Which of the following contingent liabilities wouldrequire a company to record a note to thefinancial statements?The liability is possible and is esti-mated to be $35,000.The liability is probable and cannotbe reasonably estimated.The liability is probable and estimat-ed to be $40,000.The liability is remote and cannot beestimated.The liability is remote and estimatedto be $15,000.The liability is possible and cannotbe reasonably estimated.

1. Possible Contingent Liability Estimated at $35,000:This scenario falls into the "possible"…

Answered: Which of the following contingent…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter8: Current And Contingent Liabilities

Section: Chapter Questions

Problem 12MCQ

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Which of the following statements is correct? Select one: None of these. A company may exclude a short-term obligation from current liabilities if it is paid off after the statement of financial position date and subsequently replaced by long-term debt before the statement of financial position is issued. A company may exclude a short-term obligation from current liabilities if it intends to refinance the obligation on a long-term basis. A company may exclude a short-term obligation from current liabilities if it has an unconditional right to defer settlement of the liability for at least 12 months.
When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable, the company should: Multiple Choice include a description in the notes to the financial statements. record the amount of the liability times the probability of its occurrence. exclude the information about the contingent liability from its financial statements and footnotes. record the amount of the liability as a long-term liability on the balance sheet.
Which of the following statements is correct? Select one: O a. A company may exclude a short-term obligation from current liabilities if it is paid off after the statement of financial position date and subsequently replaced by long-term debt before the statement of financial position is issued. O b. A company may exclude a short-term obligation from current liabilities if it intends to refinance the obligation on a long-term basis. O c. A company may exclude a short-term obligation from current liabilities if it has an unconditional right to defer settlement of the liability for at least 12 months. O d. None of these.
1. Which of the following is not an essential characteristic of a liability?a. Legal enforceabilityb. Present obligation to third partiesc. Involves future sacrifice of economic benefitsd. Past activity 2. An example of an item which is not a liability isa. The portion of a long termdebt due within one yearb. Estimated warranty costsc. Dividends payable common shares of the issuing corporationd. Customers’ deposits 3. Which of the following statements relating to the recognition of liabilities is falseI. Liabilities are recognized when obligations to transfer assets or provide services in the future are incurred in exchangesII. Liabilities arising from non-reciprocal transfers are recognized when the corresponding money, goods, or services are received.III. Mutually unexecuted contracts are generally not recognized as accounting liabilitiesa. I only c. I and II onlyb. II only d. I, II, and III 4. The following statements relate to liabilities. Which statement is true?I. Liabilities may…
1. Which of these is not a current liability? A. Serial maturity of long-term obligations B. Payables in providing services to be offered for sale C. Accruals for salaries and wages D. Contractual obligations falling due at an early date which are expected to be refunded E. none of the choices 2. An estimated liability is an obligation which is uncertain as to:* A. NO - amount; YES - existence B. YES - amount; YES - existence C. NO - amount; NO - existence D. YES - amount; NO – existence
1. Define and briefly discuss a loss contingency. 2. What are the similarities and differences of the accounting treatment and financial statement reporting of a loss contingency between U.S. GAAP and IFRS? 3. As a manager, would you like to report a debt as a current or non-current liability if you had a choice? Explain. And under what kind of circumstances could a short-term obligation be reported as a non-current liability?
1. Which of the following is an essential characteristic for an obligation to qualify as a liability? a. The obligation should have a definite amount at the report date. b. The party to whom payment will be made should be especially identifiable at report date c. The obligation should be settled in cash. d. The obligation should arise from past transactions of the enterprise e. All of the choices 2. Which of these is not a current liability? a. Serial maturity of long-term obligations b. Payables in providing services to be offered for sale c. Accruals for salaries and wages d. Contractual obligations falling due at an early date which is expected to be refunded e. none of the choices 3. An estimated liability is an obligation that is uncertain as to: a. NO - amount; NO - existence b. YES - amount; NO - existence c. NO - amount; YES - existence d. YES - amount; YES - existence
34. The following statements are correct, except a. A liability will be reported at less than its maturity amount prior to the maturity date if the stated rate of interest on the liability is higher than the market rate of interest. b. A liability is created because of the acquisition of an asset, payment of another liability, incurrence of an expense, declaration of cash or property dividend, a loss, or a revenue collected in advance. In all cases, each of these “causes” usually provides the basis for measuring the liability. c. Accounts payable with customary term of 18 months is classified as current liability. d. Most liabilities have stated and effective interest rates that are the same; in such a situation the principal, face, and maturity amounts are all the same.
A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated (FASB) Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. Does the expected loss meet the definition of a liability found in the conceptual framework? Explain Does the expected gain meet the definition of an asset found in the conceptual framework? Explain Why do you think accountants treat these seemingly similar situations differently? Explain
TRUE OR FALSE?1. Short-term obligation refinanced on a long-term basis at the end of the reporting period is a current liability.2. An entity must make the current and noncurrent presentation of assets and liabilities, except when a presentation based on liquidity provides information that is reliable and more relevant.3. A liability is classified as noncurrent when at the end of the reporting period the entity has the right to defer settlement of the liability for at least twelve months after the reporting period.
2. Which is a valid statement regarding recognition of liabilities? * a. A non-interest bearing note is initially recognized at face value. b. A provision should not be O recognized for future operating losses. c. For accumulating compensated absences, an entity should recognize the expense and related liability during the period the absences are incurred by the employees. d. The estimated future costs of supplying awards for customer loyalty program shall be recognized as an expense in the period the award credits are availed of by customers.
Short-term obligations can be reported as noncurrent liabilities if the company (a) intends to refinance ona long-term basis and (b) demonstrates the ability to do so by actual financing or a formal agreement to doso.

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