ACC 211_Quiz on Liabilities

Which is not a characteristic of a liability?

• It represents a transfer of an economic resource.

• It must be payable in cash.

• It arises from present obligation to another entity

• It results from past transaction or event

Which of the following represents a liability?

• The obligation to pay for goods that an entity expects to order from suppliers next year

• Obligation to provide goods but customers have ordered and paid for it during the current year.

• The obligation to pay interest on a 5 year note payable that was issued the last day of the year.

• The obligation to distribute and entities own shares.

Among the short-term obligations at year end are 90-day notes, renewable for another 90-day period. What is the classification of the notes payable?

• Current liabilities

• Deferred credits

• noncurrent liabilities

• intermediate debt

An entity has a loan due for repayment in 6 months’ time, but the entity has the option to refinance for repayment 2 years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented?

• Current liabilities

• current assets

• noncurrent liabilities

• noncurrent assets

If a long term debt becomes callable due to the violation of a loan covenant

• The debt made continued to be classified as noncurrent if the covenant can be renegotiated.

• Cash must be reserved to pay the debt.

• The debt should be re classified as current.

• Retained earnings must be restricted.

A department store received cash and issued a gift certificate that is redeemable in merchandise. When the gift certificate was issued

• deferred revenue account should be decreased

• deferred revenue account should be increased

• revenue account should be decreased

• revenue on should be increased

At year-end, an entity classified a note payable as a current liability. Under what condition could the entity reclassify the note payable from current to non-current?

• If the entity had the intent and ability to reclassify the note before the end of the reporting period.

• If the entity had the intent and ability to reclassify the note before the issuance of the financial statements.

• If the entity had executed an agreement to refinance the note before the issuance of the financial statements.

• If the entity had executed an agreement to refinance the note before the end of the reporting period.

Theoretically, what is the relationship between present value and the concept of liability?

• Present value is used to measure certain liabilities

• Present value is not used to measure liabilities

• Present value is used to measure noncurrent liabilities only

• Present value is used to measure all liabilities