An Obligation That Is Contingent on the Occurrence of a Future

question 25

Multiple Choice

An obligation that is contingent on the occurrence of a future event should be reported in the balance sheet as a liability if the

• A) future event is likely to occur.
• B) amount of the obligation can be reasonably estimated.
• C) occurrence of the future event is at least reasonably possible and the amount is known.
• D) occurrence of the future event is probable and the amount can be reasonably estimated.

Differentiate between consumer sales promotions and trade-oriented sales promotions.

Explain the concept and value of loyalty programs in building long-term customer relationships.

Understand the mechanics of different types of sales promotions including samples, rebates, and premiums.

Evaluate how point-of-purchase displays influence consumer buying decisions.

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Definitions:

Percent of Sales Method

A financial forecasting model used to estimate certain balance sheet and income statement figures based on projected sales revenue.

Uncollectible Accounts Receivable

Refers to the portion of accounts receivable that a company does not expect to collect due to customers being unable to pay.

Allowance

An amount set aside or deducted to account for possible adjustments or for diminution in value, notably in the contexts of accounts receivable and inventory.

Service Charge

A fee collected for the provision of a service, often added to the base cost of the service.