Contingent Liabilities Are

question 19

Multiple Choice

Contingent liabilities are:

• A) recognised in the financial statements unless the possibility of an outflow in settlement is remote.
• B) recognised in the notes to the financial statements unless the possibility of an outflow in settlement is remote.
• C) recognised in the notes to the financial statements because the possibility of an outflow in settlement is remote.
• D) not recognised in the notes to the financial statements because the possibility of an outflow in settlement is remote.

---

Definitions:

Contract Interest Rate

The rate of interest stated in a loan or credit agreement that must be paid on the principal by the borrower.

Bond Discount

The variance in price between the face value of a bond and the amount it fetches on the market, specifically when sold at a price less than the face value.

Straight-Line Method

A method of calculating depreciation by evenly spreading the cost of an asset over its useful life.

Semiannual Interest

Refers to the payment of interest on a loan or financial instrument every six months.