Which of the Following Circumstances Would Require Recording an Accrual

question 41

Multiple Choice

Which of the following circumstances would require recording an accrual for a loss contingency under current generally accepted accounting principles?

• A) Event is unusual in nature and occurrence of event is probable
• B) Event is unusual in nature and event occurs infrequently
• C) Amount of loss is reasonably estimable and occurrence of event is probable
• D) Amount of loss is reasonably estimable and event occurs infrequently

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Definitions:

ABC Analysis

is an inventory categorization technique that divides items into three categories (A, B, and C) based on their importance or value, helping to prioritize management and resource allocation.

Economic Order Quantity Model

A mathematical model that determines the optimal order size that minimizes the total cost of holding and ordering inventory.

Production Order Quantity Model

A mathematical model used to determine the optimal order quantity that minimizes total inventory costs, considering both holding and setup costs.

Annual Setup Costs

The total expenses incurred from setting up machinery or equipment for production runs in a factory, accumulated on a yearly basis.