Which of the Following Is the Proper Treatment for a Liability

question 23

Multiple Choice

Which of the following is the proper treatment for a liability that exists, but the exact amount of which is not known? Assume the probability of loss is probable and the amount of the loss can be estimated.

• A)The liability should be doubled following conservatism.
• B)The amount of the liability should be estimated and recorded.
• C)The liability should be ignored.
• D)The liability should be reported in the notes to the financial statements.

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Definitions:

Linear Model

A statistical method that models the relationship between a dependent variable and one or more independent variables using a linear equation.

Kilowatt-Hours

Kilowatt-hours, abbreviated kWh, measure energy usage or production over time, indicating the amount of energy equivalent to the steady power of one kilowatt running for one hour.

Linear Model

A model that describes a linear relationship between two or more variables, where the change in the dependent variable is proportional to the change in the independent variables.

Electricity Usage

The amount of electrical energy consumed by a household, business, or device.