Which of the following is an example of a liability where there is no corresponding asset?*1 pointa provision for warranties.a loan owing to a financial institutiona debenture issued by a listed companya provision for decommissioning
Question
Which of the following is an example of a liability where there is no corresponding asset?*1 pointa provision for warranties.a loan owing to a financial institutiona debenture issued by a listed companya provision for decommissioning
Solution
The correct answer is "a provision for warranties".
Here's why:
a) A provision for warranties is a liability that does not have a corresponding asset. This is because it is an amount that a company sets aside to cover the cost of fulfilling its warranty obligations. The company does not receive an asset in return for this provision.
b) A loan owing to a financial institution is a liability, but it does have a corresponding asset. The asset is the cash that the company received when it took out the loan.
c) A debenture issued by a listed company is a liability, but it also has a corresponding asset. The asset is the cash that the company received when it issued the debenture.
d) A provision for decommissioning is a liability that does have a corresponding asset. The asset is the property, plant, or equipment that will be decommissioned. The provision is an estimate of the future costs of decommissioning.
Similar Questions
Which of the following is an example of a liability?Accumulated depreciationRevenue received in advanceAllowance for doubtful debtsPrepayments
Liabilities which do not meet the recognition criteria and where the possibility of an outflow of economic resources is remote should: Reading required Learning objective 9.4 on page 256. Group of answer choices not be recognised/disclosed in the financial statement at all. be recognised as an accrual. be recognised as a provision. be disclosed as a contingent liability.
Which of the following is considered a liability on a balance sheet?
A liability is*1 pointan item that adds value to the business.a claim a creditor has against a business's assets.a sign that a business is in financial trouble.the portion of the business that belongs to its owners
Which of the following is not one of the essential characteristics for an item to be reported as a liability on the balance sheet? it is a present obligation of a particular entity it is payable to specifically identifiable payees it involves a future sacrifice of economic benefits it is reasonably measurable in terms of money
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.