Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Gain contingencies usually are recognized in the income statement when:

they are realized or virtually certain to be realized.

they are possible but not probable.

they are probable but not yet realized.

management believes they will occur in the future.

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Verified step by step guidance

Understand the concept of gain contingencies: Gain contingencies refer to potential gains that may arise from uncertain future events. These are not recorded in financial statements until certain criteria are met.

Review the accounting principle for gain contingencies: According to accounting standards, gain contingencies are recognized only when they are realized or virtually certain to be realized. This ensures that financial statements are not misleading by including speculative gains.

Analyze the options provided: Evaluate each option against the accounting principle for gain contingencies. For example, gains that are 'possible but not probable' or 'probable but not yet realized' do not meet the criteria for recognition.

Focus on the correct condition for recognition: Gains are recognized in the income statement only when they are realized or virtually certain to be realized. This ensures that the financial reporting is conservative and reliable.

Conclude the reasoning: Based on the analysis, the correct answer aligns with the principle that gain contingencies are recognized when they are realized or virtually certain to be realized, as this is the standard practice in financial accounting.