MULTIPLE CHOICE
1.Which one of the following types of liabilities is not currently recognized on balance sheets?
a.Deferred credits
b.Constructive obligations
c.Equitable obligations
d.Contingent liabilities
2.Which one of the following types of liabilities represents a duty not contractually present but which may nevertheless exist due to ethical principles of fairness?
a.Deferred credits
b.Constructive obligations
c.Equitable obligations
d.Contingent liabilities
3.Which of the following types of liabilities do not represent obligations on the firm to transfer assets in the future, but are past transactions being postponed from the income statement until future periods?
a.Deferred credits
b.Constructive obligations
c.Equitable obligations
d.Contingent liabilities
4.Which one of the following types of liabilities represents an existing situation involving uncertainty as to possible gain or loss that will ultimately be resolved when one or more future events occur or fail to occur?
a.Deferred credits
b.Constructive obligations
c.Equitable obligations
d.Contingent liabilities
5.Which of the following is a true statement?
a.There is more variety in liability groups than in asset groups.
b.Most liabilities are non-contractual in nature.
c.There are natural sub-classifications of liabilities and assets that can be inferred from the balance sheet.
d.Liabilities are measured at amounts established in the transaction, usually amounts to be paid in the future, sometimes discounted.
6.Current liabilities are initially measured at:
a.Face value.
b.Present value based on current interest rates.
c.Present value plus stated interest.
d.Book value.
7.Non-current liabilities are initially measured at:
a.Face value.
b.Present value based on current interest rates.
c.Present value plus stated interest.
d.Book value.
8.After non-current liabilities have been initially measured, they are recorded on subsequent balance sheets at:
a.Face value.
b.Present value based on current interest rates.
c.Present value plus stated interest.
d.Book value.
9.Which of the following is a true statement regarding owners’ equity?
a.APB Statement 4 and SFAC No. 6 both reflect the entity view of the firm.
b.Owners’ equity consists of only two components: contributed capital and retained earnings.
c.In a sole proprietorship there is no legal distinction between contributed capital and earned capital.
d.Dividends are legally paid only out of retained earnings.
10.Contributed capital is measured by:
a.The cost of assets contributed to the firm by stockholders.
b.The market value of assets contributed to the firm by stockholders.
c.The book value of assets contributed to the firm by stockholders.
d.The discounted present value of assets contributed to the firm by stockholders.
11.Which of the following is not true regarding derivatives?
a.A derivative is a financial instrument whose value is based upon another financial instrument, stock index or interest rate, or interest rate index.
b.Derivatives can be classified into two general types: forward-based and option-based derivatives.
c.Unrealized holding gains and losses on derivatives are not recognized.
d.SFAS No. 133 values derivatives at fair value.