Which of the Following Is an Example of a Loss

question 180

Multiple Choice

Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company's financial statements?

• A)The president of the company has threatened to resign if the board of directors does not vote to increase executive salaries.
• B)A lawsuit has been brought against the company,but the company hopes to prevail in the suit and thereby avoid any liability.
• C)The allowance for uncollectible accounts receivable is estimated at $200,000.
• D)The company owns special-purpose machinery that,if sold,would probably bring a price less than its current book value.

---

Definitions:

Deposit

Money given in advance as security or part payment, indicating commitment to a purchase or agreement and may be refundable under specific conditions.

Specific Performance

A judicial remedy requiring a party to fulfill their obligations under a contract, typically used when monetary damages are inadequate.

Injunctions

Court orders requiring an individual or entity to do or refrain from doing specific acts.

Limitations

Restrictions or caps, often referring to the time within which legal action can be taken.