A contingent liability is an obligation that should be: Answer A. Disclosed in a

Question

A contingent liability is an obligation that should be:
Answer
A. Disclosed in a footnote to the balance sheet when the contingency is not significant
B. Recorded in the accounts if the amount may be reasonably estimated and it is probable that the future event creating the obligation will occur
C. Classified in the owners' equity section of the balance sheet when the future event creating the liability is not likely to occur
D. Recorded in the accounts and classified in a contingent liabilities section of the balance sheet between current liabilities and long-term liabilities
E. None of the above

Explanation / Answer

A contingent liability should be disclosed as note if it is material unless they are likely to be remote.

Answer (A) is incorrect as when the contingency is not significant, there is no need disclosed in a footnote to the balance sheet.

Thus, the answer is (E) none of the above.

Hope this helps!

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