amount, timing and entity to whom the obligation to sacrifice future economic benefits as a result of a past legal or constructive obligation are unknown.
• E) None of the given answers.

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Definitions:

Absorption Costing

A method of accounting that incorporates all costs related to manufacturing, including direct materials, direct labor, as well as both variable and fixed overheads, into the product's price.

Unit Product Cost

The cost assigned to a single unit of product, encompassing all the costs incurred to produce, manufacture, or acquire that unit.

Absorption Costing

A method in accounting that totals up all expenses of manufacturing including costs for direct materials, direct labor, along with variable and fixed overhead, assigning them to the cost of a product.

Unit Product Cost

The total cost to produce one unit of a product, including direct materials, direct labor, and manufacturing overhead.