64 which of the following statements about contingent liabilities is incorrect a a d 4314133

64.Which of the following statements about contingent liabilities is incorrect?

A. A disclosure note is required when the loss is reasonably possible and the amount cannot be reasonably estimated.

B. A disclosure note is required when the loss is probable and the amount can be reasonably estimated.

C. A disclosure note is required when the loss is reasonably possible and the amount can be reasonably estimated.

D. A disclosure note is required when the loss is remote and the amount can be reasonably estimated.

65.Rice Corporation's attorney has provided the following summaries of three lawsuits against Rice:

• Lawsuit A: The loss is probable, but the loss cannot be reasonably estimated.

• Lawsuit B: The loss is reasonably possible, but the loss cannot be reasonably estimated.

• Lawsuit C: The loss is reasonably possible and can be reasonably estimated.

Which of the following statements is correct? 

A. A disclosure note is required for each of the three lawsuits.

B. A disclosure note is required only for lawsuits A & C.

C. A disclosure note is required only for lawsuit A.

D. A disclosure note is required only for lawsuits B & C.

66.Rice Corporation's attorney has provided the following summaries of three lawsuits against Rice:

• Lawsuit A: The loss is probable, but the loss cannot be reasonably estimated.

• Lawsuit B: The loss is reasonably possible, but the loss cannot be reasonably estimated.

• Lawsuit C: The loss is reasonably possible and can be reasonably estimated.

Which of the following statements is incorrect? 

A. A disclosure note is required for lawsuit A.

B. A disclosure note is required for lawsuit B.

C. A disclosure note is required for lawsuit C.

D. Lawsuit A is reported on the balance sheet as a liability.

67.Darwin Corporation's attorney has provided the following summaries of three lawsuits against Darwin:

• Lawsuit A: The loss is probable and the loss can be reasonably estimated.

• Lawsuit B: The loss is reasonably possible and the loss cannot be reasonably estimated.

• Lawsuit C: The loss is reasonably possible and the loss can be reasonably estimated.

Which of the following statements is incorrect? 

A. A disclosure note is required for lawsuit A.

B. A disclosure note is required for lawsuit C.

C. A disclosure note is not required for lawsuit B.

D. Lawsuit A is reported on the balance sheet as a liability.

68.With regard to reporting of contingent liabilities, U.S. GAAP and International Financial Reporting Standards (IFRS) differ in defining the term “probable”. Which of the following is correct with regard to defining “probable”? 

A. Under U.S. GAAP, “probable” means an event is more likely than not to occur.

B. Under IFRS, “probable” means an event is likely to occur.

C. Under IFRS, “probable” means an event is more likely than not to occur.

D. Under U.S. GAAP, “probable” means an event is more than likely to occur.

69.Which of the following results in a decrease in working capital? 

A. Supplies purchases with cash.

B. Purchase of a truck in exchange for factory machinery.

C. Acquisition of land in exchange for stock.

D. Purchase of equipment with cash.

70.Smith Corporation entered into the following transactions:

• Purchased inventory on account.

• Collected an account receivable.

• Purchased equipment using cash.

Which of the following statements about Smith's transactions is correct? 

A. The inventory purchase on account increased working capital.

B. Collecting an account receivable increases working capital.

C. The equipment purchase decreases working capital.

D. The inventory purchase on account decreases working capital.

71.Smith Corporation entered into the following transactions:

• Purchased inventory on account.

• Collected an account receivable.

• Purchased equipment using cash.

Which of the transactions for Smith Corporation resulted in an increase in working capital? 

A. The inventory purchase on account.

B. Collecting an account receivable.

C. The purchase of equipment using cash.

D. None of the transactions resulted in an increase in working capital.

72.SRJ Corporation entered into the following transactions:

• The accrual of interest expense on a six-month note payable.

• Collected cash for services to be provided within the next six months.

• The reclassification of short-term debt to long-term debt.

Which of the transactions for SRJ Corporation resulted in a decrease in working capital? 

A. The accrual of interest expense.

B. Collecting cash for services to be provided in the future.

C. The reclassification of short-term debt to long-term debt.

D. Both the accrual of interest expense and the reclassification of short-term debt to long-term debt.

73.SRJ Corporation entered into the following transactions:

• The accrual of interest expense on a six-month note payable.

• Collected cash for services to be provided within the next six months.

• The reclassification of short-term debt to long-term debt.

Which of the transactions for SRJ Corporation resulted in an increase in working capital? 

A. The accrual of interest expense.

B. Collecting cash for services to be provided in the future.

C. The reclassification of short-term debt to long-term debt.

D. Both the reclassification of short-term debt to long-term debt and the collection of cash for future services.

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