Financial & Managerial Accounting 3rd Edition by Charles Horngren,Harrison, Walter,Suzanne Oliver

Exercise 20

Interpreting an actual company's contingent liabilities
Farley Motors, Inc., a motorcycle manufacturer, included the following note (adapted) in its annual report:

Requirements
1. Why are these contingent (versus actual) liabilities
2. How can a contingent liability become an actual liability for Farley Motors What are the limits to the company's product liabilities in the United States