In Accounting for a Contingent Liability, If the Likelihood of the Obligation

question 101

Multiple Choice

In accounting for a contingent liability, if the likelihood of the obligation is probable and the amount can be estimated, a company must

• A) report the liability on the balance sheet.
• B) provide disclosure in the footnotes to the financial statements.
• C) not recognize the liability until it is certain and the exact amount is known.
• D) do nothing.

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Definitions:

Ice-cube Relays

Small, plug-in electromechanical relays that resemble the size and shape of an ice cube, used for various control applications.

Arc Chutes

Protective devices designed to extinguish electrical arcs that can occur in switchgear or circuit breakers, by dividing and cooling the arc.

Pull-in Current

The current required to bring an electric motor up to full operational speed from a standstill.

Dropout Current

The minimum current level at which a device, like a relay, deactivates or returns to its "off" state.