A contingent liability that is reasonably possible

a. should be recorded and disclosed.

b. should be recorded only.

c. requires no treatment.

d. should be disclosed only.

The answer is letter b, should be recorded only.

Explanation:

"Contingent liability" is a kind of liability that could happen in the future in response to unforeseeable events. An example of this is warranty of a product. However, if a contingent liability is probable in the future and the liability's amount is reasonably estimable, then this should be recorded with a journal entry. This should also be disclosed in the financial statement's footnote.

However, in the case above, it is only reasonably possible. It didn't mention anything about the contingent liability's amount to be estimable, thus the answer is letter b.

Both recording and disclosing of the contingent liability ONLY happens when it satisfies both conditions of being probable in the future and being reasonably estimable.