A Contingent Liability's Dollar Amount Does Not Get Reported on the Balance

question 57

Multiple Choice

A contingent liability's dollar amount does not get reported on the balance sheet if

• A)the probability that the event will occur is low and if the amount cannot be reasonably estimated.
• B)the probability that the event will occur is high and if the amount cannot be reasonably estimated.
• C)the probability that the event will occur is low or if the amount cannot be reasonably estimated.
• D)the probability that the event will occur is high only.
• E)the amount cannot be reasonably estimated only.

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Definitions:

Compounded Semiannually

Refers to the process where interest is added to the principal balance of a loan or deposit twice a year, effectively increasing the amount of interest earned or paid.

Promissory Note

A financial document in which one entity guarantees to pay a certain amount of money to another, either when asked or at an agreed-upon date in the future.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Canadian Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, calculated by Statistics Canada.