Just Before the End of the Year, Matawan Inc

question 9

Multiple Choice

Just before the end of the year, Matawan Inc., entered into a contract with a supplier to purchase $100,000 of product per year over the next 5 years.The amount is a significant amount of their annual purchases.How should the contract be reflected in the current financial statements?

• A)Accrued as a contingent liability.
• B)Accrued as an accrued liability.
• C)Disclosed as a contingent liability in the notes to the financial statements.
• D)Disclosed as a commitment in the notes to the financial statements.

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Definitions:

Dividend Payout Ratio

The proportion of earnings a company pays to its shareholders in the form of dividends, expressed as a percentage of the company's total earnings.

Book Value per Share

A measure of the net asset value of a company allocated to each outstanding share.

Return on Total Assets

A financial ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets.

Net Profit Margin Percentage

A profitability metric that calculates the percentage of net income derived from revenue, indicating how much of each dollar in revenue results in profit.