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When is a contingent liability recorded?

a. When the amount can be reasonably estimated.

b. When the future events are probable to occur and the amount can be reasonably estimated.

c. When the future events are probable to occur.

d. When the future events will possibly occur and the amount can be reasonably estimated.

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Joshua Stredder
Joshua StredderLv10
3 Feb 2021
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Related questions

Listed below are several terms and phrases associated with current liabilities. Mach each List A to B

List A

1, Cash, current investments, and A/R all divided by current liabilities.

2, Payment is probable and can be reasonably estimated.

3, Gift cards

4, Long-term debt maturing within one year

5, Social Security and Medicare

6, Interest expense is recorded in the period interest is incurred rather than in the period interest is paid.

7, payment is reasonably possible and can be reasonably estimated.

8, Incurred on a notes payable.

9, Unsecured notes sold in minimum denominations of $25,000 with up to 270 days.

10, Classifying liabilities as either current or long-term helps inverstors and creditors assets this.

List B

a, Recoding a contingentliability

b, disclosure of a contingent liability

c, Interest expense

d, FICA

e, Commercial paper

f, The riskiness of a business's obligations

g, Current portion of Long-term debt

h, Unearned revenue

i, Acid=test ratio

j, Accual Accounting

18. When the amount of a contingent liability can be estimated and its likelihood is possible but not probable, the company should: A) include a description in the footnotes to the financial statements. B) record the amount of the liability times the probability of its occurrence. C) record the amount of the liability as a long-term liability. D) omit the information about the contingent liability from its financial statements and footnotes.

For each of the following, determine the correct way to treat the situation: i.e. record in the books, disclosure required or no reporting needed and any amount that is to be reported or disclosed.

A, The likelihood of a payment occurring is probable, and the estimatd amount is $1.3 million

B, The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $1.1 million to $1.6 million.

C, The likelihood of a payment occurring is reasonably possible, and the estimated amount is $1.3 million.

D, The likelihood of a payment occurring is remote, while the estimated potential amount is $1.3 million.

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