A contingency liability that is remote MULTIPLE CHOICE QUESTIONS 1. If an event makes it probable that a company will experience a cash outflow but it cannot reasonably estimate the amount, the contingent liability a. should be recorded in the accounts. b. should be disclosed in the notes to the financial statements. c. should not be recorded or disclosed in the notes until the contingency actually happens. d. must be paid for the amount estimated. 2. The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense a. when the product is brought in for repairs. b. in the period in which the product was sold. c. at the end of the warranty period. d. only if the repairs are expected to be made within one year. 3. If an event may become an actual liability in the future, it is called a a. potential liability. b. hypothetical liability. c. probabilistic liability. d. contingent liability. 4. A contingency liability that is remote a. should be disclosed in the financial statements. b. must be accrued as a loss. c. does not need to be disclosed. d. is recorded as a contingent liability. 5. The accounting for warranty costs is based on the a. going concern principle. b. expense recognition principle. c. conservatism principle. d. objectivity principle. Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help
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