Asked by Jasmine Gardiner on Jun 26, 2024
Verified
Which one of the following contingencies must be accrued on the balance sheet?
A) The likely loss on a lawsuit that the firm's attorneys believe will be dropped.
B) The probable loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.
C) The reasonably possible loss on a lawsuit that the firm's attorneys believe will be dropped.
D) The reasonably possible loss on a lawsuit that the firm's attorneys believe will be settled for $50,000.
Contingencies
Conditional liabilities or assets that may arise due to future events, whose effects cannot be determined with certainty at the present time.
Balance Sheet
A financial statement that provides a snapshot of a company's financial condition at a specific time, showing assets, liabilities, and equity.
Lawsuit Loss
Financial damages that a company is required to pay as the result of legal judgment or settlement of a lawsuit.
- Recognize the conditions under which contingencies must be accrued or disclosed in financial statements.
Verified Answer
Learning Objectives
- Recognize the conditions under which contingencies must be accrued or disclosed in financial statements.
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