The Occurrence Which Most Likely Would Have No Effect on 2014

question 104

Multiple Choice

The occurrence which most likely would have no effect on 2014 net income (assuming that all amounts involved are material) is the

• A) sale in 2014 of an office building contributed by a stockholder in 1983.
• B) collection in 2014 of a receivable from a customer whose account was written off in 2013 by a charge to the allowance account.
• C) settlement based on litigation in 2014 of previously unrecognized damages from a serious accident that occurred in 2012.
• D) worthlessness determined in 2014 of stock purchased on a speculative basis in 2010.

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Definitions:

Market Interest Rates

The rates of interest charged by lenders on loans or paid on deposits, which fluctuate based on demand, supply, and the overall economic conditions.

Equity Investment

Money that is invested in a company by purchasing shares of that company, typically with the expectation of income from dividends and capital gains as the stock appreciates.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, usually with a fixed dividend.

Corporate Bond

A type of debt security issued by corporations to raise capital, with the obligation to pay back the principal along with interest.