Houston Company Is Involved in a Lawsuit

question 33

Multiple Choice

Houston Company is involved in a lawsuit.In which of the following situations is only a note disclosure of the contingent liability reported within the financial statements?

• A)When the loss is remote and the amount cannot be reasonably estimated.
• B)When the loss is probable and the amount can be reasonably estimated.
• C)When the loss is reasonably possible and the amount can be reasonably estimated.
• D)When the loss is remote and the amount can be reasonably estimated.

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Definitions:

Current Ratio

A financial ratio indicating a firm's capacity to settle short-term debts due within a year, determined by dividing its current assets by its current liabilities.

Marketable Securities

Financial instruments and assets that are easily liquidable and can be converted into cash quickly at a reasonable price.

Sales on Account

Revenues generated from sales where payment is deferred to a later date.

Ending Accounts Receivable

The amount of money owed to a company by its customers for goods or services delivered or used but not yet paid for at the end of an accounting period.