Q1) How should a loss contingency that is probable for which the amount of the loss can be reasonably estimated be accounted for?

A. Report as part of comprehensive income B. Report in the income statement, accrue on the balance sheet, and disclose as a footnote to the financial statements C. Disclose in a footnote, with no recognition in the income statement D. Neither recognize in the income statement nor disclose in a footnote

Q2) Presented below is a condensed income statement for Aussie Direct Gear for its first year of operations:

Revenues	$330,000
Expenses	220,000
Income before taxes	$110,000

The expenses include an accrual for bad debt expense of $9,950 in Year 1 and $9,650 during Year 2. Actual write offs occur in the year following the accrual. Aussie Direct Gears effective income tax rate is 34%. How much is the company's income tax payable at the end of Year 1?

	A.	$ 1,683
	B.	$34,017
	C.	$40,783
	D.	$37,400