1. Uncertainties such as natural disasters:
Are not contingent liabilities because they are future events not arising out of past transactions or events
Are contingent liabilities because they are future events arising from past transactions or events
Should be disclosed because of their usefulness to financial statements
Are estimated liabilities because the amounts are uncertain
Arise out of transactions such as debt guarantees
2. A promissory note received from a customer in exchange for an account receivable:
Is a cash equivalent for the recipient
Is an account receivable for the recipient
Is a note receivable for the recipient
Is a short-term investment for the recipient
Is a note payable for the recipient
3. Amounts received in advance from customers for future products or services:
Are not allowed under GAAP
Require an outlay of cash in the future
4. Advance ticket sales totaling $6,000,000 cash would be recognized as follows:
Debit Sales, credit Unearned Revenue
Debit Unearned Revenue, credit Sales
Debit Cash, credit Unearned Revenue
Debit Unearned Revenue, credit Cash
5. The matching principle requires:
That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user
The use of the direct write-off method for bad debts
The use of the allowance method of accounting for bad debts
That bad debts be disclosed in the financial statements
That bad debts not be written off
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