For a liability to exist,

1 point

a. A past transaction or event must have occurred.

b. The exact amount must be known.

c. The identity of the party owed must be known.

d. An obligation to pay cash in the future must exist.

2. Which of the following is not considered a characteristic of a liability?

1 point

a. Present obligation

b. Arises from past event

c. Results in an outflow of resources

d. Liquidation in reasonably expected to require use of existing resources classified as current assets

3. Which of the following should be included in current liabilities?

1 point

a. Trade notes payable

b. Short-term zero-interest bearing note payable

c. Unearned revenue

d. All of these are included in current liabilities

4. Which of the following is not a liability?

1 point

a. Deposit received from customer

b. Unearned revenue

c. Zero-interest bearing note payable

d. Stock dividend payable

5. Which of the following is a noncurrent liability?

1 point

a. Income tax payable

b. One-year magazine subscription received in advance

c. Unearned interest income related to noninterest-bearing long-term note receivable

d. Estimated warrant liability

6. If a long term debt becomes callable due to the violation of a loan covenant

1 point

The debt may continue to be classified as long term if the entity believes the covenant can be renegotiated.

The debt must be reclassified as current.

Cash must be reserved to pay the debt

Retained earnings must be restricted equal to the amount of the debt

7. At year-end, an entity classified a note payable as current liability. Under what conditions could the entity reclassify the note payable from current to noncurrent?

1 point

If the entity has the intent and ability to reclassify the note before the end of the reporting period.

If the entity has executed an agreement to refinance the note before issuance of the financial statemnets.

If the entity has the intent and ability to reclassify the note before the issuance of the financial statements

If the entity has executed an agreement to refinance the note before the end of the reporting period.

The bonus agreement of Christian Com pa nv provides that the general manager shall receive an annual bonus of 10% of the net income after bonus and tax. The income tax rate is 30%. The general manager received P230,UUU for the current vear as bonus. What is the income before bonus and tax? Ronald Company has an incentive compensation plan under which a branch manager received 10% of the branch income after deduction of bonus but before deduction of income tax. Branch income for the current year before the bonus and income tax was P1,650,000. The tax rate is 30%. What is the bonus for the current year? After three profitable years, Cairo Company decided to offer a bonus to the branch manager of 25% of income over P1,000,000 earned by the branch. The income for the branch was [31,600,000 before tax and before bonus for the current yea r. The bonus is computed on income in excess of P1,000,000 after deducting the bonus but before deducting tax. What is the bonus ofthe branch manager for the current year