Question

Debt guarantees are: Never disclosed in the financial statements. Considered to be contingent liabilities. A bad...

Debt guarantees are:

  • Never disclosed in the financial statements.

  • Considered to be contingent liabilities.

  • A bad business practice.

  • Recorded as liabilities even though it is highly unlikely that the original debtor will default.

  • Considered to be current liabilities.

Homework Answers

Answer #1

Ans is

  • Considered to be contingent liabilities.

Reason:-

Debt guarantee are not balance sheet items. They are shown as a contingent liability and paid if the primary person who is liable to pay debt fails to do so.

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