Which of the following is most likely to result in the recognition of a liability? a. Customers become entitled to rebates for their past purchases. b. Intention to acquire inventories in a future period. c. Entering into a purchase contract for future delivery. d. Agreeing on an irrevocable future commitment that is not burdensome at present.

Which of the following is most likely to result in the recognition of a liability? a. Customers become entitled to rebates for their past purchases. b. Intention to acquire inventories in a future period. c. Entering into a purchase contract for future delivery. d. Agreeing on an irrevocable future commitment that is not burdensome at present.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter4: Balance Sheet: Presenting And Analyzing Resources And Financing

Section: Chapter Questions

Problem 9Q

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Which of the following is a characteristic of a current liability but not a long-term liability? a. Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities. b. Unavoidable obligation. c. Transaction or other event creating the liability has already occurred. d. Present obligation that entails settlement by probable future transfer or use of cash, goods, or services.
Which of the following is not a criterion that must be met for an item to be classified as a liability? A certain cash payment will occur in the future. A sacrifice will require the entity’s assets or services. There is a probable future sacrifice. There is a present obligation that results from a past transaction.
Which of the following is a characteristic of a current liability? A. It is an avoidable obligation. B. It occurs because of a future transaction or event. C. It cannot be settled with services. D. It creates a present obligation for future payment of cash or services.
Which of the following is incorrect? A.To qualify as a liability, an obligation must be payable in cash or in goods and services. B.A copyright is an example of a liability. C.To qualify as a liability, an obligation must be scheduled for settlement at some future time. D.All of the above
Which document typically triggers the process of recording a liability? a. purchase requisition b. purchase order c. receiving report d. supplier’s invoice
Which of the following is NOT a contingent liability? a. Pending law suit for property damage b. Product warranty c. Discounted note receivable d. Pending law suit for slander
One of examples of contingent liability is an: *a. Obligations related to product warrantiesb. Possible receipt from a litigation settlementc. Pending court case with a probable favorable outcomed. Tax loss carryforwards
Which of the following would not be considered a general long term liability?Select one:a. Long term promissory notesb. Long term portion of judgementc. Unfunded compensated absencesd. Unfunded rent obligation
4. An encumbrance represents the estimated future liability for goods or services resulting from placing a purchase order or signing a contract. True or False
Pursuant to the conceptual framework, for an item to be characterised as a liability the definition of liabilities must be applicable to the transaction or event, and the recognition criteria should also be satisfied. Applying the definition of liabilities, there are three key components in the definition of ‘liability’, these being:1. There must be an expected future disposition of economic benefits to other entities.2. There must be a present obligation.3. A past transaction or other event must have created the obligation.Required:Take any two examples of liabilities and test if they meet all three requirements.
The accrual of a contingent liability and the related loss should be recorded when the a. Loss resulting from a future event may be material in relation to income. b. Future event that gives rise to the liability is unusual in nature and nonrecurring. c. Amount of the loss resulting from the event is reasonably estimated and the occurrence of the loss is probable. d. Event that gives rise to the liability is unusual and its occurrence is probable.
A contingent liability is an obligation that depends on the occurrence of a future event and that should be recorded in the accounts: Group of answer choices If the amount is reasonably estimated If the related future event will probably occur The related future event will probably occur and the amount is reasonably estimated. If the amount is due in cash within one year