Question

C) increase if bonds are issued at par D) increase if bonds are issued at a discount 10) Current liabilities fall into two categories, which are referred to as: A) contra liabilities and contingent liabilities B) contingent liabilities and non contingent liabilities C) liabilities of a known amount and liabilities whose amount must be estimated D) liabilities of a known amount and contingent liabilities 11) Bonds with a face value of $100,000 were sold at an effective rate of 10% to yiel excess of $100,000. It is apparent the bonds had a: A) market rate greater than 10% B) market rate less than 10% C) stated rate less than 10% D) stated rate greater than 10% 12) Short-term notes payable: A) are generally due within three months, with a maximum time period of six month B) are shown as a reduction to notes receivable on the balance sheet, with an appro disclosure C) are shown on the balance sheet with current liabilities D) are shown on the balance sheet after bonds payable 13) Potential liabilities that depend on future events arising out of past events are A) long-term liabilities B) estimated liabilities C) actual liabilities D) contingent liabilities 14) The carrying amount of bonds issued at a discount is calculated by: A) subtracting Discount on Bonds Payable from Bonds Payable B) subtracting interest Payable from Bonds Payable C) subtracting the sum of Discount on Bonds Payable and interest Payable from Bo D) subtracting interest Expense from Bonds Payable 15) The carrying amount of bonds is equal to: A) the face value of the bonds less the premium on bonds payable

Answer 1

10)

The correct answer is B) Contingent Liabilities and Non-Contingent Liabilities.

Supporting explanations:

Current liabilities are those liabilities which need to be paid within a period of 12 months or less.

Contingent liabilities are those liabilities who occurrence may or may not happen. It means that those liabilities are not sure whether they will incur or not. But non-contingent liabilities are those liabilities which will incur in future period or which are already incurred like Accounts Payable, accrued liabilities, short-term notes payable etc.

Therefore, the correct option is B) Contingent Liabilities and Non-Contingent Liabilities.

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