Q13RQ
Question
What is a contingent liability? Provide some examples of contingencies.
Step-by-Step Solution
Verified Answer
Contingent liabilities are potential but not actual and depend upon some future event.
1Step1: Contingent Liability
A contingent liability is an obligation that is based on a future event. This is a potential liability and not an actual liability. It is called contingent because it cannot be confirmed in present but can only be made sure after the happening of any future event.
2Step 2: Examples of contingencies
Some examples of the contingencies are as follow:
a) Claim over patent infringement
b) Any kind of lawsuit against the company
c) Warranty expense
d) Co-signing a notes payable
e) Giving a guarantee for third parties etc.
Other exercises in this chapter
Q12RQ
When do businesses record warranty expenses, and why?
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When do businesses record warranty expenses, and why?
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What is contingent liability? Provide some examples of contingencies.
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Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis repor
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