Winter Co. is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals from its plant. Winter's lawyer states that it is probable that Winter will lose the suit and be found liable for a judgment costing Winter anywhere from $1, 200,000 to $5,000,000. However the lawyer states that the most probable cost is $3, 600.000 As a result of the above facts, a loss contingency of $1, 200,000 and disclose an additional contingency of up to $4, 800,000 loss contingency of $3, 600,000 and disclose any additional contingency of up to $2, 400,000. a loss contingency $3, 600,000 but not discloses a contingency of $1, 200,000 to $6,00,000. Information available prior to the issuance of the financial statements indicates that t is probable that, at the date of the financial statements, a liability has been incurred for obligations related to product warranties. The amount of the loss involved can be reasonably estimated. Based on the above facts, an estimated loss contingency should be neither accrued nor disclosed but not accrued. Accrued classified as an retained earnings. When is a contingent liability recorded? When the amount can be reasonably estimated. When the future events are probable to occur and the amount can be reasonably estimated. When the future events are probable to occur. when the future events will possibly occur and the amount can be reasonably estimated. Which of the following is not considered a part of the definition of a liability? Unavoidable obligation. Transaction or other event creating the has already occurred. Present obligation that entails settlement by probable future transfer or use of cash goods or services Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities What is a contingency? An existing situation where certainly exists as to a gain or loss that will be resolved when one or more future events occur or fail to occur. An existing situation where uncertainty exists as to possible loss that will be resolved when one or more future events occur An existing situation where be resolved future exists as to possible gain or loss that will not be resolved in the foreseeable future. An existing situation where uncertainty exists as to possible gain or loss that will be resolved when one or more future events occur or fail to occur