When the Amount of a Contingent Liability Can Be Estimated

question 77

Multiple Choice

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.

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Definitions:

Hydronephrosis

Swelling of a kidney due to a build-up of urine, often caused by an obstruction in the urinary tract.

Obstructed Outflow

A blockage that prevents the normal flow of fluids or substances within the body, typically referring to medical conditions affecting organs.

Nephrolithiasis

A medical condition characterized by the formation of kidney stones.

Medulla

The innermost part of an organ or structure, such as the renal medulla in the kidney or the medulla oblongata in the brain.