Question

In: Finance

Which one of the following would be considered a contingent liability? One Answer A. A company...

Which one of the following would be considered a contingent liability? One Answer

A. A company owes $12,000 on inventories purchased on credit.

B. A company estimates that it will most likely have to pay $15,000 to the EPA for a chemical spill.

C. A company has access to a line of credit with a bank in the amount of $23,000.

D. A company believes that it might lose a lawsuit and damages could be $13,000.

E. None of the above

Solutions

Expert Solution

Ans B. A company estimates that it will most likely have to pay $15,000 to the EPA for a chemical spill.

For a liability to be considered a contingent liability the amount must be estimated and must be probable.


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