Concept introduction:
Liabilities:
Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.
A
A contingent liability is recognized as a liability when it is probable and its reasonable amount can estimate. For example: Amount to be paid the company knows it has lost the case
To choose:
The correct option about warranty expense.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
Cornerstones of Financial Accounting
- What accounts are used to record a contingent warranty liability that is probable and estimable buthas yet to be fulfilled?A. warranty liability and cashB. warranty expense and cashC. warranty liability and warranty expense, cashD. warranty expense and warranty liabilityarrow_forwardWhat accounts are used to record a contingent warranty liability that is probable and estimable but has yet to be fulfilled? A. warranty liability and cash B. warranty expense and cash C. warranty liability and warranty expense, cash D. warranty expense and warranty liabilityarrow_forward19. Which of the following best describes the accounting for assurance-type warranty costs? * a. Expensed when paid. b. Expensed when warranty claims are certain. c. Expensed based on estimate in year of sale. d. Expensed when incurred.arrow_forward
- Which of the following is usually not an accrued liability? Select one: a. Notes payable b. Taxes payable C. The answer does not exist d. Wages payable e. Interest payable Jump to...arrow_forwardHow will the lender of the promissory note record the note on its books? as an expense as revenue as an asset as a contra assetarrow_forwardWhich of the following is not a liability?a. Income taxes payableb. Accrued warranties payablec. Accrued vacation payd. Allowance for bad debtsarrow_forward
- 3. A liability created for receiving cash for future services to be provided is termed a(n) Oservice revenue. Oestimated warranty payable. Ounearned revenue. Oaccrued liability.arrow_forwardA contingent liability: Is always of a specific amount O Is a potential obligation that depends on a future event arising out of a past transaction or event O Is an obligation not requiring future payment O Is an obligation arising from the purchase of goods or services on credit O Is an obligation arising from a future eventarrow_forwardWhat is the correct treatment of advance payment made by the lessee to the lessor? A. None of the above B. If the advance payment representing loan is intended to be applied to unpaid rent, the amount is part of the debtor/lessor’s taxable income at the time of receipt of said amount. C. If the advance payment represents security deposit, the amount is part of the lessor’s taxable income. D. If the advance payment represents loan, the amount is part of the lessor’s taxable income.arrow_forward
- classified as liabilities and explain why, or why not, they are classified as liabilities:a) Provision for warrantyb) Unearned revenuec) GST payabled) Allowance for doubtful debtse) A disputable lawsuitarrow_forwardTRUE OR FALSE Interest expense paid on a loan which has prescribed is deductible from gross income of the payorarrow_forwardIf interest-bearing obligations are issued between interest payment dates, the accrued interest sold O A. should be included in the carrying amount of the liability as a credit to 'interest expense' or 'interest payable." B. should not be included in the carrying amount of the liability but rather credited to 'interest expense' or 'interest payable. O c. interest payable is debited D. interest income is credited O E. interest payable is creditedarrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College