Question

A. Listed below are 12 accounting liabilities:

1.	Insurance paid in advance
2.	Interest payable
3.	Unsettled lawsuits where a reasonable estimate of loss can be determined and the loss is probable
4.	Accounts payable
5.	Warranties payable
6.	Bonds payable
7.	Accrued liabilities
8.	Taxes payable
9.	Employment commitments
10.	Notes payable
11.	Purchase commitments
12.	Salaries payable

Place each of these accounting liabilities into one of the following six categories:

a.	Obligations with fixed payment dates and amounts
b.	Obligations with fixed payment amounts but estimated payment dates
c.	Obligations for which the firm must estimate both timing and amount of payment
d.	Obligations arising from advances from customers on unexecuted contracts and agreements
e.	Obligations under mutually executed contracts
f.	Contingent obligations

B. In addition, determine which of the liabilities would be recognized on the balance sheet as liabilities and which would not be recognized.

Suggestion: format your answer as follows (this is not a correct sample answer):

a. Obligations with fixed payment dates and amounts (not generally recognized):

1.           Rent Payable

Answer 1

Ans:

a. Obligations with fixed payment dates and amounts:

1. Interest payable

2. Bonds Payable

3. Taxes Payable

4. Notes payable

b. Obligations with fixed payment amounts but estimated payment dates:

1. Account payable

2. Salary Payable

3. Accrued liability

c. Obligations for which the firm must estimate both timing and amount of payment

1. Unsettled lawsuits where a reasonable estimate of loss can be determined and the loss is probable

d. Obligations arising from advances from customers on unexecuted contracts and agreements.

(nothing)

e. Obligations under mutually executed contract:

1. Purchase commitments

2. Employment commitments

f. Contingent obligations

1. Warranty Payable

-Note: Insurance paid in advance is treated as current assets.

2. The liabilities which would be recognized on the balance sheet as liabilities and which would not be recognized are:

a. Recognized on the balance sheet:

1. Interest payable

2. Bonds Payable

3. Taxes Payable

4. Notes payable

5. Account payable

6. Salary Payable

7. Accrued liability

b. Not recognized on the balance sheet:

1. Unsettled lawsuits where a reasonable estimate of loss can be determined and the loss is probable

2. Purchase commitments

3. Employment commitments

4. Warranty Payable