Onopea Inc. considered two contingencies at the end of 2016: ** a probable loss in the range of $200,000 to $800,000
** a reasonably possible loss of $150,000
Under U.S. GAAP, what is the balance for contingent liabilities at the end of 2016?
A) $200,000
B) $500,000
C) $350,000
D) $650,000

Question

Quizplus · Accepted Answer

Under U.S. GAAP, if a loss is probable and can be reasonably estimated, the minimum amount in the range should be accrued. Therefore, the probable loss of $200,000 should be recorded as a contingent liability. The reasonably possible loss is not accrued.