Houston Company Is Involved in a Lawsuit

question 5

Multiple Choice

Houston Company is involved in a lawsuit. In which of the following situations is only a note disclosure of the contingent liability reported within the financial statements?

• A)When the loss is remote and the amount cannot be reasonably estimated.
• B)When the loss is probable and the amount can be reasonably estimated.
• C)When the loss is reasonably possible and the amount can be reasonably estimated.
• D)When the loss is remote and the amount can be reasonably estimateD.A contingent liability that is reasonably possible and can reasonably be estimated is disclosed in the notes to the financial statements.

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Definitions:

Significance

The importance or meaning attached to something, often relevant in the context of making legal, social, or scientific determinations or judgments.

Sale of Goods Act

Legislation governing the sale of goods, providing rules on contracts, property transfer, and warranties to protect buyers and sellers.

Fitness and Quality

Standards and criteria that products or services must meet to be considered satisfactory and suitable for their intended purpose.

Principle Of Privity

The Principle of Privity in contract law states that only parties involved in the contract have the right to sue or be sued on that contract, highlighting the exclusivity of contractual obligations and benefits.