When a Company Encounters a Contingent Liability That Is Remote

question 120

Multiple Choice

When a company encounters a contingent liability that is remote in likelihood,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)record the amount of the liability as a long-term liability on the balance sheet.
• D)exclude the information about the contingent liability from its financial statements and notes.

---

Definitions:

Primordial Follicles

The earliest stage of development of an ovarian follicle, consisting of an oocyte surrounded by a single layer of granulosa cells.

Graafian Follicles

Mature ovarian follicles that are ready to release an egg during ovulation, named after Regnier de Graaf.

Bulbourethral Gland

One of two small compound glands that produce a mucoid secretion; it discharges through a small duct into the spongy urethra.

Prostate

A gland in the male reproductive system that surrounds the urethra below the bladder, contributing to the production of semen.