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:

Reference Group

A group that individuals compare themselves to for self-evaluation or guidance in forming attitudes and behaviors.

Values

Core beliefs or principles that guide behaviors and decisions in individuals and organizations.

Acceptance

Recognition and approval of something as it is; in social contexts, it often involves recognizing and validating individual differences.

Settlement-House Movement

A social reform movement that began in the late 19th century, focused on improving conditions in poor urban areas by providing community services and education.