Part A:

Question: A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if:

1. The likelihood of a loss is probable.

2. The incurrence of a loss is more likely than not.

3. The incurrence of a loss is reasonably possible.

4. The likelihood of a loss is remote.

Question Part B: The method that does not necessarily produce a declining pattern of depreciation over an asset's service life is:

1. All of these answer choices produce a declining pattern.

2. The sum-of-the-years'-digits method.

3. The double-declining-balance method.

4. The units-of-production method

Part C: False Value Hardware began 2016 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. False Value estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts.

What is the balance in the allowance for sales returns account at the end of 2016?

$21,000.

$39,000.

$43,000.

$11,000.