Question

A contingent liability:

a. is only remotely possible.
b.cannot be estimated.
c. will result from a future event.
d. is a potential liability that has arisen because of a past event or transaction.
e. will only result when a remote event becomes probable.
f. is remotely estimable and probable.

Answer 1

d. is a potential liability that has arisen because of a past event or transaction.

Step-by-step explanation:

A contingent liability refers to an obligation which arises owing to past events or transactions, whose happening is improbable i.e it may or may not arise in the near future.

If the effect of such a liability can be reasonably estimated, then these should be provided for as a footnote in the financial statements.

An example of a contingent liability would be a legal suit filed against the company, if lost would lead to an obligation for damages which the company may have to pay.