If a company estimates that it is "reasonably possible" that it will lose a significant amount in a lawsuit, then this contingent liability: a. should be reported as a liability on the balance sheet. b. should be disclosed in the footnotes to the financial statements. c. need not be disclosed. d. should be reported as a contra-liability on the balance. sheet. e. should be reported as a reduction of stockholders' equity on the balance sheet.
If a company estimates that it is "reasonably possible" that it will lose a significant amount in a lawsuit, then this contingent liability: a. should be reported as a liability on the balance sheet. b. should be disclosed in the footnotes to the financial statements. c. need not be disclosed. d. should be reported as a contra-liability on the balance. sheet. e. should be reported as a reduction of stockholders' equity on the balance sheet.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![If a company estimates that it is "reasonably possible"
that it will lose a significant amount in a lawsuit, then
this contingent liability:
a. should be reported as a liability on the balance sheet.
b. should be disclosed in the footnotes to the financial
statements.
c. need not be disclosed.
d. should be reported as a contra-liability on the balance.
sheet.
e. should be reported as a reduction of stockholders'
equity on the balance sheet.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F99e8e6ac-2b5d-4064-9484-266acb482ffa%2Faff20502-5861-45aa-a097-e90667ec7d2e%2F26xukj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:If a company estimates that it is "reasonably possible"
that it will lose a significant amount in a lawsuit, then
this contingent liability:
a. should be reported as a liability on the balance sheet.
b. should be disclosed in the footnotes to the financial
statements.
c. need not be disclosed.
d. should be reported as a contra-liability on the balance.
sheet.
e. should be reported as a reduction of stockholders'
equity on the balance sheet.
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