A Contingent Liability Is Reported

question 42

Multiple Choice

A contingent liability is reported:

• A) in a footnote to the financial reports.
• B) on the balance sheet.
• C) in the income statement.
• D) as a negative figure on the statement of changes in equity.

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Definitions:

Straight-Line Depreciation

A technique for distributing the expense of a physical asset evenly across its life span.

Average Accounting Return

A measure of the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Average Total Assets

The mean value of all assets owned by a company over a specific period, used in financial analysis to gauge the company's asset use efficiency.

Profitability Index

A calculation used to determine the relative profitability of a project by dividing the present value of future expected cash flows by the initial investment.