A Contingency Was Evaluated at Year-End

question 6

Multiple Choice

A contingency was evaluated at year-end.Management felt it was probable that this would become an actual liability and the amount could be reasonably estimated.If this was not reported on the balance sheet or 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:

iPhone App

A software application developed specifically for use on Apple's iPhone operating system (iOS).

Unit Sales

The quantity of items sold or number of services provided by a business in a given time period.

Revenue Model

A framework for generating financial income, identifying which revenue source to pursue, what value to offer, how to price the value, and who pays for the value.

Flat Fee

A pricing structure that charges a single fixed fee for a service, regardless of usage or time expended.