A contingent liability should be recorded when
A) any lawsuit is actually filed against a company.
B) it is certain that funds are available to pay the amount of the claim.
C) it is probable that a liability has been incurred even though the amount of the loss cannot be reasonably estimated.
D) the amount of the loss can be reasonably estimated and it is probable prior to issuance of financial statements that a liability has been incurred.

Question

Quizplus · Accepted Answer

A contingent liability should be recorded when the amount of the loss can be reasonably estimated and it is probable prior to issuance of financial statements that a liability has been incurred. This means that there is a likelihood, more than 50%, that the company will have to pay a certain amount in the future, and the amount of the loss can be reasonably estimated.

A Contingent Liability Should Be Recorded When