Q:1-Which of the following is not an essential characteristic of a liability?
Mark one answer:
A liability embodies a present obligation to be settled by a probable future transfer or use of assets.
The obligated company has little or no discretion to avoid the future sacrifice.
The obligation is legally enforceable.
The transaction or event obligating the company has already happened.

Q:6-The modified cash basis of accounting for warranty costs:
Mark one answer:
is seldom used for financial reporting.
is based on the matching concept.
is conceptually unsound.
requires warranty expense and warranty obligation to be estimated and recorded in the period of the sale.

Q:7-Trade accounts payable:
Mark one answer:
should, theoretically, be recorded net of any cash discount.
are examples of liabilities that must be estimated and accrued.
do not include purchases on an open- charge basis.
are normally long-term liabilities.

Q:8-Liquidity:
Mark one answer:
refers to an entity’s ability to use its financial resources to adapt to change.
describes the nearness to cash of a company’s assets and liabilities.
involves the potential to create new current and long-term debt.
involves the potential to restructure existing debt.

Q:9-An example of an item which is not a liability is:
Mark one answer:
dividends payable in stock.
advances from customers on contracts.
accrued estimated warranty costs.
the portion of long-term debt due within one year.

Q:10-The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the:
Mark one answer:
bond indenture.
bond debenture.
registered bond.
bond coupon.