When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable, the company should:Multiple Choice include a description in the notes to the financial statements. record the amount of the liability times the probability of its occurrence. exclude the information about the contingent liability from its financial statements and footnotes. record the amount of the liability as a long-term liability on the balance sheet.

There are three types of contingent liabilities and their treatment SR. NO. TYPE TREATMENT…

Answered: When the amount of a contingent…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 14QE

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When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable, the company should:

Multiple Choice

include a description in the notes to the financial statements.
record the amount of the liability times the probability of its occurrence.
exclude the information about the contingent liability from its financial statements and footnotes.
record the amount of the liability as a long-term liability on the balance sheet.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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