Question

Contingent liabilities must be recorded if: Multiple Choice The future event is probable and the amount owed can be reasonably estimated. The future event is remote. The future event is reasonably possible but not estimable. The amount owed cannot be reasonably estimated. The future event is probable but not estimable.

Answer 1

Answer: The future event is probable and the amount owed can be reasonably estimated.

Explanation:

A Contingent Liability is an obligation that the business may possibly have to incur due to past events that the company engaged in.

The obligation might come about in future based on the outcome of other events, most of which the business usually have no control over.

An example of this is a law suit.

A Contigent liability should only be recorded in the books of accounting if and only if the future event is probable and the amount owed can be reasonably estimated.

If not then it is recommended to wait until the obligation might be incurred.