Question

There is a possibility of a safety hazard for a manufactured product. As yet, no claim has been made for damages, though there is a reasonable possibility that a claim will be made. If a claim is made, it is probable that damages will be paid and the amount of the loss can be reasonably estimated. This possible loss must be:

Answer 1

Answer:

Accrued: No; Disclosed: No

Explanation:

In accrual accounting an expense or revenue is only recorded when incurred and earned respectively.

In this instance there is a possibility of a safety hazard for manufactured product.

Since no claim has been made yet we do not accrued any amount.

The principle of full disclosure requires that a business discloses information that significantly influenced a business's financial statement.

No claims have been made on the safety hazard, although there is reasonable possibility a claim can be made and damages can be estimated.

For the business this is irrelevant to be disclosed as no claim has actually been mad that can affect the business.