Agreements associated with acquiring resources it needs to do business obligate the company to pay cash or provide goods or services in exchange for the benefits received.The amount of the expense recognized should
A)be equal to the cash they expect to receive to reduce the liability to zero
B)be equal to the cash they expect to pay to reduce the asset to zero
C)be equal to the cash they expect to pay to reduce the liability to zero
D)be equal to the cash they expect to receive to reduce the asset to zero

Question

Quizplus · Accepted Answer

When a company acquires resources, it creates a liability to pay cash or provide goods or services in exchange for those resources. The expense recognized should be equal to the cash they expect to pay to reduce the liability to zero. Therefore, choice C is the correct answer.

Agreements Associated with Acquiring Resources It Needs to Do Business