When the Amount of a Contingent Liability Can Be Reasonably

question 114

Multiple Choice

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not probable,the company should:

• A)include a description in the notes to the financial statements.
• B)record the amount of the liability times the probability of its occurrence.
• C)accrue the amount of the liability as a long-term liability.
• D)exclude any information about the contingent liability from its financial statements and notes.

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Definitions:

Prohibits Assignment

A clause or legal principle that prevents the transfer of a contract or right from one party to another.

Misrepresentation

The act of providing false or misleading information about a material fact in a transaction.

Contract Price

The amount of money agreed upon by parties involved in a contract for services or goods to be provided or delivered.

Delegatee

A person or party that is designated to act or make decisions on behalf of another, typically in a specified capacity or for particular issues.