Question

Star Company has a contingent liability that has a likelihood of actual occurrence that is classified as probable. Also, the amount of the liability can be reasonably estimated. Under these circumstances, Star is required to

Answer 1

Answer:

recognize a liability and an expense in its financial statements.

Explanation:

Contingent liability refers to a liability that arises in some unpredictable future event. In this, the amount is expected or predicted.

Here in the question the actual occurrence would be categorized also its amount would be predicted so the same is to be recorded as a liability and recorded as an expense in the financial statement i.e. balance sheet & income statement