1. A firm’s year ends on December 31. Its tax is computed and submitted to the U.S. Treasury on March 15 of the following year. When should the taxes be reported as a liability? 2. Many firms believe...

1. A firm’s year ends on December 31. Its tax is computed and submitted to the U.S. Treasury on March 15 of the following year. When should the taxes be reported as a liability?

2. Many firms believe that it is very difficult to estimate the amount of a possible future contingency. Should a contingent liability be reported even when the dollar amount of the loss is not known? Should it be disclosed in the notes to financial statements?