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Intermediate Accounting: Current Liabilities & Contingencies

36. Of the following items, the only one which should not be classified as a current liability is
a. current maturities of long-term debt.
b. sales taxes payable.
c. short-term obligations expected to be refinanced.
d. unearned revenues.

42. If a short-term obligation is excluded from current liabilities because of refinancing, the footnote to the financial statements describing this event should include all of the following information except
a. a general description of the financing arrangement.
b. the terms of the new obligation incurred or to be incurred.
c. the terms of any equity security issued or to be issued.
d. the number of financing institutions that refused to refinance the debt, if any.

43. In accounting for compensated absences, the difference between vested rights and accumulated rights is
a. vested rights are normally for a longer period of employment than are accumulated rights.
b. vested rights are not contingent upon an employee's future service.
c. vested rights are a legal and binding obligation on the company, whereas accumulated rights expire at the end of the accounting period in which they arose.
d. vested rights carry a stipulated dollar amount that is owed to the

50. Which of the following contingencies need not be disclosed in the financial statements or the notes thereto?
a. Probable losses not reasonably estimable
b. Environmental liabilities that cannot be reasonably estimated
c. Guarantees of indebtedness of others
d. All of these must be disclosed.

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Solution Preview

36. c. Refinancing 8. (S.O. 2) Certain short-term obligations expected to be refinanced on a long-term basis should be excluded from current liabilities. Under FASB Statement No. 6, a short-term obligation is excluded from current liabilities if (a) it is intended to be refinanced on a long-term basis and (b) the ability to accomplish the refinancing is reasonably demonstrated. Both conditions must exist before the item can be excluded from current liabilities. Evidence as to the intent and ability to refinance usually comes ...

Solution Summary

The four multiple choice questions all deal with classification of liabilities and appropriate disclosure in the financial statements. Each response is a full paragraph of explanation and each is cited.