Which of the Following Is TRUE of a Contingent Liability

question 217

Multiple Choice

Which of the following is TRUE of a contingent liability?

• A) It is a potential liability that depends on a future event.
• B) It is an actual liability that is difficult to estimate.
• C) It is an actual liability that depends on a past event.
• D) It is a liability resulting from a lawsuit settled in court.

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Definitions:

Reportable

Information or events significant enough to be disclosed in financial statements or to regulatory bodies.

Operating Segment

A component of a company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the same company.

Consolidated Assets

The total assets of a parent company and its subsidiaries, combined into one financial statement as if they were a single entity.

Asset Test

A measure of a company's liquidity, calculated by comparing its most liquid assets to its current liabilities.