Today's question: FAR

Management can estimate the amount of loss that will occur if a foreign government expropriates some company assets. If expropriation is reasonably possible, a loss contingency should be:

A) Disclosed but not accrued as a liability

B) Disclosed and accrued as a liability

C) Accrued as a liability but not disclosed

D) Neither accrued as a liability nor disclosed

Correct Answer: A

Explanation: The key words are "reasonably possible". FASB #5 states that if a loss contingency is reasonably possible, it should be disclosed but not accrued. A loss contingency is accrued only if the loss contingency is probable and the amount of the loss can be reasonably estimated.

Today's question: REG

Attachment and perfection will occur simultaneously when _________________

A) the security agreement so provides.

B) there is a purchase money security interest taken in inventory.

C) attachment is by possession.

D) the goods are sold on consignment.

Correct Answer: C

Explanation: There are only three different ways to perfect: by possession, by filing and perfection by attachment. Possession will not only create the security agreement required for attachment, but will also result in perfection. Thus when attachment is by possession, attachment and possession occur simultaneously. Note that they would also occur simultaneously when perfection by attachment occurs.

The remaining answer choices are incorrect for the following reasons:

• Perfection will not occur merely because the security agreement so provides. You must perfect by one of the three methods.
• No possession or filing occurred and perfection by attachment requires a PMSI creditor in consumer goods, not a PMSI creditor in inventory. Thus, no perfection occurred.
• No possession, filing or perfection by attachment occurred and therefore there is no perfection.

Today's question: BEC

Which one of the following would increase the working capital of a firm?

A) Refinancing a short-term note payable with a two year note payable.

B) Purchase of a new plant financed by a 20-year mortgage.

C) Cash collection of accounts receivable.

D) Payment of a 20-year mortgage payable with cash.