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fire and burned. Beck had had a dispute with the railroad for several
years concerning the ownership of a small parcel of land. The
representative of the railroad has offered to assign any rights the railroad
may have in the land to Beck in exchange for a release of his right to
reimbursement for the loss he has sustained from the fire. Beck appears
inclined to accept the railroad's offer. The railroad's 2010 financial
statements should include the following related to the incident:
recognition of a loss and creation of a liability for the value of the
land.
recognition of a loss only.
creation of a liability only.
disclosure in note form only.
Question 6. (TCO D) Which of the following best describes the cash-
basis method of accounting for warranty costs?
Expensed based on estimate in year of sale
Expensed when liability is accrued
Expensed when warranty claims are certain
Expensed when incurred
Question 7. (TCO D) The term used for bonds that are unsecured
regarding principal is
junk bonds.
debenture bonds.
in-debenture bonds.
callable bonds.
Question 8. (TCO D) On November 1, Year 1, Dixon Corporation
issued $800,000 of its 10-year, 8% term bonds dated October 1, Year 1.
The bonds were sold to yield 10%, with total proceeds of $700,000 plus
accrued interest. Interest is paid every April 1 and October 1. What