D Question 4 1 pts In the accounting records of a defendant, lawsuits: O Are estimated liabilities. O Should always be recorded. Should always be disclosed. O Should be recorded if payment for damages is probable and the amount can be reasonably estimated.
Correct answer is option d) as in accounting records defeendant,
lawsuits should be recorded if payment for damages is probable and
the amount can be reasonably estimated. As per prudence
Option a is incorrect as it cannot be recorded as liability even
on basis of estimate if it is not probable.
Option b is incorrect as it is recorded only if it is probable
and a reliable estimate can be made.
Option c is incorrect as it should be disclosed only when a
reasonable estimate could not be made Only then disclosure should
be made in footnotes as contingent liability. Otherwise by prudence
concept it should be recorded.
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