2110 Exam 5 Study Guides/PPT MC Practice

What is a liability?

• A probable future sacrifice of economic benefits

• A guaranteed future income

• An asset that appreciates over time

• A type of equity

Which of the following is an example of a liability?

• Accounts Payable

• Cash Reserves

• Inventory

• Retained Earnings

What is a contingent liability?

• A liability that is certain to occur

• A potential obligation that may or may not occur

• An asset that is contingent on market conditions

• A type of revenue

When is a contingent liability recorded?

• When the event is probable and the loss can be reasonably estimated

• When the event is certain and the loss is unknown

• When the event is unlikely and the loss is minimal

• When the event is impossible and the loss is significant

Which of the following is a characteristic of liabilities?

• Payment of cash

• Increase in equity

• Generation of revenue

• Appreciation of assets

What is a current liability?

• A liability expected to be satisfied within one year or operating cycle

• A liability that lasts more than five years

• A liability that requires no payment

• A liability that is not recorded in financial statements

Which of the following is an example of a current liability?

• Accounts Payable

• Long-term Bonds

• Mortgage Payable

• Capital Stock

What happens if none of the criteria for a current liability is met?

• It becomes a long-term liability

• It is written off

• It is converted to equity

• It is ignored

When do Accounts Payable typically show up on a general ledger account?

• When goods or services are purchased on credit

• When cash is received

• When a loan is taken

• When dividends are paid

Do Accounts Payable require any formal agreements?

• No, they do not require any contractual agreements

• Yes, they require a formal contract

• Yes, they require a verbal agreement

• Yes, they require a notarized document