FAR 4 Module 2 Flashcards
What are the gain and the loss contingencies
Gain contingencies
If remote?
If not remote?
Loss contingencies
If probable?
If reasonably Possible?
Remote?
What are the disclosures for DOG guaranteed remote?
PROBABLE Loss contingency: Accrue the MOST LIKELY amount within the range if one amount is more likely than others.
How should a contingent gain be reported in the financial statements under U.S. GAAP?
How are loss contingencies recorded under U.S. GAAP when the outcome is probable but the amount is a range?
Tiger Rags is evaluating its financial statement disclosures relating to gain contingencies. When should Tiger Rags recognize the gain on the contingency?
Gain contingencies are recorded when the gain is realized
What are examples of loss and gain continencies?
Pending or threatened litigation?
Pending or threatened litigation: falls under lawsuit contingencies
How should a company record a liability for a purchase commitment if the market price drops below the contract price?
Liability is recognized when the market price is lower than the contract price. The loss is the difference.
How should a company account for a contingent liability when the loss is probable but not reasonably estimated?
For a probable loss that cannot be reasonably estimated, disclose in the notes but do not accrue the liability.
How should Northan Retailers report the sale of refundable merchandise coupons received in June, with a cash payment of $10 per coupon, redeemable between July 1 and December 31, and a retail price of $11?
How do you find the amount to accrue as estimated liability? what are the Premiums formulas?
Step 1: Total estimated coupon redemption
Step 2: Coupons to be redeemed
Step 3: Outstanding premium claims
Step 4: Estimated liability for premium claims
JEs?
How do you calculate the estimated liability under warranties at year-end using the expense warranty accrual method?
