Which of the following is both an estimated liability and a contingent liability?
A)Cosignature on $500 loan
B)Current portion of long-term debt
C)Warranty liability
D)Liability for dividends

Question

Quizplus · Accepted Answer

A warranty liability is both an estimated liability and a contingent liability because it is an estimated amount that the company may have to pay out in the future if a product needs repair or replacement, but it is only contingent on the occurrence of a specific event (such as a product malfunction). The other options do not meet both criteria. A cosignature on a loan is a contingent liability but not an estimated liability as the likelihood of the company needing to pay is uncertain. The current portion of long-term debt is an estimated liability but not a contingent liability because it is a known amount that the company is expected to pay in the near future. The liability for dividends is neither an estimated nor a contingent liability as it is a contractual obligation that the company must fulfill.

Which of the Following Is Both an Estimated Liability and a Contingent