Contingent liabilities are recorded or disclosed in the financial statement notes unless they are:

• A. Probable but the amount cannot be reasonably estimated
• B. Possible and the amount can be reasonably estimated
• C. Remote and the amount cannot be reasonably estimated
• D. Probable and the amount can be reasonably estimated

Answer: (C)

Verified step by step guidance

1. Understand the concept of contingent liabilities: Contingent liabilities are potential obligations that may arise depending on the outcome of a future event. They are classified based on the likelihood of occurrence (probable, possible, or remote) and whether the amount can be reasonably estimated.
2. Review the accounting treatment for contingent liabilities: If the liability is probable and the amount can be reasonably estimated, it should be recorded in the financial statements. If the liability is probable but the amount cannot be reasonably estimated, it should be disclosed in the notes to the financial statements.
3. Analyze the treatment for possible contingent liabilities: If the liability is possible, regardless of whether the amount can be reasonably estimated, it should be disclosed in the notes to the financial statements.
4. Understand the treatment for remote contingent liabilities: If the liability is remote, it is generally not recorded or disclosed in the financial statements, regardless of whether the amount can be reasonably estimated.
5. Apply the correct classification: Based on the problem, contingent liabilities that are remote and the amount cannot be reasonably estimated are not recorded or disclosed in the financial statements. This aligns with the correct answer provided in the problem.