When the Amount of a Contingent Liability Cannot Be Estimated

question 48

Multiple Choice

When the amount of a contingent liability cannot be estimated and its possible but not probable,the company should:

• A)include a description in the footnotes to the financial statements.
• B)record the amount of the liability times the probability of its occurrence.
• C)record the liability and estimated amount of the loss on the balance sheet.
• D)omit the information about the contingent liability from its financial statements and footnotes.

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Definitions:

Psychotic Disorder

A mental health condition characterized by disconnection from reality, which can include delusions and hallucinations.

Schizophrenia

A chronic brain disorder characterized by distorted thinking, perceptions, emotions, and behavior, often manifesting in hallucinations, delusions, and disorganized speech.

Occupational Functioning

Refers to the capacity and performance level of an individual in their professional role or work environment.

Reality Testing

A psychological process in which an individual differentiates between the external world and internal thoughts and perceptions.