Which of the Following Is an Example of a Contingent

question 160

Multiple Choice

Which of the following is an example of a contingent liability?

• A)A liability for notes payable with interest included in the face amount
• B)The liability for future warranty repairs on computers sold during the current period
• C)A lawsuit being threatened but not yet filed against a restaurant chain for improper preparation of food
• D)A corporate long-term employment contract with the chief executive officer

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Definitions:

Aging

A method used in accounting to categorize a company's accounts receivable according to the duration of time an invoice has been outstanding.

Allowance Account

An account used to reduce the carrying amount of accounts receivable or loans to their net realizable value, reflecting expected losses due to uncollectibility.

Aging

A method used to categorize accounts receivable based on the length of time an invoice has been outstanding.

Accounts Receivable

Unpaid customer debts to a company for goods or services that have been supplied.