On January 17,2014,an Explosion Occurred at an Boondocks Fireworks Plant

question 46

Multiple Choice

On January 17,2014,an explosion occurred at an Boondocks Fireworks plant causing extensive property damage to area buildings.Although no claims had yet been asserted against Boondocks by March 10,2014,Boondocks' management and counsel concluded that it is reasonably possible Boondocks will be responsible for damages and that $2,500,000 would be a reasonable estimate of its liability.Boondocks' $10,000,000 comprehensive public liability policy has a $500,000 deductible clause.In Boondocks' December 31,2014,financial statements,which were issued on March 25,2015,how should this item be reported?

• A) As a footnote disclosure indicating the possible loss of $500,000
• B) As an accrued liability of $500,000
• C) As a footnote disclosure indicating the possible loss of $2,500,000
• D) As an accrued liability of $2,500,000

---

Definitions:

Sensitivity

The capacity to perceive, feel, or be aware of stimuli or changes in the environment; can also refer to the degree of responsiveness to social or emotional matters.

Weber Fraction

A principle that quantifies the perception of change in a given stimulus, stating that the just noticeable difference is a constant proportion of the original stimulus’s intensity.

Difference Threshold

The smallest amount that a given stimulus must be increased or decreased so that an individual can detect the difference.

Standard Stimulus

A specific stimulus used as a reference point in psychological experiments to measure reactions or perceptions.