Commitment and Contingencies Flashcards
When should a company recognize warranty costs for a product with an included warranty
What amount should be accrued for a probable contingent loss when a range of possible losses is estimated but no specific amount within the range is considered the best estimate
What contingent amounts should be disclosed in the notes when the following exist?
Probable loss: $1,500,000
Reasonably possible loss: $500,000
Remote loss: $300,000
Probable gain: $700,000
GAAP Rules for a loss contingency
What is the appropriate accounting treatment for a purchase commitment when the market value of inventory drops below the fixed purchase price
How do you solve a purchase commitment problem where the market price drops below the contract price
How does the settlement of a lawsuit affect a company’s income if the actual settlement differs from the previously accrued liability
How does a company estimate its liability for outstanding promotional prizes at year-end?
How should a company report a loss contingency when insurance covers part of the potential liability
How should a company report a contingent liability when a range of potential losses exists with no single amount being more probable, and how should retooling costs be treated
How should a company estimate its liability for coupons included with sales when redemption is expected in the future
How should a company report a probable gain contingency, such as compensation for expropriated property, when the compensation exceeds the carrying amount but is not yet realized?
How should a company accrue a liability for promotional items redeemed with box tops and cash?
Are reserves for unspecified business risks accrued or disclosed
At what amount should a warranty liability be recorded if the fair value option is elected
When should warranty costs be recognized
How should a company report a probable loss contingency when the range of possible losses is $500,000 to $2,500,000, with $1,000,000 being the most probable amount
