Examples of contingent liabilities include
A)lawsuits requesting the company to pay damages for product liability or patent infringement
B)product warranty expenses
C)guarantees of obligations of other parties
D)liabilities for discounted accounts receivable
E)income tax extensions
F)both A and C
G)both B and E
H)both D and E

Question

Quizplus · Accepted Answer

Contingent liabilities are potential liabilities that may arise in the future depending on the outcome of a certain event, such as a lawsuit or a guarantee of obligations of other parties. Examples of contingent liabilities include lawsuits requesting the company to pay damages for product liability or patent infringement (choice A) and guarantees of obligations of other parties (choice C). Product warranty expenses (choice B) are not considered contingent liabilities, as they are expected expenses based on the company's current products. Liabilities for discounted accounts receivable (choice D) are not contingent liabilities either, as they are already recognized and measured. Income tax extensions (choice E) are also not contingent liabilities, as they are simply an extension of time to pay a known and measurable liability. Therefore, the best choice is F, both A and C.

Examples of Contingent Liabilities Include