FAR — Financial Accounting & Reporting — Quiz 56

Questions in this quiz (10)

1. Which of the following is considered a long-term liability?

   • Accounts payable due in 30 days
   • Salaries payable
   • Notes payable due in 8 years
   • Unearned revenue due next month

2. Which transaction increases liabilities?

   • Paying accounts payable
   • Borrowing from a lender
   • Recording depreciation
   • Collecting accounts receivable

3. Which accounting principle requires liabilities to be recorded when incurred?

   • Matching principle
   • Accrual principle
   • Cost principle
   • Consistency principle

4. Why are liabilities important in financial reporting?

   • They increase revenue
   • They represent future obligations
   • They eliminate expenses
   • They increase assets

5. Which best describes contingent liabilities?

   • Obligations already recorded
   • Potential obligations depending on future events
   • Current liabilities
   • Long-term investments

6. Which is an example of a contingent liability?

   • Accounts payable
   • Pending lawsuit
   • Notes payable
   • Unearned revenue

7. When should a contingent liability be recorded?

   • When probable and estimable
   • When possible but uncertain
   • Only when paid
   • When disclosed only

8. When should a contingent liability be disclosed but not recorded?

   • When probable
   • When possible but not probable
   • When certain
   • When paid

9. Which account records estimated warranty obligations?

   • Warranty expense
   • Warranty payable
   • Accounts receivable
   • Revenue

10. Which entry records estimated warranty expense?

    • Debit Warranty Expense; Credit Warranty Payable
    • Debit Warranty Payable; Credit Cash
    • Debit Expense; Credit Revenue
    • Debit Inventory; Credit Warranty Payable