Classification and Characteristics of Liabilities Quiz
Explore characteristics, classifications, and types of liabilities. Test yourself with questions on current, long-term, and contingent liabilities.
#1
Which of the following is a current liability?
Accounts receivable
Long-term debt
Accumulated depreciation
Accounts payable
#2
What is a contingent liability?
A liability that is certain to occur
A potential liability that depends on the outcome of a future event
A liability that has already occurred
A liability that is not recorded in financial statements
#3
Which financial statement reports a company's liabilities?
Income statement
Statement of cash flows
Balance sheet
Statement of retained earnings
#4
Which of the following is an example of a long-term liability?
Accounts payable
Short-term bank loan
Salaries payable
Mortgage payable
#5
Which of the following is a characteristic of a liability?
It increases owner's equity
It represents an obligation to transfer economic benefits
It decreases assets
It is recorded on the income statement
#6
Which type of liability is considered a long-term liability?
Accounts payable
Salaries payable
Bonds payable
Income taxes payable
#7
How are liabilities typically classified on a balance sheet?
Based on their size
Based on their order of occurrence
Based on their liquidity
Based on their age
#8
Which of the following is an example of a deferred revenue liability?
Prepaid rent
Accrued salaries
Unearned subscription revenue
Accounts payable
#9
What is the formula to calculate the debt-to-equity ratio?
Total liabilities / Total assets
Total liabilities / Total equity
Total assets / Total equity
Total assets / Total liabilities
#10
What is the main characteristic of a contingent liability?
It is certain to occur
It depends on a future event
It has already occurred
It is not legally binding
#11
What is a lease liability?
The obligation to pay rent on a leased asset
The obligation to maintain a leased asset
The obligation to insure a leased asset
The obligation to purchase a leased asset
#12
What is a callable bond?
A bond that can be converted into shares of stock
A bond that can be redeemed by the issuer before its maturity date
A bond that pays interest only when the issuer has sufficient profits
A bond that pays a variable interest rate
#13
What is a subordinated debt?
Debt that is secured by specific assets of the company
Debt that has a lower priority of payment than other debts in case of bankruptcy
Debt that is issued to finance short-term expenses
Debt that is guaranteed by a third party
#14
What is a finance lease?
A lease in which the lessor retains ownership of the leased asset
A lease that transfers substantially all the risks and rewards incidental to ownership of the leased asset
A lease that is used to finance the purchase of equipment
A lease that requires the lessee to make payments equal to the fair value of the leased asset
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