If the Amount of a Probable Loss on a Contingent

question 4

Multiple Choice

If the amount of a probable loss on a contingent liability is not determinable,the liability should be

• A)accrued and indicated in the body of the financial statements.
• B)disclosed in footnotes but not accrued.
• C)neither accrued nor disclosed in footnotes.
• D)disclosed in the auditor's report but not disclosed on the financial statements.

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Definitions:

Present Value

Calculated by discounting future cash flows to understand their worth in today's terms, taking into account the time value of money.

Simple Interest

Interest calculated on the principal amount only, not on accrued interest from previous periods.

Compounded Annually

Interest on an investment that is calculated at the end of the year on both the initial principal and the accumulated interest from previous periods.

Invests

The initiative of funneling financial capitals in order to gain profits or generate income.