Question

Which of the following is an example of a contingent liability?

a. Obligations related to product warranties.
b. Possible receipt from a litigation settlement.
c. Pending court case with a probable favorable outcome.
d. Tax loss carryforwards.

Answer 1

An example of a contingent liability is obligations related to product warranties.

Step-by-step explanation:

An example of a contingent liability is obligations related to product warranties. When a company sells a product with a warranty, they have a potential obligation to repair or replace the product if it malfunctions within the warranty period. This is a contingent liability because it depends on the occurrence of a future event, such as the product breaking down.