Which of These Items Represents a Definite Commitment to Pay

question 44

Multiple Choice

Which of these items represents a definite commitment to pay out funds in the future?

• A) bonds payable
• B) reserves for rebuilding furnaces
• C) deferred taxes
• D) minority shareholders' interests
• E) redeemable preferred stock

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Definitions:

Accrual-Based Net Income

This is the measure of profitability that includes all earned revenues and incurred expenses within a reporting period, according to the accrual basis of accounting.

Initial Value Method

The procedure of accounting for an investment at its cost at the time of purchase without subsequent adjustment for changes in market value.

Dividends

Payments made to shareholders out of a corporation's profits as a return on their investment.

Consolidated Net Income

The total profit of a parent company and its subsidiaries after taxes and interest, reflecting the group's overall financial performance.