Recognizing a Loan Received as Revenue Instead of as a Liability

question 8

Multiple Choice

Recognizing a loan received as revenue instead of as a liability has a positive effect on the reported financial statements for all of the following except:

• A) It understates liabilities.
• B) It overstates revenues.
• C) It overstates net income.
• D) It overstates assets.

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Definitions:

Due Diligence

An investigation or audit of a potential investment or product to confirm all facts, such as reviewing all financial records plus anything else deemed material.

Thalamus

A part of the brain that acts as a principal relay station for sensory information, directing it to appropriate areas of the brain for processing.

Physiological Explanation

An interpretation of a phenomenon or behavior by relating it to physiological processes and biological functions.

Cognition

The cognitive process of gaining awareness and comprehension via thinking, experiencing, and sensory perception.