Blossom Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the residents to be exposed to highly toxic chemicals from its plant. Blossom's lawyer states that it is probable that Blossom will lose the suit and be found liable for a judgment costing Blossom anywhere from $1840000 to $9000000. However, the lawyer states that the most probable cost is $5400000. As a result of the above facts, Blossom should accrue a loss contingency of $1840000 and disclose an additional contingency of up to $7160000. O a loss contingency of $5400000 and disclose an additional contingency of up to $3600000. O a loss contingency of $5400000 but not disclose any additional contingency. O no loss contingency but disclose a contingency of $1840000 to $9000000.

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Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.