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ser-zykov [4K]
3 years ago
9

Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2013 of a circuit

flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $2 million. The fiscal year ends on December 31.Required:a. Should this loss contingency be accrued, disclosed only, or neither? Explain.b. What loss, if any, should Sound Audio report in its 2013 income statement?c. What liability, if any, should Sound Audio report in its 2013 balance sheet?d. Prepare any journal entry needed.
Business
1 answer:
Vlad [161]3 years ago
5 0

Answer:

1) This is a loss contingency. a liability is accrued if it is both probable that the confirming event will occur and the amount can be at least reasonably estimated.

2) loss: 2,000,000

3) liability: 2,000,000

4) loss- product recall 2,000,000

liability- product recall 2,000,000

a disclosure note is appropriate

Explanation:

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Answer for the question:

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Download pdf
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Answer:

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Company executives tends to pursue personal interests at the expense of the shareholders who are the bona fide owners of the business.

This selfish interest pursuance is playing out because the CEO's remuneration packages cannot be said to be justifiable in that they are not linked to any performance metrics such as the level  of profits posted.

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