When a Company Encounters a Contingent Liability That Is Remote

question 98

Multiple Choice

When a company encounters a contingent liability that is remote in likelihood, 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 on the balance sheet.
• D) omit the information about the contingent liability from its financial statements and footnotes.

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Definitions:

Null Hypothesis

In statistics, a statement suggesting that there is no significant effect or difference, and any observed deviation is due to random chance.

Chi-Squared Test

A statistical test used to determine if a significant relationship exists between two categorical variables by comparing observed and expected frequencies.

Contingency Table

A table used in statistics to summarize the distribution of two categorical variables, showing the frequency at which certain combinations of the variables occur.

Alternative Hypothesis

The hypothesis that there is a significant difference between groups or conditions, as opposed to the null hypothesis.