Which of the Following Is a Contingency That Would Most

question 61

Multiple Choice

Which of the following is a contingency that would most likely require accrual?

• A) Potential claims on extended warranties.
• B) Customer premium offers.
• C) Potential liability on a product where none have yet been sold.
• D) Sales tax payable.

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Definitions:

Operating Merger

Occurs when the operations of two companies are integrated with the expectation of obtaining synergistic gains. These may occur due to economies of scale, management efficiency, or a host of other reasons.

Synergy

Occurs when the whole is greater than the sum of its parts. When applied to mergers, a synergistic merger occurs when the postmerger earnings exceed the sum of the separate companies’ pre-merger earnings.

Pro Forma Cash Flows

Projected cash inflows and outflows that are expected to occur as a result of a proposed financial decision or investment.

Hostile Takeover

An acquisition attempt by a company or individual without the consent or cooperation of the target company's board of directors.