Answer: Decrease by $4,000
Explanation:
Contingency amount simply means the fund which a company puts aside in order to settle unforeseen expenses that the company may incur in future.
Gain contingency simply means that the future occurence brings about a gain to the business while loss contingency simply means that the future occurence brings about a loss to the business.
In this scenario, since Provincial Co. estimates it is probable that it will receive a $10,000 gain contingency and pay a $4,000 loss contingency.
After recording the appropriate journal entries to recognize contingent amounts, Provincial Co.'s net assets will decrease by $4,000 as $4000 will be removed because it's a loss.
