A contingent liability should be recorded in a company's financial statements only if the likelihood of a loss occurring is:

A) At least remotely possible and the amount of the loss is known.

B) At least reasonably possible and the amount of the loss is known.

C) At least reasonably possible and the amount of the loss is reasonably estimable.

D) Probable and the amount of the loss can be reasonably estimated.

Answer: D

When a gain contingency is probable and the amount of gain is reasonably estimable, the gain should be:

A) Reported in the income statement and disclosed.

B) Offset against stockholders' equity.

C) Disclosed, but not recognized in the income statement.

D) Reported in the income statement, but not disclosed.

Answer: C

Gain contingencies usually are recognized in a company's income statement when:

A) The gain is certain.

B) The amount is reasonably estimable.

C) The gain is reasonably possible and the amount is reasonably estimable.

D) The gain is probable and the amount is reasonably estimable.

Answer: A