Question

A contingent liability: is only remotely possible. cannot be estimated. will result from a future event. is a potential liability that has arisen because of a past event or transaction. will only result when a remote event becomes probable. is remotely estimable and probable.

Answer 1

A liability that has arisen because of a past event or transaction is the correct answer

Step-by-step explanation:

Answer 2

will only result when a remote event becomes probable. is remotely estimable and probable.

Step-by-step explanation:

Contingent liabilities are potential debts or obligations to pay, depending on the results of an uncertain future event. The requirement to pay does not exist now. The liability may occur or not occur depending on the outcome of an unpredictable future event.

A contingent liability is relevant only if the amount of liability can be estimated accurately, and there is a likelihood of the future event happening. If these two factors can be established, then the contingent liability is disclosed in the books of accounts. Product warranties and pending lawsuits are good examples of contingent liabilities. Their outcomes are uncertain, but their related costs can be estimated.