3

Question 3 10 points Save Answer Which of the following statements relating to liabilities is/are TRUE? 1. A provision for a liability is created to recognise a probable future outflow of economic resource as a result of a past event. 2. Some types of liabilities, such as borrowings and provisions for liabilities may appear under the headings of both Current liabilities and Non-current liabilities. 3. Company X has guaranteed a loan taken out by its supplier, a start-up business Company Y. Company X would recognise this as a liability on its own statement of financial position only if it appeared likely that company Y would not be able to repay the loan. 4. Company A is involved in a legal case spanning some years. At 30 September 2020 lawyers provided an estimate of 250,000 for damages plus costs but at 30 September 2021 this estimate has been revised to 320,000. The journal entry required at 30 September 2021 is DR Provision for legal damages 70,000 and CR Legal damages expense 70,000. O 1, 2 and 3 only 1 and 4 only O 2 and 3 only 0 1 and 3 only O 2, 3 and 4 only