Question

Gain contingencies usually are recognized in a company's income statement when_____________.a. The gain is probable and the amount can be reasonably estimated.b. The gain is reasonably possible and the amount can be reasonable estimated. c. Realized.d. The amount can be reasonably estimated.

Answer 1

Answer:

A. The gain is probable and the amount can be reasonably estimated.

Answer 2

Answer: Gain contingencies usually are recognized in a company's income statement when realized.(C)

Explanation:

A gain contingency is an uncertain circumstance that will be decided in the future, that may result in a gain. Examples of gain contingencies are bonuses, gifts and receipt of money from donations.

According to the conservatism theory, the person preparing the financial statement should not prepare for the income and should provide for all losses. The gain contingencies should therefore be acknowledged in the income statement when they are realized.