Which of the Following Is Not a Potential Loss or Return

question 56

Multiple Choice

Which of the following is not a potential loss or return of a variable interest entity?

• A) Entitles holder to residual profits.
• B) Entitles holder to benefit from increases in asset fair value.
• C) Entitles holder to receive shares of common stock.
• D) If the variable interest entity cannot repay liabilities, honoring a debt guarantee will produce a loss.
• E) If leased asset declines below the residual value, honoring the guarantee will produce a loss.

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Definitions:

Customer Refunds Payable

A liability account for estimated refunds and allowances that will be paid or granted customers in the future.

Merchandise Returns

Goods returned by the buyer to the seller, often due to defects, wrong size, or dissatisfaction.

Purchase Discounts

A deduction from the original purchase price allowed by the seller to the buyer, typically for early payment or bulk purchasing.

Merchandise Inventory

Goods held by a retailer or wholesaler that are available for sale to customers.