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

question 67

True/False

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 statements, this could be considered a violation of generally accepted accounting principles.

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Definitions:

Liquidated Damages

are a predetermined amount of money agreed upon in a contract that one party will pay to the other in the event of a breach.

Liquidated Damages

A predetermined sum agreed upon by the parties to a contract to be paid as compensation in the event of a breach.

UCC

stands for the Uniform Commercial Code, a set of laws that provide legal standards and regulations for commercial transactions in the United States.

Non-breaching Seller

A seller who has complied with the terms of a contract and has not violated any conditions or obligations.