EXAM QUESTIONS AND ANSWERS (1)

The most common type of liability is: D. One to be paid in cash and for which the amount and timing are known. Characteristic of a liability? B. It must be payable in cash. Which of the following is the best definition of a current liability? D. An obligation expected to be satisfied with current assets or by the creation of other current liabilities. Which of the following is not a liability? A. An unused line of credit. Current liabilities normally are recorded at their: C. Maturity amount. Current liabilities are normally recorded at the amount expected to be paid rather than at their present value. This practice can be supported by GAAP according to the concept of: C. Materiality. The key accounting considerations relating to accounts payable are: A. Determining their existence and ensuring that they are recorded in the appropriate accounting period. Classifying liabilities as either current or long-term helps creditors assess: B. The relative risk of a firm's liabilities. When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in: A. A current liability. A discount on a non-interest bearing note payable is classified in the balance sheet as: