10 multiple choices questions:
1. When must a loan be reported as 'current'?
a. If due within 18 months after year-end.
b. A long-term loan that is in covenant breach and an agreement is reached after year-end.
c. A long-term loan that is in covenant breach and an agreement is reached before year-end.
d. A long-term debt with no stated maturity date.
2. Which one of the following is a contingent loss that is required to be disclosed only in a note to the financial statements?
a. A loss that has a low degree of certainty and is not probable.
b. A loss that probably will never materialize and the amount would not have a significant impact on the company.
c. A probable loss of a known or certain amount.
d. A probable loss of a reasonably estimated amount.
3. Which does not represent a financial liability
a. Cash dividends payable are dividends declared and are reported as a current liability if it is payable within the coming year.
b. Dividends in arrears for preferred shares.
c. Bonus that depends on earnings of the current year.
d. Payroll taxes and withholdings.
4. A constructive obligation arises due to:
a. A legal contract related to the construction of an asset requiring the payment.
b. An environmental clean- up liability arising due to legislative requirements.
c. The company's past practices or established policy creating an expectation.
d. An obligation of uncertain timing and amount.
5. A financial liability is classified as FVTPL when:
a. The company wants to avoid an accounting mismatch.
b. The company records the liability at amortized cost.
c. The financial liability is recorded as current on the statement of financial position.
d. The company expects to settle the liability at some point in the future.
6. A provision is defined as a:
a. A liability of uncertain timing or amount.
b. An estimate of receivables that will are likely not collectible.
c. A financial liability that cannot be measured accurately.
d. A liability that is contingent on a future event that is unlikely to occur.
7. Liabilities are:
a. Any accounts having credit balances on the balance sheet.
b. Obligations to transfer ownership shares to other entities in the future.
c. A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of economic benefits.
d. A contractual obligation such as a purchase order issued for a specific item of inventory or equipment to be delivered in the future.
8. A short-term note payable may include all of the following except:
a. Trade notes payable.
b. Non trade notes payable.
c. A current portion of a long-term liability.
d. Unearned revenue.
9. Constructive obligations may arise from:
a. Accrued Liabilities resulting from operations.
b. Warranty obligations.
c. Notes Payable.
d. Unearned Revenues.
10. A company had sales of $1 million. Coupons in the amount of $1 per $10 in sales were given to paying customers. History has shown that 50% of all coupons are redeemed. Which of the following statements is correct?
a. A provision for $50,000 must be recognized.
b. A provision for $100,000 must be recognized.
c. A provision for $1 million must be recognized.
d. No provision is necessary.
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