Which one of the following items would be most likely considered a contingent liability for Cannonbar,a grocery store chain?
A)A patron slipped on a grape and broke her neck during the period under audit,no claim has been made against Cannonbar.
B)The IRS has disagreed with deductions claimed on Cannonbar's previous period return.
C)Management believes that a lawsuit that was filed during the period under audit against Cannonbar will be settled.
D)Cannonbar has a note payable with a bank that was collateralized by all of the company's receivables in the period under audit.

Question

Quizplus · Accepted Answer

A contingent liability is a potential obligation that may arise depending on the outcome of a future event. In this case, the incident of a patron slipping and potentially filing a claim represents a contingent liability.

Which One of the Following Items Would Be Most Likely