Which of the following is not a characteristic of a liability?

Which of the following is not a characteristic of a liability? Multiple Choice

  • It arises from present obligations to other entities.
  • It represents a probable, future sacrifice of economic benefits.
  • It must be payable in cash.
  • It results from past transactions or events.
The most common type of liability is: Multiple Choice
  • One that must be estimated.
  • One that comes into existence due to a gain contingency.
  • One that comes into existence due to a loss contingency.
  • One to be paid in cash and for which the amount and timing are known.
Of the following, which typically would not be classified as a current liability? Multiple Choice
  • Rent revenue received in advance.
  • Estimated liability from cash rebate program.
  • A long-term note payable maturing within the coming year.
  • A six-month bank loan to be paid with the proceeds from the sale of common stock.
At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent: Multiple Choice
  • Revenue upon receipt of the advance payment.
  • Liabilities until the product or service is provided.
  • A component of shareholders’ equity.
  • Long-term assets until the product or service is provided.
A loss contingency should be accrued in a company’s financial statements only if the likelihood that a liability has been incurred is: Multiple Choice
  • Probable and the amount of the loss can be reasonably estimated.
  • Reasonably possible and the amount of the loss can be reasonably estimated.
  • At least remotely possible and the amount of the loss is known.
  • Reasonably possible and the amount of the loss is known.

Answer

1 C. It must be payable in cash. It is not necessary that liability is to be paid in cash 2.D. one to be paid in cash and for which the amount and timing are known. 3.B.Estimated liability from cash rebate program. The above amount will not be reported as current liability. 4.B.Liabilities until the product or service is provided. The amount received in advance will be treated as liability until the obligation is fulfilled.

5. A. Probable and the amount of the loss can be reasonably estimated.

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