Test Bank for - Intermediate Accounting, Vol. 2, 5e (Lo/Fisher)...

Test Bank for Intermediate Accounting, (Volume 2), 5th Canadian Edition By Kin Lo, George Fisher (All Chapters) 1 / 4

1 Copyright © 2023 Pearson Canada Inc.Intermediate Accounting, Vol. 2, 5e (Lo/Fisher) Chapter 11 Current Liabilities, Non-Financial Liabilities, and Contingencies

Learning Objective 1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

1) Which of the following characteristic is required for a liability under IFRS Framework?

• A past obligation.
• A present obligation.
• An unknown obligation.
• A future obligation.

Answer: B

Diff: 1 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

2) Which of the following characteristic is required for a liability under IFRS Framework?

• Arises from a past event.
• Arises from a non-financial transaction.
• Arises from a future transaction.
• Arises from a forecasted transaction.

Answer: A

Diff: 1 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

3) Which of the following characteristic is required for a "liability" under IFRS Framework?

• Expected to result in the inflow of economic benefits.
• Expected to result in the inflow of economic benefits that are measurable.
• Expected to result in the outflow of resources embodying economic benefits.
• Expected to result in the outflow of economic benefits that are virtually certain.

Answer: C

Diff: 1 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

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2 Copyright © 2023 Pearson Canada Inc.4) Which of the following groups includes only financial liabilities?

• Accounts payable, Notes payable, Warranties payable.
• Bank loan, Bonds payable, Right-of-use obligation.
• Accounts payable, Warranties payable, Bonds payable.
• Bank overdraft, USD bank loan, Obligation under customer loyalty plan.

Answer: B

Diff: 1 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

5) Which of the following is correct about a "liability" under IFRS Framework?

• A future obligation arising from past events, the settlement of which is expected to result in an inflow

of resources.

• A present obligation arising from past events, the settlement of which is expected to result in an inflow

of resources.

• A past obligation arising from past events, the settlement of which is expected to result in an outflow

of resources.

• A present obligation arising from past events, the settlement of which is expected to result in an

outflow of resources.

Answer: D

Diff: 2 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

6) Which is an example of a liability?

• The decision to borrow $150,000 from the ABC Bank on January 15, 2024.
• Withdrawing $10,000 from the operating line of credit on January 15, 2024.
• Selecting the supplier to provide the raw materials for the manufacturing process.
• Choosing the site for a future plant expansion from a list of several possible choices.

Answer: B

Diff: 2 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

7) Which of the following is a financial liability?

• A magazine publisher's obligation to provide the magazine monthly for an agreed-upon period.
• Warranties.
• Accounts payable.
• Income taxes payable.

Answer: C

Diff: 2 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

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3 Copyright © 2023 Pearson Canada Inc.8) Which statement is correct under the IFRS definition for a "liability"?

• The obligating event must be probable before the liability can be recognized.
• The obligating event must be virtually certain before the liability can be recognized.
• A reliable measure of the obligation must exist before the liability can be recognized.
• A precise measure of the obligation must exist before the liability can be recognized.

Answer: C

Diff: 2 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

9) Which statement regarding liabilities is NOT correct under the IFRS Framework?

• A reliable estimate for an asset is presumed to exist.
• A provision exists if the timing of payment is uncertain.
• A provision exists if the amount of payment is uncertain.
• A reliable estimate for a liability is presumed to exist.

Answer: A

Diff: 2 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

10) Which statement is correct about financial and non-financial liabilities?

• A non-financial liability is a contractual obligation to deliver cash to another party.
• A non-financial liability does not meet all of the criteria for a "liability."
• The two liabilities may be valued differently for financial reporting purposes.
• A non-financial liability is measured at fair value rather than amortized cost.

Answer: C

Diff: 3 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

11) Which is NOT an example of a non-financial liability?

• Warranty liability.
• Bank loan.
• Income taxes payable.
• Deferred revenue.

Answer: B

Diff: 3 Type: MC

Skill: Concept

Objective: 11.1 Describe the nature of liabilities and differentiate between financial and non-financial liabilities.

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