If a Contingent Liability Is Reasonably Estimable and It Is

question 61

Multiple Choice

If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur the contingent liability

• A) should be recorded in the accounts.
• B) should be disclosed in the notes accompanying the financial statements.
• C) should not be recorded or disclosed in the notes until the contingency actually happens.
• D) must be paid for the amount estimated.

Calculate key financial ratios and analyze financial data.

Understand the errors made during the adjusting entry process and their impacts.

Explain the purpose and process of reversing entries.

Understand the significance of the post-closure trial balance and the difference between permanent and temporary accounts.

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Definitions:

Critical Path

The longest pathway in a CPM/PERT network.

Liquidity Ratios

Financial metrics used to evaluate a company's ability to pay off its short-term liabilities with its liquid assets.

Current Assets

Financial assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of the business, whichever is longer.

Current Liabilities

Short-term financial obligations due within one year or within the company's operating cycle.