ACC309 Quiz on Current Liabilities (Theories) 

Disclosure usually is not required for 

a. Contingent losses that are reasonably possible and cannot be reliably measured.
b. Contingent losses that are remote and can be reliably measured. 
c. Contingent gains that are probable and can be reliably measured. 
d. Contingent losses that are probable and cannot be reliably measured. 
Reporting in the financial statements is required for
a. All loss contingencies. 
b. Gain contingencies that are probable and can be reliably measured.
c. Loss contingencies that are possible and can be reliably measured.
d. Loss contingencies that are probable and can be reliably measured. 
At the end of the current year, an entity received an advance payment of 60% of the sales
price for special order foods to be manufactured and delivered within five months. At the
same time, the entity subcontracted for production of the special order goods at a price
equal to 40% of the main contract price. What liabilities should be reported in the entity's
year-end statement of financial position? 
a. None 
b. No deferred revenue but payable to subcontractor is reported at 40% of the main contract
price 
c. Deferred revenue equal to 60% of the main contract price and payable to subcontractor
equal to 40% of the main contract price 
d. Deferred revenue equal to 60% of the main contract price and no payable to
subcontractor 
An entity sells appliances that include a three-year warranty. Service calls under the
warranty are performed by an independent mechanic under a contract with the entity.
Based on experience, warranty costs are expected to be incurred for each machine sold.
When should the entity recognize these warranty costs?
a. When payments are made to the mechanic 
b. When the services calls are performed 
c. When the machines are sold 
d. Evenly over the life of the warranty