When a Gain Contingency Is Probable and the Amount of Gain

question 1

Multiple Choice

When a gain contingency is probable and the amount of gain can be reasonably estimated,the gain should be:

• A)Reported in the income statement and disclosed.
• B)Offset against stockholders' equity.
• C)Disclosed,but not recognized in the income statement.
• D)Reported in the income statement,but not disclosed.

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Definitions:

Taxable Income

The amount of income that is used to calculate an individual's or a company's income tax due to the government.

Average Tax Rate

The fraction of total income that goes to taxes, calculated by dividing the total amount of taxes paid by the taxpayer's total income.

Interest Income

The income earned by an entity from its investments in interest-bearing financial assets such as bonds, loans, or savings accounts.

Eligible Dividends

Dividends designated by a company to be eligible for a lower tax rate in the hands of shareholders, often under specific tax jurisdictions.