A Contingency Was Evaluated at Year-End and Considered to Have

question 177

Multiple Choice

A contingency was evaluated at year-end and considered to have a remote possibility of becoming an actual liability.If this was not reported on the balance sheet or in the notes to the financial statements,what effect would this have on the financial reporting of the company?

• A) There would be no effect.
• B) The liabilities on the balance sheet would be understated.
• C) The information about the transaction would be inadequately disclosed in the notes.
• D) The net income of the company would be understated.

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Definitions:

Annex Canada

The historical idea or proposal for the United States to incorporate Canada into its territory, a concept that has been present at various times but never realized.

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A facility equipped with telescopes and other instruments for observing astronomical events and celestial bodies to advance knowledge of the universe.

Metric System

An international system of units based on powers of ten, commonly used around the world for scientific and everyday measurements.

National Roads

Major highways or roads that are funded and maintained by the federal government of a country, often spanning multiple states or regions.