A contingent liability which is normally accrued is
A) notes receivable discounted.
B) accommodation endorsements on customer notes.
C) additional compensation that may be payable on a dispute now being arbitrated.
D) estimated claims under a service warranty on new products sold.

Question

Quizplus · Accepted Answer

A contingent liability is a potential liability that may arise from a past event, but its existence will only be confirmed by a future event that is not wholly within the entity's control. Therefore, estimated claims under a service warranty on new products sold is a contingent liability that would be normally accrued. Choices A and B are not contingent liabilities, and choice C is specific to a particular situation and cannot be generalized as being normally accrued.

A Contingent Liability Which Is Normally Accrued Is