A contingent liability is recorded (accrued) when:

A It is possible

B It is probable and the amount can be reasonably estimated

C It is remote

D The lawsuit is filed

✓ Correct Answer: Option B

ASC 450: accrue contingent loss when probable and estimable. Disclose if reasonably possible. Ignore if remote.

💡 Why is B) the correct answer?

The correct answer to the question "A contingent liability is recorded (accrued) when:" is Option B: It is probable and the amount can be reasonably estimated.

The other options — A) It is possible, C) It is remote, D) The lawsuit is filed — are incorrect for this CPA Exam Prep question. As explained above: ASC 450: accrue contingent loss when probable and estimable. Disclose if reasonably possible. Ignore if remote.

📚 About This CPA Exam Prep Practice Question

This 2-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

Practice CPA Exam Prep Quizzes → Browse All Questions Study Flashcards

A contingent liability is recorded (accrued) when:

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

Related CPA Exam Prep Questions