Reporting & Analyzing Liabilities

Question 1

What is a liability?

Answer 1

Present obligation to give up an economic benefit in the future

Question 2

What are the 3 characteristics of an Interest-Bearing Debt?

Answer 2

Initial Recognition, Interest Expense, Payments

Question 3

What is the difference between a Finance Lease vs Operating Lease?

Answer 3

Finance is buying an asset with a loan, whereas Operating is similar to a simple rental

Question 4

True or False: You record Warranty Expense and Warranty Liability at a different time as the revenue

Answer 4

False

Question 5

True or False: Extended Warranties are not sold separately

Answer 5

False

Question 6

What are Contingent Liabilities?

Answer 6

Potential obligations from past events, depending on a future event

Question 7

How does a Finance Lease Income Statement differ from an Operating Lease’s?

Answer 7

Operating’s Income Statement reports a single, straight-line Lease Expense