Which of the Following Statements Best Describes a Contingent Liability

question 35

Multiple Choice

Which of the following statements best describes a contingent liability? A contingent liability is a:

• A)liability,the amount of which is known and which definitely must be paid.
• B)potential liability that has arisen because of a past transaction or event,but its ultimate outcome will not be known until a future event occurs or fails to occur.
• C)liability that will only be incurred if a particular future event takes place.
• D)potential liability that will be incurred if a natural disaster happens.

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Definitions:

Corporate Profits Tax

A levy placed on the profit of a firm, with different rates used for varying levels of profit.

Individual Income Tax Rate

The percentage at which an individual's earned income is taxed by the government, which can vary depending on the level of income and other factors.

Corporate Sector

The segment of the economy that is comprised of companies or corporations and is distinguished from the public sector and private individuals.

Noncorporate Sector

The part of the economy composed of households and unincorporated businesses, contrasted with the corporate sector which consists of incorporated businesses.