When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:
A) Reported in the income statement and disclosed.
B) Offset against shareholders' equity.
C) Disclosed but not recognized in the income statement.
D) Neither recognized in the income statement nor disclosed.

Question

Quizplus · Accepted Answer

According to accounting principles, when a gain contingency is probable and the amount can be reasonably estimated, it is typically disclosed in the notes to the financial statements but not recognized in the income statement. This is because recognizing such gains before they are realized could potentially mislead the financial statement users about the entity's actual financial position.

When a Material Gain Contingency Is Probable and the Amount