Which of the Following Is the Proper Treatment for a Contingency

question 78

Multiple Choice

Which of the following is the proper treatment for a contingency that is probable but the exact amount of which is not known? The amount can be estimated.

• A) The liability should be doubled following conservatism.
• B) 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:

Tangent

A straight line that touches a curve at a single point without crossing it at that point.

Long-run Equilibrium

A state in a market where all firms are making normal profits, with no incentives for entry or exit, and all factors of production are variable.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers.

Long Run

A period of time in which all factors of production and costs are variable, allowing companies to adjust to market changes.