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:

Anorexia Nervosa

A serious eating disorder characterized by significantly restricted food intake and an intense fear of gaining weight.

Menstrual Cycles

The recurring cycle of physiological changes in the female reproductive system that includes the menstrual period, usually lasting about 28 days.

Bone Density

The amount of bone mineral in bone tissue, indicating strength and resistance to fracture.

Eating Disorders

Mental disorders characterized by abnormal or disturbed eating habits, which negatively affect a person's health or well-being.