Question

If the likelihood of an obligation is remote:

A. no action is necessary in the accounting treatment.

B. the obligation with the estimated dollars is recorded and put into the footnotes.

C. the obligation with the estimated dollars is recorded on the Balance Sheet.

D. the disclosure with explanation is put into the financial statement footnotes.

Answer 1

If the likelihood of an obligation is remote, the disclosure with explanation is put into the financial statement footnotes.

Step-by-step explanation:

If the likelihood of an obligation is remote, the correct accounting treatment is option D. The disclosure with explanation is put into the financial statement footnotes. In this case, no action is taken to record the obligation with estimated dollars on the balance sheet or in the footnotes. Instead, it is disclosed in the footnotes to provide transparency to the readers of the financial statements.