Question

A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:At least reasonably possible and the amount of the loss can be reasonably estimated.Probable and the amount of the loss can be reasonably estimated.More likely than not and the amount of the loss is known.At least reasonably possible and the amount of the loss is known.

Answer 1

Answer:

The answer is: Probable and the amount of the loss can be reasonably estimated.

Explanation:

Losses should be recorded as soon as possible (conservatism principle) as long as they are probable and can be reasonably estimated. A loss doesn't have to occur to be recorded, that is why they are recorded as contingency losses. If the company finds it probable that a loss will happen but can't estimate it, then it can't record it as a contingency loss.