A Contingency Was Evaluated at Year-End and Considered to Have

question 116

Multiple Choice

A contingency was evaluated at year-end and considered to have a reasonable possibility of becoming an actual liability.If this was not reported in the notes to the financial statements,what is the effect 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:

Keystone Species

An organism that other species in an ecosystem significantly rely on, and if it were eliminated, the ecosystem would undergo major changes.

Sea Stars

Marine invertebrates known for their star shape and ability to regenerate limbs, part of the echinoderm family.

Dung Beetles

Beetles that feed on feces, playing important ecological roles such as nutrient recycling and soil aeration.

Keystone Species

Species that have a disproportionately large impact on their environment relative to their abundance, crucial for ecosystem structure and function.