Which of the Following Is Not a Limitation of Financial

question 25

Multiple Choice

Which of the following is not a limitation of financial statements?

• A)Financial statements report quantitative economic information; they do not reflect qualitative economic variables.
• B)The cost principle requires assets to be recorded at their original cost; thus, the balance sheet does not generally reflect the fair values of most assets and liabilities.
• C)Net income from the income statement is added to the Retained Earnings account balance in the balance sheet.
• D)Estimates are used in many areas of accounting; when the estimate is made, about the only fact known is that the estimate is probably not equal to the "true" amount.

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Definitions:

Unreasonably Dangerous

A term used to describe products or activities that pose a risk of harm beyond what would be contemplated by an ordinary person under normal usage.

Defective Product

A product that is not safe for its intended use due to a design, manufacturing, or marketing defect, potentially leading to legal liability for the manufacturer.

Section 402A

A specific provision of the Restatement (Second) of Torts, establishing the manufacturer's liability for harm caused by defective products.

Implied Warranty of Merchantability

An assurance that a product will meet a reasonable level of quality and reliability for the purpose it was sold for.