Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company's financial staternents?Multiple ChoiceThe president of the company hos threatened to resign if the boord of drectors does not vote to mcreese executive saleriesA lewsut hes been brought eganst the compeny, but the company hopes to preval in the sut and thereby evoid any liabity.The allowance for uncollectible eccounts receivable is estimated bt $200000The compeny owns speciel purpose machinery that, f sold, would probobly bing e price les than cument book value

The accounting of contingent liabilities As per GAAP, contingent liabilities can be broken down into…

Answered: Multiple Choice

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 11CYBK

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Similar questions

Kong Corp is currently experiencing an employee lawsuit for discrimination. There is a remote chance that the company will lose the lawsuit and no future outcome can be estimated. How should the company treat the lawsuit in their financial statements? As a liability on the balance sheet Ignore - no need to disclose in the financial statements or record as a liability As an HR complaint Disclose in the notes to the financial statements
Muzna Salim Mob Which of the following should be disclosed as a note to financial. statements as a contingent liability? Damages awarded against a company by court, for wrongful dismissal of an employee A customer's claim for injuries suffered on company premises with 5% chance of success A customer's claim which, according to legal opinion, has a 75% chance of success A customer's claim that is unlikely to succeed finition of rovenue stated hy JERS15 which of the following statements is correct?
The accounting assumption or principle of __________________ is being violated if a company that is a party to major litigation that it may lose decides not to include the information in its financial statements because of the risk of it having a negative impact on the company’s share price. a. Going concern. b. Historical cost. c. Expense recognition. d. Full disclosure.
If there is sudden vacancy of directors in the commercial company and to maintain the minimum requirement what basis do the appointment of directors is made? f Based on decision of creditors ion Temporary Permanent Based on decision of Auditor
If a company estimates that it is "reasonably possible" that it will lose a significant amount in a lawsuit, then this contingent liability: a. should be reported as a liability on the balance sheet. b. should be disclosed in the footnotes to the financial statements. c. need not be disclosed. d. should be reported as a contra-liability on the balance. sheet. e. should be reported as a reduction of stockholders' equity on the balance sheet.
Jordan’s response about the eff ect of Beta’s impairment loss is most likely incorrect withrespect to the impact on its:A. debt to total assets.B. fixed asset turnover.C. cash flow from operating activities.
What type of disclosure or accounting do you believe is necessary for the following items? a. Because of a general increase in the number of labor disputes and strikes, within and outside the industry, there is an increased likelihood that a company will suffer a costly strike in the near future. b. A company reports a material unusual and infrequent loss on the income statement. No other mention is made of this item in the annual report. C. A company expects to recover a substantial amount in connection with a pending refund claim for a prior year's taxes. Although the claim is being contested, counsel for the company has confirmed the client's expectation of recovery.
A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. a. Explain why expected loss and gain are treated differently in accounting in the situation of a lawsuit. b. Give an example of a company that experienced an expected loss and gain due to a lawsuit. Provide the disclosure in their financial statements on gains and losses.
An example of a Type I subsequent event would be A. a sudden change in senior management after the financial statement date B. a filing with the Securities and Exchange Commission (SEC) of an amended form 10K after the financial statement date C. the bankruptcy of a client’s customer after year-end as a result of poor financial condition that existed as of the balance sheet date D. the bankruptcy of a client’s customer after year-end as a result of poor financial condition that existed after the balance sheet date
2. Which is a valid statement regarding recognition of liabilities? * a. A non-interest bearing note is initially recognized at face value. b. A provision should not be O recognized for future operating losses. c. For accumulating compensated absences, an entity should recognize the expense and related liability during the period the absences are incurred by the employees. d. The estimated future costs of supplying awards for customer loyalty program shall be recognized as an expense in the period the award credits are availed of by customers.
For each separate situation, indicate whether Cruz Company should (a) record a liability, (b) disclose in notes, or (c) have no disclosure.
What is the required treatment of each of the below events in the financial statements? Justify your decisions. a) On 25 July 20X9, Carey settled and paid a claim involving prior employees alleging sexual discrimination as a result of promotions announced at the Christmas party in 20X8. Five women who had been overlooked for management promotions undertook legal action in March 20X9. b) On 1 August 20X9, Carey Ltd made an announcement to the Singapore Stock Exchange of its intention to take over a private engineering partnership. This would increase sales revenue of Carey Ltd by 15%. It was to be funded by a 1:10 rights issue. c) On 12 August 20X9, a fire damaged the head office of Carey. The buildings, fixtures and fittings were only partly insured. d) At its 5 September 20X9 meeting, Carey’s board of directors voted to double the advertising budget for the coming year and authorised a change in advertising agencies.

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