Which One of the Following Contingencies Must Be Accrued on the Balance

question 3

Multiple Choice

Which one of the following contingencies must be accrued on the balance sheet?

• A)The likely loss on a lawsuit that the firm's attorneys believe will be dropped.
• B)The probable loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.
• C)The reasonably possible loss on a lawsuit that the firm's attorneys believe will be dropped.
• D)The reasonably possible loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.

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Definitions:

Salary

A fixed regular payment, typically paid on a monthly or biweekly basis but often expressed as an annual sum, made by an employer to an employee.

Tax-Deferred Account

A savings account or investment option where taxes on the principal and/or earnings are delayed until the investor withdraws the funds.

Taxable Account

An investment account in which the earnings are subject to income tax.

Compounded Quarterly

The process of adding interest to the principal sum of a loan or deposit, calculated every three months.