Rice Corporation's attorney has provided the following summaries of three lawsuits against Rice: • Lawsuit A: The loss is probable,but the loss cannot be reasonably estimated.
• Lawsuit B: The loss is reasonably possible,but the loss cannot be reasonably estimated.
• Lawsuit C: The loss is reasonably possible and can be reasonably estimated.
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Which of the following statements is incorrect?
A)A disclosure note is required for lawsuit A.
B)A disclosure note is required for lawsuit B.
C)A disclosure note is required for lawsuit C.
D)Lawsuit A is reported on the balance sheet as a liability.

Question

Quizplus · Accepted Answer

According to accounting principles, a loss from a lawsuit should be reported on the balance sheet as a liability if the loss is both probable and can be reasonably estimated. Since lawsuit A's loss cannot be reasonably estimated, it should not be reported as a liability on the balance sheet, making statement D incorrect.

Rice Corporation's Attorney Has Provided the Following Summaries of Three