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

question 116

Multiple Choice

A contingency was evaluated at year-end and considered to have a reasonable possibility of becoming an actual liability.If this was not reported in the notes to the financial statements,what is the effect 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:

Trademark

A symbol, word, or phrase legally registered or established by use as representing a company or product.

Undervalued

Describes a security or asset selling for less than its intrinsic or true value, indicating a potential investment opportunity.

Consolidated Buildings

Buildings that are combined under a single ownership or management, potentially for accounting or operational efficiency reasons in real estate or corporate structures.

Trademark

A distinguishable symbol, pattern, or phrase that differentiates the goods or services of a specific origin from those of other sources.