2. Which is a valid statement regarding recognition of liabilities? * a. A non-interest bearing note is initially recognized at face value. b. A provision should not be O recognized for future operating losses. c. For accumulating compensated absences, an entity should recognize the expense and related liability during the period the absences are incurred by the employees. d. The estimated future costs of supplying awards for customer loyalty program shall be recognized as an expense in the period the award credits are availed of by customers.

2. Which is a valid statement regarding recognition of liabilities? * a. A non-interest bearing note is initially recognized at face value. b. A provision should not be O recognized for future operating losses. c. For accumulating compensated absences, an entity should recognize the expense and related liability during the period the absences are incurred by the employees. d. The estimated future costs of supplying awards for customer loyalty program shall be recognized as an expense in the period the award credits are availed of by customers.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Alternative Accounting Treatments a. Estimate the amount of liability and record. b. Do not record as a liability but disclose in a footnote to the financial statements. c. Neither record as a liability nor disclose in a footnote to the financial statements. Required: Match the appropriate alternative accounting treatment with each of the potential contingent liabilities listed below. Potential Contingent Liabilities 1. Income taxes related to revenue included in net income this year but taxable in a future year. 2. Potential costs in future periods associated with performing warranty services on products sold this period. 3. Estimated cost of future services under a product warranty related to past sales. 4. Estimated cost of future services under a product warranty related to future sales. 5. Estimated cost of pension benefits related to past employee services that has yet to be funded. 6. Potential loss on environmental cleanup suit against company; a court judgment against the…
If the statement of financial position error is discovered in a subsequent accounting period, what action is to be done by the entity? A. Reclassify the item to its proper real account but do not restate the statement of financial position of the prior year affected by the error. B. Reclassify the item to its proper real account. C. Restate the statement of financial position of the prior year affected by the error. D. Reclassify the item to its proper real account and restate the statement of financial position of the prior year affected by the error
ccess the FASB Accounting Standards Codification at the FASB website (www.fasb.org).Required:1. Obtain the relevant authoritative literature on recognition of contingent losses. What is the specific citationthat describes the guidelines for determining when an expense and liability should be accrued for a contingentloss?2. List the guidelines.
Which of the following is not a criterion that must be met for an item to be classified as a liability? A certain cash payment will occur in the future. A sacrifice will require the entity’s assets or services. There is a probable future sacrifice. There is a present obligation that results from a past transaction.
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