Question

Abbott Corp.'s attorney estimates that the company will ultimately have to pay between $350,000 and $500,000 relating to current litigation, and that the most likely amount of the loss will be equal to $400,000. Abbott Corporation should record a contingent liability and loss of

Answer 1

Answer:

$400,000

Explanation:

Contingent liability and loss is explained as a loss that may or may not occur depending on uncertain events. Amount recorded for contingency loss is based on of the loss can be reasonably estimated. In this case, since the loss is probable and easy to estimate, and most likely amount be equal to 400,000, the amount that should be recorded as contingent liability and loss should be $400,000. The contingent liability can only be recorded when the loss or liability can be estimated. Otherwise, it should be written as disclosed.