Contingencies and Commitments

Question 1

If the contract can be modified, the loss is required to be footnotes as a contingent liability but is not accrued in the accounts.

Answer 1

True, Footnotes

Question 2

If the contract cannot be modified, the loss must be accrued. The inventory is recorded at Market Value and a loss is recognized.

Answer 2

Market Value - Contract price

Question 3

If the most likely amount is FMV __________

Answer 3

report that.

Question 4

Probable and reasonably possible contingent GAIN AND LOSSES must be disclosed in the ______________

Answer 4

NOTES TO THE FINANCIAL STATEMENTS.

Question 5

General or unspecified business risks should not be accrued in the financial statements and need not be disclosed in the notes thereto.

Answer 5

True

Question 6

Warranty services can be recorded at the FV only if the contract can be __________

Answer 6

settled by a third party.

Question 7

An event such as possible future fire loss is not probable and cannot be reasonably estimated.

Answer 7

There no contigent liability to be reported.