F5 M2 Contingencies & Commitments

Question 1

A liability that has recourse is also a _____ liability.

Answer 1

Contingent liability

Question 2

At the date of sale, if the warranty costs are ____ and ____ then they must be recognized.

Answer 2

Probably and estimable

Question 3

Warranty expense must be recognized on the (cash/accrual) basis.

Answer 3

Accrual

Question 4

When you see “reasonably possible” what kind of disclosure do you give?

Answer 4

Footnote only

Question 5

If the loss is reasonably possible should you accrue for it?

Answer 5

No

Question 6

A contingent liability that is probably and estimable must be recognized. If all amounts within a range of values are equally likely, then the _____ amount in the range is the measurement amount.

Answer 6

Lowest

Question 7

Contingent liabilities which are remotely possible are recorded how?

Answer 7

Neither accrued nor disclosed

Question 8

Contingent liabilities which are remotely possible and include related party transactions should be recorded how?

Answer 8

As a disclosure only

Question 9

Reasonably possible losses should be disclosed how?

Answer 9

In the notes only, no accrual

Question 10

Gain contingencies are not recorded until

Answer 10

The transaction generating the gain is completed

Question 11

Gain contingencies are recorded how?

Answer 11

As a note disclosure only

Question 12

The contingent liability for a discounted note receivable is the ____ value.

Answer 12

Maturity value