I. Multiple Choice Questions. Circle your answer. Do 1 1. All of the following a

Question

I. Multiple Choice Questions. Circle your answer. Do 1 1. All of the following are examples of legal liabilities excep a. notes payable b. sales tax payable sick pay payable (may be taken as time off) d. c. property taxes payable 2. Under current standards of the FASB, liabilities include only legal obligations a. b. both legal and illegal obligations both legal and nonlegal obligations d. c. legal, nonlegal, and illegal obligations 3. On the balance sheet, liabilities are generally classified as a. current or long-term b. legal or nonlegal c. material or immaterial d. probable or estimated

Explanation / Answer

1)correct option is "C" -sick pay payable

Legal liability arises out of contracts ,torts ,fines or taxes imposes by government .

All of the other option given are examples of legal liaility as either they arise out of a contract(note payable) or imposed by government (taxes)

2)correct option is "C"

Illegal obligations since not recognised by law are never recognised in books of accounts .

So only legal and non legal obligations are recorded in books

3)correct option is "A"

liabilities are classified as current or non current (long term )

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