Distinguishing Liabilities from Equity Flashcards Preview

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Flashcards in Distinguishing Liabilities from Equity Deck (6)
1

Manditorily reedeemable shares are classified as liabilities if both...

They are obligations to repurchase the firms equity shares AND they require or may require an obligation settlement via transfer of assets.

2

An obligation to issue shares worth a fixed dollar amount in return for the purchase of goods on credit is recorded as debt or equity?

Debt/Liability

3

An obligation to issue a fixed number of shares in return for the purchase of goods on credit is recorded as debt or equity?

Equity, because the supplier is accepting the risk of change in stock value. We have no risk.

4

Under IFRS if a financial instrument requires the issuer to _____ cash or other financial assets then the instrument is classified as a liability.

Transfer

5

IFRS does not require precise information amount the separate debt and equity values.

True

6

When a firm sells a put option, a debit to OE is recorded for the FV of the option,

False, a credit to a liability