A contingent liability that is likely and can be reasonably estimated should be:
A)disclosed in a note to the financial statements.
B)accrued with a journal entry.
C)either disclosed in a note or accrued with a journal entry.
D)ignored until the liability materializes.

Question

Quizplus · Accepted Answer

Contingent liabilities that are both likely to occur and can be reasonably estimated should be recorded in the financial statements through an accrual with a journal entry. This ensures that the financial statements accurately reflect the company's financial position by recognizing the obligation and its associated expense.

A Contingent Liability That Is Likely and Can Be Reasonably