An example of a contingent liability is
A)a bond that can be converted into common stock.
B)any interest-bearing liability.
C)a bond that was sold at a discount.
D)the unrealized loss from the reduction in the fair value of a long-term liability.
E)a lawsuit being filed against a company.

Question

Quizplus · Accepted Answer

A contingent liability is a potential liability that may occur depending on the outcome of an uncertain future event. A lawsuit being filed against a company is a common example of a contingent liability because the outcome of the lawsuit is uncertain and the amount of any potential liability is unknown. The other options are not examples of contingent liabilities.

An Example of a Contingent Liability Is