ACCCOB2_8_Liabilities

Some liabilities are not contractual obligations and may not be payable in cash.

• T

• F

Discount on Notes Payable is a contra account to Notes Payable on the Statement of Financial Position.

• T

• F

Bonds will sell for a premium when the market rate of interest exceeds their stated rate. 

• T

• F

Amortization of discount on bonds payable results in interest expense that is less than the actual cash outflow. 

• T

• F

Bond issues that mature in installments are called serial bonds.

• T

• F

The times interest earned ratio is computed by dividing income before interest expense by interest expense.

• T

• F

Among the short-term obligations of Lance Company as of December 31, the Statement of Financial Position

date, are notes payable totaling ₱250,000 with a bank.  These are 90-day notes, renewable  for another 90-day period.  These notes should be classified on the Statement of Financial Position of the company as

• current liabilities.

• deferred charges.

• long-term liabilities.

• intermediate debt.

Which of the following should NOT be included in the current liabilities section of the Statement of Financial

Position?

• Trade notes payable

• Short-term zero-interest-bearing notes payable

• The discount on short-term notes payable

• All of these are included

Of the following items, the only one which should NOT be classified as a current liability is

• current maturities of long-term debt.

• Output VAT payable.

• short-term obligations expected to be refinanced.

• unearned revenues.

Which of the following is a characteristic of a current liability but not a long-term liability?

• Unavoidable obligation.

• Present obligation that entails settlement by probable future transfer or use of cash, goods, or services.

• Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities.

• Transaction or other event creating the liability has already occurred.