When a gain contingency is probable and the amount of gain is reasonably estimable,the gain should be:
A)Reported in the income statement and disclosed.
B)Offset against stockholders' equity.
C)Disclosed,but not recognized in the income statement.

Question

Quizplus · Accepted Answer

According to accounting principles, gain contingencies are not recognized in the financial statements until they are realized or realizable. However, if a gain is probable and the amount can be reasonably estimated, it should be disclosed in the notes to the financial statements but not recognized in the income statement. This approach is taken to avoid overstating income and assets before the gain is certain.

When a Gain Contingency Is Probable and the Amount of Gain