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NEW QUESTION: 1
Because of a defect discovered in its seat belts in December Year 1, an automobile manufacturer believes it is probable that it will be required to recall its products. The final decision on the recall is expected to be made in March Year 2. The cost of the recall is reliably estimated to be US $2.5 million. How should this information be reported in the December 31, Year 1, financial statements?
A. As an appropriation of retained earnings of US $25 million.
B. It should not be disclosed because it has not yet happened.
C. As an adjustment of the opening balance of retained earnings equal to US $25 million
D. As a loss of US $2.5 million and a provision of US $2.5 million.
Answer: D
Explanation:
A provision is a liability of uncertain timing or amount. Recognition of provisions is appropriate when the entity has a legal or constructive present obligation resulting from a past event called an obligating event), it is probable that an outflow of economic benefits will be necessary to settle the obligation, and its amount can be reliably estimated. Consequently, the company must recognize a loss and a liability for US $2.5 million.

NEW QUESTION: 2

A. Option D
B. Option C
C. Option B
D. Option A
Answer: A

NEW QUESTION: 3

A. Option C
B. Option B
C. Option D
D. Option A
Answer: D

NEW QUESTION: 4
Which protocol allows for IP mobility in-between Data Centers?
A. OTV
B. VXLAN
C. FABRIC PATH
D. LISP
Answer: D