Examples of Equitable or Constructive Obligations Include

question 29

Multiple Choice

Examples of equitable or constructive obligations include:

• A) A state government promises economic support to householders and businesses affected by recent bushfires. It has in the past provided at least this level of support.
• B) Management of a retail store decides to offer compensation to customers as a result of faulty scooters purchased from the store and causing injury. The manufacturers are normally considered liable for this type of fault.
• C) A company that has published policies regarding support for the environment and has in the past rehabilitated polluted sites has identified contamination it has caused in land surrounding one of its production sites. Not correcting the problem with the site will lead to serious difficulties with the local community.
• D) A state government promises economic support to householders and businesses affected by recent bushfires. It has in the past provided at least this level of support and a company that has published policies regarding support for the environment and has in the past rehabilitated polluted sites has identified contamination it has caused in land surrounding one of its production sites. Not correcting the problem with the site will lead to serious difficulties with the local community.
• E) All of the given answers.

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Definitions:

Operating Activities

Activities that relate directly to the primary revenue-producing operations of an organization, such as sales and service delivery.

Fixed Asset

Long-term tangible property that a company owns and uses in its operations to generate income, such as buildings, machinery, and equipment.

Operating Activities

Activities that relate directly to the primary operations of the company, such as production, distribution, marketing, and selling of goods and services.

Indirect Method

A way of reporting cash flows from operating activities in the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate the cash from operations.