1. A certain contingent liability was evaluated at year-end, and considered to have a remote possibility of becoming an actual liability. If the accountant decided not to report it on the balance sheet or in the notes to the financial statement, what effect would this have on the financial reporting of the company?

a. the net income of the company would be understated

b. there would be no effect

c. the information about the transaction would be inadequately disclosed in the notes

d. the liabilities on the balance sheet would be understated.

2. Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?

a. sale tax

b. federal income tax

c. fica oasdi taxes

d. fica-medicare taxes

3. which of the following occurs when a company records accrued interest expense on a note payable?

a. cash is debit

b. note pay is credit

c. interest payable is credit

d. interest expense is credit

4. a certain contingent liability was evaluated at year end, and considered to have reasonable possibility of becoming an actual liability. If the accountant decided not to report it in the notes to the financial statement, what effect would this have on the financial reporting of the company?

a. the net income of the company would be understated

b. the liabilities on the balance sheet would be understated

c. there would be no effect

d. the info about the transaction would be inadequately disclosed in the notes.