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

question 107

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 on the balance sheet or 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:

Fearful

Feeling afraid or anxious; the emotional response to perceived threats or danger.

Suicidal

Characterized by having thoughts, intentions, or behaviors towards ending one’s own life.

Adventitious Crisis

A crisis or emergency situation that arises suddenly, often due to an external event or disaster, requiring immediate response and intervention.

Riot

A violent disturbance by a crowd or mob, often in protest against something or someone.