A Certain Contingent Liability Was Evaluated at Year-End, and Considered

question 139

Multiple Choice

A certain contingent liability was evaluated at year-end, and considered to have a reasonable possibility of becoming an actual liability. If the accountant decided not to report it in the notes to the financial statement, what effect would this have 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:

3PL

Third-party logistics, which refers to the outsourcing of supply chain functions and logistics to an external service provider.

Multiple-Channel Distribution

The use of two or more different types of channels to distribute a company's products or services to its customers, such as online, retail, and wholesale channels.

Complementary Functions

Activities or services that add value to or enhance the effectiveness of primary products or services.

Parallel Channels

Distribution channels that run alongside each other, offering products and services to the same market segments but through different pathways or intermediaries.