ABC Co$.$ had several contingent liabilities at year$-$end.

Which of the following treatments of contingent liabilities is correct?

ANSWER

ABC had several lawsuits for which it determined a reasonably possible loss of $$750,000.$ ABC accrued this loss in the journal.

ABC had a group of lawsuits which it determined had a remote possibility of resulting in a loss. ABC disclosed these lawsuits in a note to the financial statements.

ABC had several lawsuits for which it determined a probable loss of $$1,000,000.$ ABC disclosed this amount in the notes to the financial statements.

ABC had several contingent liabilities for which it believes it is reasonably possible it will result in a loss, so ABC disclosed all of these in the notes to the financial statements.