Final answer:
Known liabilities of estimated amounts are reported on the balance sheet as part of the company’s obligations that require recognition following accounting standards. The option (B) is correct.
Step-by-step explanation:
The question relates to how known liabilities of estimated amounts should be reported in financial statements. Known liabilities that can be estimated are reported on the balance sheet. They represent obligations that the company is aware of and has a reasonable estimate for, even if the precise amount may not be known. By accounting principles, these liabilities must be recognized because they represent present obligations that will result in an outflow of resources embodying economic benefits from the entity.
Using the T-account framework, liabilities appear on the right side of the account, opposite assets, and are part of the fundamental equation where assets equal liabilities plus net worth. This reflects the requirement for financial statements to present a fair and balanced view of the company's financial position, ensuring that all known obligations, including estimated liabilities, are properly accounted for. Therefore, option (B) is correct.