Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following costs would most likely be classified as a committed fixed cost for a retailer?

Advertising expenses

Cost of goods sold

Sales commissions paid to employees

Annual store lease payments

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Verified step by step guidance

Understand the concept of committed fixed costs: These are costs that a company is obligated to pay over the long term and cannot be easily adjusted or eliminated in the short term. Examples include lease payments, depreciation, and salaries of permanent staff.

Analyze each option provided in the problem: Advertising expenses are discretionary costs, meaning they can be adjusted based on the company's budget or strategy. Cost of goods sold is a variable cost that changes with the level of sales or production. Sales commissions are also variable costs tied to employee performance or sales volume.

Focus on the correct answer: Annual store lease payments are a committed fixed cost because they represent a long-term contractual obligation that the retailer must pay regardless of sales or other operational factors.

Relate the concept to the retailer's financial structure: Committed fixed costs like lease payments are essential for maintaining the retailer's operations and cannot be avoided without significant changes, such as closing the store.

Summarize the reasoning: The correct answer is annual store lease payments because they are fixed, long-term obligations that the retailer is committed to paying, unlike the other options which are variable or discretionary costs.