Which of the Following Statements Regarding Contingent Liabilities Is True

question 50

Multiple Choice

Which of the following statements regarding contingent liabilities is true?

• A)If they are probable and estimable, then they must be recorded even before the outcome of the future event.
• B)If they are probable and estimable, then they should be disclosed in the notes to the financial statements.
• C)The accounting principle that determines whether a contingent liability is to be recorded is that of Historical Cost.
• D)Contingencies that are not estimable should not be recorded or disclosed in the financial statements even if they are probable.

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Definitions:

Assemblers

Individuals or machines that put together components to create a finished product.

Partnership

A legal form of business operation between two or more individuals who share management and profits.

Ratio

A mathematical expression that compares two quantities and shows the relative size of one quantity to the other.

Original Ratio

Original ratio refers to the initial proportional relationship between two or more quantities before any changes are made.