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:

Direct-Mail Retailing

A marketing strategy where companies send promotional materials directly to potential customers through postal mail.

Print-Media Retailing

The sale of goods or services through print mediums such as newspapers, magazines, or direct mail advertisements.

Vending Machines

Automated machines that dispense products such as snacks, beverages, or tickets to consumers after money, a credit card, or a specially designed card is inserted.

Cold Beverages

Drinks that are served chilled and are refreshing, especially preferred in hot climates or seasons.