Question

Standard Company has a contingent liability that has a likelihood of actual occurrence that is classified probable. Also, the amount of the liability can be reasonably estimated. Under these circumstances, Standard is required to Multiple Choice

a. recognize a liability only.
b. recognize an expense only
c. disclose but not recognize the ability or the expense.
d. recognize a liability only.
e. recognize an expense only.
f. disclose but not recognize the liability or the expense
g. recognize a liability and an expense in its financial statements.

Answer 1

g. recognize a liability and an expense in its financial statements.

Step-by-step explanation:

in view of the fact that the actual incidence is identified and classified as probable and the total amount of liability can be reasonably estimated, It should identify a liability and an expense in the financial statement.

The Journal (which is an accounting entry for making records of any transactions either Economic or non economic) would be:

Expense a/c xxx

Liability a/c xxx