Answered: Estimated liabilities are disclosed in…

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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Question

1. Estimated liabilities are disclosed in financial statements by:

footnote to the financial statements.
showing the amount among the liabilities but not extending to the liability total.
an appropriation of retained earnings.
appropriately classifying them as regular liabilities in the balance sheet.

2. Cali Company had a P4,000,000 note payable due on March 1, 2001. On January 31, 2001, before the issuance of its 2000 financial statements, Cali issued long-term bonds payable in the amount of P5,000,000. Proceeds from the bonds were used to repay the note when it came due. How should Cali classify the note in its December 31, 2000 financial statements?

current liability with separate disclosure of the note refinancing
current liability with no disclosure required
noncurrent liability with separate disclosure of the note refinancing
noncurrent liability with no separate disclosure required

3. Of the following items, the one which should be classified as a current liability is:

an accommodation endorsement.
a cash dividend declared before the balance sheet date when the date of record is subsequent to the balance sheet date.
unfunded past service cost of a pension plan.
dividends in arrears on cumulative preferred stock

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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