F4 - Contingencies and Commitments

Question 1

What amount of liability should a company report on its balance sheet related to the lawsuit if there is no exact amount only estimate?

Answer 1

Always go for the lowest amount on the estimate

Question 2

Which of the following methods should a company use to account for a contingent liability when the loss is probable but not reasonably estimated?

Answer 2

A contingent liability that is probable but cannot be reasonably estimated should be disclosed in the financial statements but not recorded as an adjustment in the financial statements.

Question 3

What is the underlying concept governing the generally accepted accounting principles pertaining to recording gain contingencies?

Answer 3

The accounting concept of conservatism applies: “anticipate all losses but not gains.”

Question 5

reasonably possible we will

Answer 5

Disclosed but not accrued.

Question 6

probable contingency

Answer 6

Accrual and disclosure

Question 7

should Green recognize as a contingency gain in its financial statements?

Answer 7

Gain contingencies are not reflected in the financial statements because to do so may cause recognition of revenue prior to its realization