Pretty People Incorporated, is the defendant in a pending discrimination lawsuit. What information about the lawsuit would you, as an auditor, need to know to decide whether to disclose the litigation in the financial statements?
What will be an ideal response?
If a negative outcome of the lawsuit is probable and the amount of the contingency can be estimated, the amount will have to be charged to income and appear as a liability in the financial statements. If the event has a reasonably possible chance of having a negative outcome or the amount cannot be estimated, the contingency should be disclosed in the footnotes of the financial statements. In general, loss contingencies that are judged to be remote are neither accrued in the financial statements nor disclosed in the footnotes.
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Sharon owes Lawrence Co $15,000 on a note payable, plus $3,000 of unpaid interest. Lawrence agrees to accept equipment in full settlement of the debt. The equipment is recorded on Sharon's books at $12,000, and it is currently worth $14,200. What types and amounts of gains or losses, if any, should be recorded by Sharon on this troubled debt restructuring?
A) ?No gain or loss should be recognized. B) ?Gain on Debt Restructure, $6000 C) ?Gain on Debt Restructure, $3,800; Gain on Disposal of Equipment, $2,200 D) ?$6,000 Gain on Debt Restructure, $800; Gain on Disposal of Equipment, $2,200
The application of GAAP requires firms to write down assets whose fair values decrease below their book values, but does not allow firms to revalue upward the values of assets whose fair values have increased. This asymmetric treatment rests on the ________________________________________
Fill in the blank(s) with correct word
Select the statement that, ethically speaking, best represents a valid concept of what loyalty to a firm means.
A. While a willingness to sacrifice might be a part of loyalty, it would seem that devotion and faithfulness to a common good is both more essential to loyalty and what explains the willingness to sacrifice. B. Loyalty means a willingness to sacrifice one's own interest by going above and beyond ordinary employee responsibilities. C. Since the model of agency law lays a legal duty of loyalty on employees, employees clearly have a corresponding ethical responsibility to be loyal. D. Loyal employees are expected to sacrifice for the firm even though the firm is not necessarily bound to sacrifice for the employee.
Regression analysis can be performed using one or more activities to predict costs
Indicate whether the statement is true or false