Accountıng Iı Deneme Sınavı Sorusu #985237
A company has a lawsuit filled against it, claiming an indemnity of 40,000 TL. Probability is that the company will lose the lawsuit however cannot estimate the amount of the indemnity to be be paid.
In this situation, the company should _______.
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disclose a contingent liability in the footnotes |
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record a provision in the balance sheet |
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record as accrued consultancy expense E. by not recording anything |
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record as notes payable in the balance sheet |
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record a contingent liability in the balance sheet C. |
There are three possible cases and three treatments ;
a. Almost impossible to lose the lawsuit; so does not pay any indemnity – No Liability Reported
b. Probably will lose the lawsuit, however the amount of indemnity cannot be estimated reliably – Liability Disclosed in Footnotes
c. Probably will lose the lawsuit and the amount of indemnity can be estimated reliably – Journalized and Reported in Financial Statements
The correct answer is A.
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