When the Amount of a Contingent Liability Can Be Estimated

question 22

Multiple Choice

When the amount of a contingent liability can be estimated and it is likely,the company should:

• A)include a description in the footnotes to the financial statements.
• B)record the estimated 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:

Merchant

An individual or business entity engaged in the sale and purchase of goods for profit.

Consideration

A legal concept that refers to something of value exchanged between parties to form a binding contract.

Article 2

Article 2 of the Uniform Commercial Code (UCC) deals with the sale of goods, providing guidelines and rules for transactions involving the purchase and sale of goods.

Stocks And Bonds

Financial instruments, with stocks representing ownership in a company and bonds being loans made to a corporation or government.