A Contingent Liability Is Recorded in the Accounting Records

question 4

Multiple Choice

A contingent liability is recorded in the accounting records

• A)if a reasonable estimate of the expected loss can be determined and if it is probable.
• B)if the contingency has not already been disclosed in the notes to the financial statements.
• C)if it will possibly become an actual liability,and the exact amount is unknown.
• D)under no circumstances.

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Definitions:

Price-Taker Firm

A business that has no control over the market price of its products and must accept the prevailing market price.

Economic Profit

The difference between a firm's total revenue and its total costs, including both explicit and opportunity costs.

Opportunity Cost

The highest valued alternative that must be sacrificed as a result of choosing an option.

Economic Losses

The decrease in wealth or resources experienced by an individual, organization, or country, typically measured by cost incurred that are not offset by gains.