61. How is the pension expense calculated for a defined-contribution plan?
A. Based on the contributions made by the employer that year.
B. Based on the expected portion of future benefits that were earned that period.
C. Based on the expected portion of current benefits that were earned that period
D. Based on the amount that the employer should contribute this year to meet the future expected benefit earned this year.
62. Contingent liabilities will become actual liabilities depending on:
A. the outcome of a future event.
B. the degree of uncertainty surrounding the outcome of a future event.
C. a decision by the board of directors to record the liability.
D. whether they are probable and estimable.
63. Gain contingencies, which are significant and likely and can be reasonably estimated:
A. should be disclosed in a note to the financial statements.
B. should be reported in the body of the financial statements.
C. may be reported in the body of the financial statements.
D. should not be reported or disclosed until the gain is realized.
64. A contingent liability, which is significant, probable, and can be reasonably estimated:
A. should be disclosed in a note to the financial statements.
B. should be reported as a provision in the body of the financial statements.
C. may be reported in the body of the financial statements.
D. should not be reported or disclosed.
65. A contingent liability or asset whose existence and amount has to be confirmed by some future event:
A. should be disclosed in a note to the financial statements.
B. should be reported as a provision in the body of the financial statements.
C. may be reported in the body of the financial statements.
D. should not be reported or disclosed.
66. All of the following are examples of contingent losses except?
A. Lawsuits
B. Income tax reassessments
C. Guarantees of third party debt
D. Warranties
67. Portage La Prairie Company is currently being audited by the tax authorities with respect to a deduction they claimed two years ago. If they are reassessed, the amount they will owe could be as high as $2,000,000. Neither their accountant nor their attorney has been able to tell them how likely it will be that they will owe the additional taxes. How should Portage La Prairie Company report the situation?
A. They should go back and restate the income statement from two years ago.
B. They should accrue a liability this period.
C. They should disclose the potential liability in the notes.
D. They should do nothing.
68. Portage La Prairie Company is currently being audited by the tax authorities with respect to a deduction they claimed two years ago. If they are reassessed, the amount they will owe could be as high as $2,000,000. Their accountant has been unable to tell them how likely it is that they will owe the additional taxes. This is an example of which of the following?
A. An accrued liability
B. A contingent liability
C. A contingent asset
D. A future income tax liability
69. A former employee was fired last year for stealing $500 from the company's petty cash drawer. The former employee is now suing the company for wrongful dismissal on the grounds that they should never have put him in-charge of the petty cash drawer. The company's lawyer does not think there is any chance the employee could win their suit. How should the company report the situation?
A. They should go back and restate the income statement from last year.
B. They should accrue a liability this period.
C. They should disclose the potential liability this period.
D. They should do nothing.
70. Which of the following is an example of an executory contract?
A. A warranty obligation on a product sold.
B. Interest accrued on an outstanding loan.
C. An agreement to purchase inventory next month.
D. The purchase of goods from a supplier.