Question

Which of the following statements is false?

A. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing.
B. Cash dividends should be recorded as a liability when they are declared by the board of directors.
C. Unearned revenues represent advance payments for goods or services from customers.
D. Stock dividends declared but not yet distributed are a reported as a liability until the stock is issued.

Answer 1

The false statement is that stock dividends declared but not yet distributed are reported as a liability; they should be recorded in shareholders' equity.

Step-by-step explanation:

The statement which is false among the options provided is: Stock dividends declared but not yet distributed are reported as a liability until the stock is issued. This is not correct as stock dividends represent a reallocation of equity rather than an obligation, and are therefore recorded in shareholders' equity, not as a liability on the balance sheet. On the contrary, the statements about a company being able to exclude a short-term obligation from current liabilities if it intends to refinance on a long-term basis, recording cash dividends as a liability when declared, and unearned revenues representing advance payments for goods or services are all true.