Asked by Kameron Teague on Apr 29, 2024
Verified
All of the following statements regarding uncertainty in liabilities are true except:
A) Liabilities can involve uncertainty in whom to pay.
B) A company can create a liability with a known amount even when the holder of the note may not be known until the maturity date.
C) A company can have an obligation of a known amount to a known creditor but not know when it must be paid.
D) A company only records liabilities when it knows whom to pay,when to pay,and how much to pay.Without all three,a liability cannot be recorded.
E) A company can be aware of an obligation but not know how much will be required to settle it.
Uncertainty
A situation where the outcomes of an event or condition cannot be accurately predicted or quantified.
Liabilities
Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of economic benefits.
- Build a solid understanding of liabilities, which covers known, estimated, and contingent liabilities, along with mastering the criteria for their recognition.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
D
Explanation :
This statement is not true because a company can record a liability with a known amount and payee even if the payment date is uncertain. Recording the liability in this case is required under accrual accounting principles.
Learning Objectives
- Build a solid understanding of liabilities, which covers known, estimated, and contingent liabilities, along with mastering the criteria for their recognition.