Intermediate Accounting Vol. 2 exam questions and verified correct answers

Warranty Provision - correct answer -has a present obligation -it is probable -can be measured reliably past event - correct answer referred to as the obligating event. true - correct answer warranty results in an outflow of resources. true - correct answer where no reliable estimate can be made, no warranty liability is recognized. accrual approach - correct answer -has the soundest theoritical support -it properly matches cost with revenue provision - correct answer -both probable and measured reliably. actual warranty cost - correct answer -is analyzed to validate the original estimate. legal obligation - correct answer obligation arising from a contract, legislation or other operation of law. change in estimate - correct answer difference between estimate and actual cost constructive obligation - correct answer obligation derived from an entity's actions where: -it will accept certain responsibilities -valid expectation expense as incurred approach - correct answer -approach of expensing warranty cost only when actually incurred. obligating event - correct answer -past event that leads to a present obligation Provision - correct answer -existing liability of uncertain timing and uncertain amount. obligating event - correct answer -an event that creates legal or constructive obligation outflow of resources - correct answer regarded as probable if the event is more likely than not to occur.