ACCO 320 CH 13 UPDATED ACTUAL Questions and CORRECT Answers
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Course
ACCO 320 CH 13
Institution
ACCO 320 CH 13
ACCO 320 CH 13 UPDATED ACTUAL
Questions and CORRECT Answers
What are liabilities? - CORRECT ANSWER- A present obligation of the entity to transfer
an economic resource as a result of past events
Legal obligation - CORRECT ANSWER- 1. A contract through its explicit or implicit
terms
2. legi...
ACCO 320 CH 13 UPDATED ACTUAL
Questions and CORRECT Answers
What are liabilities? - CORRECT ANSWER✔✔- A present obligation of the entity to transfer
an economic resource as a result of past events
Legal obligation - CORRECT ANSWER✔✔- 1. A contract through its explicit or implicit
terms
2. legislation (ie. tax liability)
3. Other operation of law
Constructive obligation - CORRECT ANSWER✔✔- 1.By an established pattern of past
practice, published policies or a sufficiently specific current statement, the entity has
indicated to other parties that it will accept certain responsibilities, and
2.As a result, the entity has created a valid expectation on the part of those other parties that it
will discharge those responsibilities
Financial liability - CORRECT ANSWER✔✔- Any liability that is a contractual obligation
Non-financial liabilities - CORRECT ANSWER✔✔- -usually not payable in cash
-more difficult to measure than financial liabilities because the obligations will be met with
goods and services and the timing of meeting the obligation and its amount aren't fixed
line of credit - CORRECT ANSWER✔✔- the amount of actual credit used is reported on the
SFP, and any restrictions that are imposed by the financial institution are disclosed in the
notes
Payroll deductions - CORRECT ANSWER✔✔- CPP/QPP, EI, Income taxes - deducted from
employees' pay and paid to government. There's an employer portion to CPP/QPP & EI.
Accumulated rights to employee benefits - CORRECT ANSWER✔✔- Vacations or other
compensated leaves (sick days earned). Expensed in the period earned by employees since
they are unconditional. Sick days that can be taken due to actual sickness requires an estimate
, Callable debt - CORRECT ANSWER✔✔- Debt that can be called at any time before
maturity
Considered current as it may have to be funded out of current assets
Need to disclose planned repayment for users
If a long-term debt agreement is violated and the liability becomes payable on demand
(callable), the debt is classified as current
Callable debt IFRS - CORRECT ANSWER✔✔- Always current, even if the lender agrees
between the date of the SFP and the date the financial statements are released that it won't
demand repayment because of the violation
At the date of the SFP, the entity didn't have an unconditional right to defer the payment
beyond 12 months from the reporting date
That right could only be exercised by the lender
Callable debt ASPE - CORRECT ANSWER✔✔- Reclassified as current liability unless:
-The creditor waives in writing the covenant requirements, OR
-The violation has been cured or rectified within the grace period that's usually given in these
agreements
AND it's not likely that the company will violate the covenant requirements within a year
from the date of the SFP.
Short term debt expected to be refinanced - CORRECT ANSWER✔✔- -amount scheduled to
mature within one year from the date of the SFP
-classification issue arises when the liability is expected to be refinanced on a long term basis
and current assets aren't expected to be needed for it
Short term debt expected to be refinanced IFRS - CORRECT ANSWER✔✔- If the debt is
due within 12 months from the reporting date, it's classified as a current liability, even if a
long-term refinancing has been completed before the financial statements are released
Exception: For continuing long-term classification, at the date of the SFP, the entity expects
to refinance it or roll it over under an existing agreement for at least 12 months and the
decision is solely at management's discretion
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