Answered: 2). A landlord records the collection…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

2). A landlord records the collection of a tenant's security deposit as a(n):

1. liability

2. prepaid expenses

3. contingent liability

4. contra liability

1). Which of the following statements regarding accounting for leases is true?

a. If the lease term is one year or longer, a liability must be recognized.

b. leases accounting rule will result in more assets and liabilities being recognized on the balance sheet

c. Leasing will likely remain popular because leases do not require a large initial outlay of cash

d. All of these are correct

e. None of these are correct

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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