{"id":191056,"date":"2025-02-14T05:48:15","date_gmt":"2025-02-14T05:48:15","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=191056"},"modified":"2025-02-14T05:48:17","modified_gmt":"2025-02-14T05:48:17","slug":"receiving-payment-prior-to-delivering-goods-or-services-causes-a-current-liability-to-be-incurred","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/02\/14\/receiving-payment-prior-to-delivering-goods-or-services-causes-a-current-liability-to-be-incurred\/","title":{"rendered":"Receiving payment prior to delivering goods or services causes a current liability to be incurred"},"content":{"rendered":"\n<p>1.Receiving payment prior to delivering goods or services causes a current liability to be incurred.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>2.All long-term liabilities eventually become current liabilities.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>3.For a current liability to exist, the liability must be due usually within a year and must be paid out of current assets.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>4.The borrower issues a note payable to a creditor.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>6.Interest expense is reported in the operating expense section of the income statement.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>7.An interest-beating note is a loan in which the lender deducts interest from the amount loaned before the money isadvanced to the borrower.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>8.The amount borrowed is equal to the face amount of the note on an interest bearing note payable.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>9.The amount of money a borrower receives from the lender is called the discount rate.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p>10.The proceeds of a discounted note are equal to the face value of the note.<\/p>\n\n\n\n<p>a.True<\/p>\n\n\n\n<p>b.False<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Correct Answers:<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>True<\/strong><\/li>\n\n\n\n<li><strong>True<\/strong><\/li>\n\n\n\n<li><strong>True<\/strong><\/li>\n\n\n\n<li><strong>True<\/strong><\/li>\n\n\n\n<li><strong>(Missing from the question list)<\/strong><\/li>\n\n\n\n<li><strong>False<\/strong><\/li>\n\n\n\n<li><strong>False<\/strong><\/li>\n\n\n\n<li><strong>True<\/strong><\/li>\n\n\n\n<li><strong>False<\/strong><\/li>\n\n\n\n<li><strong>False<\/strong><\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Receiving payment prior to delivering goods or services causes a current liability to be incurred (True).<\/strong><br>When a company receives advance payment before delivering goods or services, it creates an obligation to fulfill that order, making it a liability. This liability is recorded as <strong>unearned revenue<\/strong>, a current liability, until the goods or services are provided.<\/li>\n\n\n\n<li><strong>All long-term liabilities eventually become current liabilities (True).<\/strong><br>Long-term liabilities, such as bonds payable and long-term loans, have portions that become due within the next year. When these portions reach their maturity period within a year, they are classified as current liabilities.<\/li>\n\n\n\n<li><strong>For a current liability to exist, the liability must be due usually within a year and must be paid out of current assets (True).<\/strong><br>Current liabilities are obligations due within a year and are typically settled using current assets, such as cash or accounts receivable.<\/li>\n\n\n\n<li><strong>The borrower issues a note payable to a creditor (True).<\/strong><br>A note payable is a formal written agreement where the borrower acknowledges a debt obligation to a creditor. This document specifies the amount borrowed, repayment terms, and interest.<\/li>\n\n\n\n<li><strong>Interest expense is reported in the operating expense section of the income statement (False).<\/strong><br>Interest expense is a financial cost related to borrowing and is reported in the <strong>non-operating section<\/strong> of the income statement, not under operating expenses.<\/li>\n\n\n\n<li><strong>An interest-bearing note is a loan in which the lender deducts interest before advancing money (False).<\/strong><br>This describes a <strong>discounted note<\/strong>, not an interest-bearing note. In an interest-bearing note, the borrower receives the full loan amount and pays interest separately.<\/li>\n\n\n\n<li><strong>The amount borrowed is equal to the face amount of the note on an interest-bearing note payable (True).<\/strong><br>In an interest-bearing note, the borrower receives the face value and pays interest at agreed intervals.<\/li>\n\n\n\n<li><strong>The amount of money a borrower receives from the lender is called the discount rate (False).<\/strong><br>The discount rate refers to the interest deducted upfront in a discounted note, but the actual money received is called the <strong>proceeds<\/strong>.<\/li>\n\n\n\n<li><strong>The proceeds of a discounted note are equal to the face value of the note (False).<\/strong><br>In a <strong>discounted note<\/strong>, interest is deducted in advance, meaning the borrower receives less than the face value.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>1.Receiving payment prior to delivering goods or services causes a current liability to be incurred. a.True b.False 2.All long-term liabilities eventually become current liabilities. a.True b.False 3.For a current liability to exist, the liability must be due usually within a year and must be paid out of current assets. a.True b.False 4.The borrower issues a [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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