CPA Far Quiz
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SELECT FINANCIAL STATEMENT ACCOUNTS
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A for-profit entity has a long-term supply contract that requires it to purchase a minimum quantity each year. As of December 31, 20X5, the entity has not met the minimum, but the supplier has not billed any penalty and management believes it is likely the supplier will enforce the penalty of $120,000 based on past practice; the amount is reasonably estimable. Under FASB ASC 450 (Contingencies) and ASC 405, what is the most appropriate treatment at December 31, 20X5?
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