When the Amount of a Contingent Liability Cannot Be Reasonably

question 11

Multiple Choice

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,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 footnotes.

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Definitions:

Trade Specialization

The economic practice where countries or regions focus on producing goods and services in which they have a comparative advantage, leading to increased efficiency and productivity.

Trade Surplus

Occurs when a country's exports exceed its imports during a specific time period, indicating a positive balance of trade.

Bilateral Trade Agreement

An agreement between two countries that lowers tariffs and trade barriers on most goods and services traded between them.

Exports

Goods or services produced in one country and sold to buyers in another, contributing to a country's economy by bringing in revenues.