A Contingency Was Evaluated at Year-End

question 6

Multiple Choice

A contingency was evaluated at year-end.Management felt it was probable that this would become an actual liability and the amount could be reasonably estimated.If this was not reported on the balance sheet or 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:

Uniformly Distributed

This term characterizes a distribution in which all intervals of the same length within its range have an equal probability of containing a point from the data set.

Goodness of Fit

A statistical analysis to describe how well a model fits a set of observations. It measures the discrepancy between observed and expected values.

Hypothesized Probability Distribution

A specified probability distribution based upon assumptions or theories, prior to analyzing data.

Chi-Square Tests

A statistical test used to determine the significant difference between observed and expected frequencies in one or more categories.