When a Material Gain Contingency Is Probable and the Amount

question 60

Multiple Choice

When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:

• A) Reported in the income statement and disclosed.
• B) Offset against shareholders' equity.
• C) Disclosed but not recognized in the income statement.
• D) Neither recognized in the income statement nor disclosed.

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Definitions:

Entire Amount

The full or total quantity or sum without deduction or exception.

Insurance Claimed

The process of requesting payment from an insurance company for covered losses or policy benefits.

Legal Standard of Care

The extent of carefulness and precaution demanded from a person obligated to exercise a duty of care.

Acceptable Standard

A recognized level of quality or attainment that is considered satisfactory.