Contingent Liabilities Whose Ultimate Payment Is Reasonably Probable Should Be

question 39

Multiple Choice

Contingent liabilities whose ultimate payment is reasonably probable should be

• A)recorded in the body of the balance sheet.
• B)disclosed in the footnotes to the financial statements.
• C)ignored.
• D)disclosed in the auditor's report.

---

Definitions:

Capital Lease

A lease agreement in which the lessee essentially acquires all the risks and rewards of ownership, akin to a financial purchase.

Operating Lease

A leasing agreement for the use of an asset, where the lessee does not assume the risk of ownership.

Benefits and Risks

An assessment of the positive outcomes (benefits) and potential negative outcomes (risks) associated with a decision or action.

Straight-Line Amortization

A method of allocating the cost of an intangible asset over its useful life in equal installment.