Multiple Choice
Ricardo has a debt ratio of 92\% and total assets of \$192. Which of the following best represents the amount of Ricardo's total liabilities?
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9. Current Liabilities
Types of Liabilities
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Which of the following is NOT a liability that must be estimated?
A
Accounts Payable
B
Contingent Liability
C
Warranty Liability
D
Pension Obligation
Verified step by step guidance1
Step 1: Understand the concept of liabilities. Liabilities are obligations that a company owes to external parties, typically arising from past transactions or events. They are classified as current or non-current based on their due dates.
Step 2: Review the types of liabilities mentioned in the problem. Accounts Payable is a liability that represents amounts owed to suppliers for goods or services received. Contingent Liability refers to potential obligations that depend on the outcome of future events. Warranty Liability is an estimated obligation to repair or replace products under warranty. Pension Obligation is an estimated liability related to employee retirement benefits.
Step 3: Identify which liabilities require estimation. Contingent Liability, Warranty Liability, and Pension Obligation involve estimation because their amounts depend on future events, probabilities, or actuarial calculations.
Step 4: Recognize that Accounts Payable does not require estimation. It is a definite liability with a known amount and due date, based on invoices received from suppliers.
Step 5: Conclude that the correct answer is Accounts Payable, as it is NOT a liability that must be estimated.
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