Define contingency. What exactly is the company uncertain about?
What will be an ideal response?
Answer: A loss contingency is an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur. The two criteria that must be met before a loss contingency is reported in a company's financial statements are: (1) it is probable that a liability has been
incurred (or an asset has been impaired), and (2) the company can reasonably
estimate the amount of the loss. Here, "uncertainty" means that a company is uncertain about the outcome of the future event that will either confirm or deny that a liability exists due to an event that has already taken place.
You might also like to view...
The petty cash fund has a current balance of $100. Based on activity in the fund, it is determined that the balance needs to be changed to $700. Which journal entry is needed to make this change?
A) Debit the Petty Cash account and credit the Cash account for $700. B) No journal entry is needed because this change only involves cash. C) Debit the Petty Cash account and credit the Cash account for $600. D) Debit the Cash account and credit the Petty Cash account for $600.
Depository receipts are identical to the securities themselves
Indicate whether the statement is true or false