F5M2

Question 1

Contingency

Answer 1

existing situation or set of circumstance involving uncertainty as to a possible gain or loss that will be determined by the outcome of a future event

Question 2

gain contingency (example and treatment)

Answer 2

favorable settlement or possible refund on tax dispute

NO JE

disclosure ONLY if reasonably possibly and can estimate

Question 3

Do gain contingencies have JE

Answer 3

NO

Question 4

Loss contingency - probable

Answer 4

record JE and disclose

Question 5

Loss contingency - reasonably possible

Answer 5

disclosure ONLY

Question 6

Loss contingency - remote

Answer 6

IGNORE; unless DOG

Question 7

DOG

Answer 7

debt, obligations, guarantees

Question 8

When there is a range in a loss contingency, what amount do you choose?

Answer 8

1. if there is a range, select the lowest amount

2. if there is a range, but one is more likely, choose that one

Question 9

Potential loss Contingencies

Answer 9

if an un asserted claim is probable, treat it similiarly to a regular loss contingency

Question 10

When are premiums and warranties accrued

Answer 10

when probable and can be reasonably estimated

Question 11

Warranty

Answer 11

entire liability for warranty should be accrued in year of sale to ‘match’ costs