If a company estimates that it is "reasonably possible" that it will lose a significant amount in a lawsuit, then this contingent liability: a. should be reported as a liability on the balance sheet. b. should be disclosed in the footnotes to the financial statements. c. need not be disclosed. d. should be reported as a contra-liability on the balance. sheet. e. should be reported as a reduction of stockholders' equity on the balance sheet.
If a company estimates that it is "reasonably possible" that it will lose a significant amount in a lawsuit, then this contingent liability: a. should be reported as a liability on the balance sheet. b. should be disclosed in the footnotes to the financial statements. c. need not be disclosed. d. should be reported as a contra-liability on the balance. sheet. e. should be reported as a reduction of stockholders' equity on the balance sheet.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter8: Current And Contingent Liabilities
Section: Chapter Questions
Problem 12MCQ
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