Activity 10- CFAS (Deadline: April 27, 2021)

1. Which is the correct definition of a provision?

a. A possible obligation arising from past event
b. A liability of uncertain timing or amount
c. A liability which cannot be easily measured
d. An obligation to transfer funds to an entity
Answer: B

2. A legal obligation is an obligation that is derived from all of the following, except
a. Legislation
b. A contract
c. Other operation of law
d. An established pattern of past practice
Answer: D

3. It is an event that creates a legal or constructive obligation because the entity has no other
realistic alternative but to settle the obligation.
a. Obligation event
b. Past event
c. Subsequent event
d. Current event
Answer: A

4. Which of the following is incorrect regarding the discount rate used in measuring a provision?
a. Reflects current market assessment of the time value of money
b. Reflect risks specific to the liability
c. Does not reflect risks for which future cash flow estimates have been adjusted.
d. Is a post-tax discount rate
Answer: D

5. The likelihood that the future event will or will not occur can be expressed by a range of
outcome. Which range means that the future event occurring is very slight?
a. Probable
b. Reasonably possible
c. Certain
d. Remote
Answer: D
6. A contingent liability
a. Has a most probable value of zero but many require of payment if a given future event occurs.
b. Definitely exists as a liability but the amount or due date is indeterminate
c. Is reported of current liability
d. Is bot disclosed in the financial statement
Answer: A

7. How should a contingent liability be reported in the financial statements when it is reasonably
possible?
a. As a differed liability
b. As an accrued liability
c. As a disclosure only
d. As an account payable
Answer: C

8. A present obligation that is probable and for which the amount can be reliably measured should
a. Not be accrued but disclosed in the notes to the financial statements
b. Be accrued by debiting appropriated retained earnings and crediting liability
c. Be accrued by debiting the expense and crediting appropriated retained earnings
d. Be accrued by debiting the expense and crediting a liability
Answer: D

9. Contingent asset is usually recognized when

a. Realized
b. Occurrence is reasonably possible and the amount can be reliably measured.
c. Occurrence is probable and measurable
d. The amount can be reliably measured.
Answer: A

10. Gain contingency that is remote and measurable

a. Must be disclosed in a note to the financial statements.
b. May be disclosed in a note to the financial statements.
c. Must be reported in the body of the financial statements.
d. Should not be reported or disclosed.
Answer: D