Under What Condition Should a Pending Lawsuit Be Recognized as a Liability

question 74

Multiple Choice

Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet?

• A)The amount can be reasonably estimated.
• B)The outcome is probable.
• C)The outcome is reasonably possible.
• D)The outcome is probable and can be reasonably estimated.

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Definitions:

Collateral

Assets pledged by a borrower to secure a loan or other credit, ensuring the lender can seize these assets if the borrower fails to repay.

C-Corporation

A C-Corporation is a business structure where the owners or shareholders are taxed separately from the entity, which is recognized as a legal entity under U.S. law.

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two different levels, such as corporate earnings and shareholder dividends.

Proprietorship

A business owned and operated by an individual, where the owner is personally responsible for the business's debts.