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

question 177

Multiple Choice

A contingency was evaluated at year-end and considered to have a remote possibility of becoming an actual liability.If this was not reported on the balance sheet or in the notes to the financial statements,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:

Charismatic Organizations

Groups or entities led by individuals who possess charismatic authority, inspiring devotion and followings based on personal qualities and charisma.

Bureaucracies

Complex organizational structures with strict rules, procedures, and hierarchies intended to manage large-scale administrative tasks efficiently.

Weber

Maximilian Karl Emil Weber, a German sociologist, philosopher, and political economist, known for his contributions to the understanding of social theory and social structure.

Max Weber

A German sociologist, philosopher, and political economist known for his theory on the protestant ethic and the spirit of capitalism, as well as his ideas on bureaucracy.