A Certain Contingent Liability Was Evaluated at Year-End; the Company

question 13

True/False

A certain contingent liability was evaluated at year-end; the company felt it was probable that it would become an actual liability, and the amount could be reasonably estimated. If the accountant decided to report it on the balance sheet, this could be considered a violation of generally accepted accounting principles.

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Definitions:

Non-Interest Bearing

refers to financial instruments or accounts that do not earn or involve the payment of interest, such as certain loans or bonds.

Notes Receivable

Financial assets representing amounts owed to the holder by others, typically arising from selling goods or services on credit.

Long-Term Credit Sales

Sales made on credit with repayment terms extending beyond the standard period, typically over a year or more.

Profitable Credit Sales

Sales made on credit that generate a profit for the company, after accounting for the cost of goods sold and other expenses related to the sale.