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:

African American

A term referring to Americans of African descent, particularly those whose ancestors were brought to America through the transatlantic slave trade.

Risk-Benefit

The comparison between the potential risks and benefits of a specific action or decision, often used in healthcare and research to make informed choices.

Cost-Benefit

A comparison that assesses the relative advantages and disadvantages of certain decisions, actions, or policies in terms of both their costs and their benefits.

SWOT

An acronym for Strengths, Weaknesses, Opportunities, and Threats; a strategic planning tool used to identify and analyze key factors affecting an organization.