Which of the Following Is a Contingency That Should Be

question 58

Multiple Choice

Which of the following is a contingency that should be accrued?

• A) The company is being sued and a loss is reasonably possible and reasonably estimable.
• B) The company deducts life insurance premiums from employees' paychecks.
• C) The company offers a two-year warranty and the expenses can be reasonably estimated.
• D) It is probable that the company will receive $100,000 in settlement of a lawsuit.

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Definitions:

Adjusted Cost

Adjusted cost refers to the alteration of the original cost of an asset to account for depreciation, improvements, or impairments, providing a more accurate value of the asset over time.

Goods Sold

Refers to the total quantity of products that have been sold by a business within a specific period.

Manufacturing Overhead

The total of all the indirect costs incurred during the production process, which are not directly tied to specific units of output.

Overapplied Overhead

Overapplied overhead occurs when the allocated manufacturing overhead costs are more than the actual overhead costs, indicating too much cost was assigned to products.