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

question 130

Multiple Choice

In accounting for a contingent liability, if the likelihood of the obligation is remote, a company should

• A) recognize the liability and report it on the balance sheet.
• B) provide disclosure in the footnotes to the financial statements.
• C) report an allowance account on the balance sheet.
• D) do nothing.

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Definitions:

Need for Stimulation

A psychological drive for sensory or intellectual arousal and experiences that are varied, novel, complex, and intense.

Social Approval

The act of seeking validation or acceptance from others in a social context.

Synthetic Ideas

Concepts or notions formed by combining different ideas, elements, or components in new and innovative ways, often leading to novel solutions or creations.

Divergent Thinking

A cognitive process used to generate creative ideas by exploring many possible solutions, often leading to novel or unconventional outcomes.