Recognizing a Loan Received as Revenue Instead of as a Liability

question 58

Multiple Choice

Recognizing a loan received as revenue instead of as a liability has a positive effect on the reported financial statements for all of the following except:

• A)It understates liabilities.
• B)It overstates revenues.
• C)It overstates net income.
• D)It understates expenses.

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Definitions:

Reconstruction Amendments

Amendments to the United States Constitution adopted during the Reconstruction era, including the 13th, 14th, and 15th amendments, which abolished slavery, granted citizenship rights, and prohibited voter discrimination based on race.

Federal Government

The national government of a federal country, which has specific powers delegated to it by a constitution, distinguished from state or provincial governments.

Custodian of Freedom

A term that implies the responsibility of protecting and preserving the liberties and rights of a group or nation.

Burlingame Treaty

An 1868 agreement between the United States and China that recognized mutual rights of their citizens and encouraged cultural and commercial exchange.