11.2 Learning Objective 2
1) Which statement is correct?
A) Contingencies arise from future events.
B) The amount to be paid for contingencies is known or reasonably estimable.
C) Current liabilities arise from future events.
D) The amount to be paid for current liabilities is known or reasonably estimable.
2) Which statement is correct?
A) Supplier discounts can only be accounted for by using the gross method.
B) The amount owing for trade payables is generally not known with a high degree of certainty.
C) An accrued liability is needed when a company has received goods, but not the invoice.
D) Completeness means that obligations are reported in the proper accounting period.
3) Which statement is
not
correct?
A) "Purchase discount lost" is reported if the gross method is used.
B) Cut off means that obligations are reported in the proper accounting period.
C) Supplier discounts can be accounted for by using the gross method.
D) Trade payables are obligations for goods received or services used.
4) Which is a reason to use the net method to record purchase discounts?
A) Cost-benefit factor is greater for the net method.
B) Reporting "purchase discounts lost" signifies inefficient business practices.
C) Given the materiality of the amounts involved, the net method is used.
D) The net method is technically superior to the gross method.
5) Which statement is
not
correct?
A) Contingencies arise from future events.
B) The amount to be paid for contingencies is determined by future events.
C) Current liabilities arise from past events.
D) The amount to be paid for current liabilities is known or reasonably estimable.
6) Explain the nature of current liabilities and how these are accounted for in the financial statements.