A Contingent Liability, Which Is Significant, Probable, and Can Be

question 4

Multiple Choice

A contingent liability, which is significant, probable, and can be reasonably estimated:

• A)should be disclosed in a note to the financial statements.
• B)should be reported as a provision in the body of the financial statements.
• C)may be reported in the body of the financial statements.
• D)should not be reported or disclosed.

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Definitions:

Compounded Monthly

Describes interest on an investment or loan that is calculated and added to the principal balance monthly, allowing for the interest to earn interest.

Guaranteed Investment Certificate

A secure investment that guarantees to return the principal amount along with a fixed rate of interest at the end of the investment term.

Interest

The cost of borrowing money, calculated as a percentage of the total amount borrowed.

Compounded Annually

Refers to the process of earning interest on both the initial principal and the accumulated interest from previous periods on a deposit or loan.