21 It is reasonably possible that a contingent liability will become a real liability in the future, and the amount is reasonable estimable. What is the accounting treatment? A a journal entry and a disclosure note B a journal entry but no disdosure note a disdosure not only D no disclosure required 22 What are generally payable within one year and are expected to be paid by current assets? A current assets B current liabilities contingent liabilities D mortgages payable 23 For a corporation, the earnings per share ratio is shown on the face of which financial statement? A Income statement B Statement of changes in stockholders' equity Balance sheet D Statement of cash flows E None of the other answers is correct 24 Retained earnings with a debit balance is called A B contra liability deficit D Paldin capital -restricted retained earnings 25 The ending inventory of year I was understated. What effect does this have on the financial statements of year 2? A Net Income will be understated B Cost of goods sold will be overstated Retained earnings will be overstated The beginning inventory will be understated D 26 This year our company had net income of $500,000 The number of common shares outstanding at January 1 was 820,000. Our company had cumulative preferred stock outstanding that was convertible during the current year into 20,000 shares of common stock. No conversions were actually done. The dividend on the preferred stock is $50,000. What is the diluted earnings per share? A $.60 B $ 54 $.63 D $.65 E None of the other answers is correct. 27 Our company changes from the pay as you go method of accounting for warranty expense to estimating the expense in the period of sales A We account for this prospectively B We account for this retrospectively As management, we can choose whether to account for this either prospectively or retrospectively