Reference no: EM132932266
Questions -
Q1) Jeremiah Company sells warranty service contracts that cover a two-year period. The sales price of each contract is P5,000. Jeremiah's experience shows that of the total pesos spent for repairs in service contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year. Jeremiah sold 1,000 contracts evenly throughout 2020 and 800 contracts evenly throughout 2021. How much should Jeremiah report as contract service revenue for the year ended December 31, 2021?
A. P800,000
B. P3,300,000
C. P4,500,000
D. P2,500,000
Q2) Mother, Inc. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Mother, Inc.'s lawyer states that it is probable that Mother, Inc. will lose the suit and be found liable for a judgment costing Mother, Inc. anywhere from P400,000 to P2,000,000. However, the lawyer states that the most probable cost is P1,200,000. As a result of the given facts, Mother, Inc. should accrue
A. no loss contingency but disclose a contingency of P400,000 to P2,000,000.
B. a loss contingency of P400,000 and disclose an additional contingency of up to P1,600,000.
C. a loss contingency of P1,200,000 and disclose an additional contingency of up to P800,000.
D. a loss contingency of P1,200,000 but not disclose any additional contingency.
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