A contingent liability:

a. is only remotely possible.

b. cannot be estimated.

c. will result from a future event.

d. is a potential liability that has arisen because of a past event or transaction.

e. will only result when a remote event becomes probable.

f. is remotely estimable and probable.

Question

Business

Lauren Cooper

9 December, 12:50

A contingent liability:

a. is only remotely possible.

b. cannot be estimated.

c. will result from a future event.

d. is a potential liability that has arisen because of a past event or transaction.

e. will only result when a remote event becomes probable.

f. is remotely estimable and probable.

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Answers (1)

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Talia · Answer 1

d. is a potential liability that has arisen because of a past event or transaction.

Explanation:

A contingent liability refers to an obligation which arises owing to past events or transactions, whose happening is improbable i. e it may or may not arise in the near future.

If the effect of such a liability can be reasonably estimated, then these should be provided for as a footnote in the financial statements.

An example of a contingent liability would be a legal suit filed against the company, if lost would lead to an obligation for damages which the company may have to pay.

A contingent liability:a. is only remotely possible.b. cannot be estimated.c. will result from a future event.d. is a potential liability that has arisen because of a past event or transaction.e. will only result when a remote event becomes probable.f. is remotely estimable and probable.