Multiple Choice: Other Liabilities Select the correct answer for each of the following:

1. An example of a contingent liability is:

a. Unearned subscription revenue.

b. Bond premium.

c. Wages payable.

d. Potential future payment on a pending breach of contract lawsuit.

2. Deferred income tax does not need to be recorded when:

a. Temporary differences will reverse within 5 years.

b. The company does not know when the temporary difference will reverse.

c. The future repayment of taxes is sufficiently far off that the present value of the payment approaches zero.

d. Accelerated depreciation is used for both financial reporting and tax purposes.

3. A liability for deferred income taxes should be recorded when:

a. Revenue included in income for financial reporting purposes will be taxed at a later time.

b. Revenue included in income for financial reporting purposes is exempt from income tax.

c. Straight-line depreciation is used for both financial reporting and tax purposes.

d. Income taxes are paid in advance to avoid interest charges and late fees.

4. Under a defined-benefit pension plan:

a. The employer agrees to make a specified contribution each period; the benefits received by the retiree are specified.

b. The employer agrees to make a specified contribution each period; the benefits received by the retiree may vary.

c. The employer’s contribution may vary; the benefits received by the retiree are specified.

d. The employer’s contribution may vary; the benefits received by the retiree may vary.