12. Contingent assets may be disclosed in the notes if probable and reasonably e
ID: 2575318 • Letter: 1
Question
12. Contingent assets may be disclosed in the notes if probable and reasonably estimable. a. True b. False Indicate the answer choice that best completes the statement or answers the question 13. All of the following are characteristics of current liabilities except a. they may be replaced with a new short-term liability rather than being paid in cash. b. they may involve estimated amounts. c. they are due within one year or within the operating cycle, whichever is longer. d. All three of these are characteristic of current liabilities 14. Which of the following accounts is not classified as a current liability? Note payable, due in three years b. Taxes payable c. Salaries payable d. Accounts payable 15. Which of the following statements is true of liabilities? a. Accounts payable are listed in the Current Liabilities section in alphabetical order by vendor b. Classification of current liabilities is important because of the liquidity concept. c. Current liabilities are listed in order of decreasing amounts in the Current Liabilities section of the bal sheet. Copyright Cengage Learning. Powered by Cognero.Explanation / Answer
Answer -
12. - B. False
Explanation - Contingent Assets are not required to be recognised and disclosed in Financial Statements. However, when the flow of economic benefit or income from the contingent assets is probable and reasonably estimable, then the contingent asset is recognised as income in the financial statements. Therefore, they are not disclosed in notes incase of being reasonable and certain.
___________________________________________________________________________________________
13. - D. All three of these are characteristics of Current Liabilties.
Explanation - current liabilties may be replaced with a new liabilty or obligation. current liabilties may involve estimated amounts, they are termed as provisions. liabilities are classified as current liabilitis if they are to be settled within the financial year or operating cycle, whichever is longer.
___________________________________________________________________________________________
14. - A. Note Payable, due in three years
Explanation - Current liabilties are those liabilities which are required to be settled within one financial year or operating cycle, which ever is longer. However, since note payable are to be settled in three years, hence they are not to be classified as Current Liabilities.
___________________________________________________________________________________________
15. - B. classification of current liabilities is important because of liquidity concept.
Explanation - Assuming this question has only three options. the correct answer is that the current liabilities are classified due to liquidity. There is no such requirement to classify current liabilities in alphabetical order or decreasing order of amounts. The balance sheet is prepared using two orders - 1. Order of Liquidity - the most liquid assets n liabilities at the top and least liquid at the bottom i.e. decreasing order of their liquidity . 2. Order of permanence - the most permanent assets n liabilities at the top and least permanent at the bottom i.e. decreasing order of their permanence.
___________________________________________________________________________________________
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.