CHAP013 - Chapter 13 - Current Liabilities and...

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Chapter 13 Current Liabilities and Contingencies True/False Questions 1. Some liabilities are not contractual obligations and may not be payable in cash. Answer: True Learning Objective: 1 Level of Learning: 2. Long-term debt that is callable by the creditor in the upcoming year should be classified as a current liability only if the debt is expected to be called. Answer: False Learning Objective: 1 Level of Learning: 1 3. A customer advance produces a liability that is satisfied when the product or service is provided. Answer: True Learning Objective: 3 Level of Learning: 1 4. Amounts withheld from employees in connection with payroll often represent liabilities to third parties. Answer: True Learning Objective: 1 Level of Learning: 1 5. A company should accrue a liability for a loss contingency if it is at least reasonably possible that assets have been impaired, and the amount of potential loss can be reasonably estimated. Answer: False Learning Objective: 6 Level of Learning:1 6. A disclosure note is required for all material loss contingencies for which the probability of loss is reasonably possible. Answer: True Learning Objective: 6 Level of Learning: 1 7. The concept of substance over form influences the classification of obligations expected to be refinanced. Answer: True Learning Objective: 4 Level of Learning: 1 8. For a loss contingency to be accrued, the claim must have been made before the accounting period ended. Answer: False Learning Objective: 5 Level of Learning: 2 9. Warranty expense is recorded along with the related liability in the reporting period in which the product under warranty is sold. Answer: True Learning Objective: 5 Level of Learning: 1 10. The cost of promotional offers should be recorded as expenses in the accounting period when the offers are redeemed by customers. Answer: False Learning Objective: 6 Level of Learning: 2 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 3
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Chapter 13 Current Liabilities and Contingencies Matching Pair Questions Use the following to answer questions 11-15: 11-15. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term by placing the letter designating the best term in the space provided by the phrase. Terms: A. Accrued liabilities B. Advances from customers C. Callable D. Discount on notes payable E. Interest payable F. Probable G. Sales tax payable H. Secured loan I. Short-term note J. Warranty liability Phrases: 11. ____ A liability when received. 12. ____ Confirming event is likely to occur. 13. ____ A loss contingency accrued in the period of related sales. 14. ____ Most common temporary financing arrangement. 15.
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CHAP013 - Chapter 13 - Current Liabilities and...

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