Which of the following is an example of a contingent liability?
A) A corporate long-term employment contract with the chief executive officer.
B) A lawsuit pending against a restaurant chain for improper preparation of food.
C) A liability for notes payable with interest included in the face amount.
D) The liability for future warranty repairs on computers sold during the current period.

Question

Quizplus · Accepted Answer

A contingent liability is a potential obligation that may arise depending on the outcome of a future event. A pending lawsuit is an example of a contingent liability because the obligation to pay depends on the outcome of the lawsuit.

Which of the Following Is an Example of a Contingent