F4 M2: Contingencies and Commitments

Question 1

Contingent Liabilities are based on

Answer 1

uncentainty regarding future events.
- A condition exists, but how that condition will be resolved is unknown at 12/31.

Question 2

Gurantees of indebtedness - Cosign for another - must be disclosed even if the chances are

Answer 2

remote

Question 3

Probable (-70%), or more likely than note, and amount can be estimated

Answer 3

-Recognize - Debit to Estimated Loss/Expense and Credit to Estimated Liabiltiy

Question 4

Probable but not estimated

Answer 4

• Footnote disclosure only
• Alerts the users of financial statements to the potential liabilty

Question 5

Reasonable Possible (50/50)

Answer 5

• Footnote disclosure only, nature , and possible amount of loss

Question 6

Remote

Answer 6

• No disclosure

Question 7

Co-Sign for another party

Answer 7

• Must disclose even if remote

Question 8

With a contingent liablility such as a lawsuit, if you are given the most likely amount then

Answer 8

accrue for this amount as an accrued liability

Question 9

Gain contingencies are

Answer 9

NOT recognized
-Foot note disclosure only

Question 10

If a loss is probable,** but no amount is more likely than any other**, book the ___________ in the range.

Answer 10

amount