An Entity Is Currently Under Investigation for Providing Defective Products

question 51

Multiple Choice

An entity is currently under investigation for providing defective products to their customers.If found guilty,the entity may be required to compensate their customers for approximately $500 000.The court case is still pending and the outcome will not be known until later in the next financial year.For the current financial year,the amount of $500,000 will be:

• A) recognised in the balance sheet as an asset.
• B) recognised in the balance sheet as a liability.
• C) recognised in the balance sheet as a contingent liability.
• D) disclosed in the notes to the financial statements as a contingent liability.

---

Definitions:

Sample Size

The number of observations or data points collected in a statistical sample.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the values are from the mean.

Power Of Test

The probability that a statistical test will reject a false null hypothesis, correctly identifying a true effect.

Net Weight

The weight of a product without the weight of its packaging, often an important measure in commerce for products sold by weight.