Question

Gain contingencies are recorded when:

A. it is probable that a benefit will be received.
B. the amount of the gain can be reasonably estimated.
C. it is probable that a benefit will be received, and the amount of the gain can be reasonably estimated.
D. None of these answers is correct.

Answer 1

Gain contingencies are recorded when it is probable that a benefit will be received and the amount can be reasonably estimated, requiring both conditions to be met for recognition in financial statements.

Step-by-step explanation:

Gain contingencies are typically addressed in accounting and financial reporting standards. The correct answer to the student's question, 'Gain contingencies are recorded when:' is C. it is probable that a benefit will be received, and the amount of the gain can be reasonably estimated. This means that for a gain contingency to be recognized in financial statements, two conditions must be met: there must be a high probability that the gain will occur and it must be possible to make a reasonable estimation of the amount of that gain. Until both criteria are satisfied, the potential gain is usually disclosed in the notes to the financial statements rather than recorded on the balance sheet.