Question

A loss contingency should be accrued when the amount of loss is known and the occurrence of the loss is: remote reasonably possible

a. no no
b. yes yes
c. yes no
d. no yes

Answer 1

A loss contingency should be accrued when the loss can be reasonably estimated and its occurrence is probable, not when it is remote or only reasonably possible. The correct answer here is option c. yes no.

Step-by-step explanation:

A loss contingency should be accrued when the amount of the loss can be reasonably estimated and it is probable that the loss has occurred or will occur. According to generally accepted accounting principles (GAAP), this means that the loss must not be remote but likely to happen. Thus, a loss contingency should be accrued if the loss is both known and the occurrence is probable. So, the correct option would be c. yes no, implying that the loss should be accrued if the occurrence is probable, not remote or only reasonably possible.