Which of the following is a contingent liability?
A) Unearned revenues
B) Excise tax payable
C) Payroll liabilities
D) Disputed additional tax assessment

Question

Quizplus · Accepted Answer

A contingent liability is a possible obligation that depends on the occurrence or non-occurrence of one or more future events that are beyond the control of the entity. A disputed additional tax assessment is a contingent liability because it represents a claim from a taxing authority that the company disputes and is uncertain whether it will need to pay or not. Choices A, B, and C are not contingent liabilities; unearned revenues are liabilities resulting from the prepayment for goods or services, excise tax payable is a liability associated with a specific tax, and payroll liabilities are obligations to pay employee wages and benefits.

Which of the Following Is a Contingent Liability