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14 May, 08:22

Which of the following is a contingency that would most likely require accrual? Sales tax payable. Customer premium offers. Potential liability on a product where none have yet been sold. Potential claims on extended warranties.

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  1. 14 May, 10:18
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    The correct answer is B

    Explanation:

    The contingency is the plan, which is course of action for the business that would take if an unexpected situation occur. So, the contingency plan is the plan or method which ensures that the business is prepared for what may come.

    Accrual for contingency, it is the information which is available previously to issuance of the financial statements that indicates the assets has been impaired and the loss amount could be reasonably estimated.

    The one which is most likely need the accrual is the customer premium offers as it is the technique of sales promotion where the customers are provided two or more products and they pay the price lower of the combined products.
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