Which of the following is the most likely candidate for a contingent liability that must be accrued?
A) Potential liability for a lawsuit in which the firm is a defendant
B) Property tax payable
C) Potential liability on a product that is still in the planning stages (no items have been sold)
D) Warranty liability

Question

Quizplus · Accepted Answer

Warranty liability is a contingent liability that is both probable and can be reasonably estimated, thus it must be accrued. This is because it arises from existing sales and the company can estimate the costs based on past experiences or industry standards.

Which of the Following Is the Most Likely Candidate for a Contingent