Intermediate Accounting II – Exam 2 – Flashcards
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A correct valuation is:
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held to maturity at amortized cost.
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Debt securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses and are included as other comprehensive income and as a separate component of stockholder's equity are:
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available for sale debt securities
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Watt Company purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includes:
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a debit to held-to-maturity securities at $315,000.
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An available for sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a
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debit to debt investments
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When a company holds between 20% to 50% of the outstanding stock of an investee, which of the following statements applies?
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The investor should use the equity method to account for its investment unless circumstances indicate that it is unable to exercise "significant influence" over the investee.
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When an investment in a held to maturity security is transferred to an available for sale security, the carrying value assigned to the available for sale security should be
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its fair value at the date of the transfer
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"Gains trading" or "cherry picking" involves
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selling securities who value has increased since acquisition while holding those whose value has decreased since acquisition
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The converged standard on revenue recognition
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recognizes and measures revenue based on changes in assets and liabilities
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A company must account for a contract modification as a new contract if
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Goods and services are distinct and the company has the right to receive the standalone price
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Consideration paid or payable to customers
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reduces the consideration received and the revenue to be recognized
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A company has satisfied its performance obligation when the
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company has transferred physical possession of the asset
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The role of the agent in the principal-agent relationship is to
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arrange for the principal to provide goods or services to a customer
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Consignments are a specialized marketing method whereby the
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Consignee takes possession of merchandise but title remains with manufacturer
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Non refundable upfront fees
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should not be recorded as revenue if they are for future delivery of products and services
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The Billings and Construction in Progress account is a(n)
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contra-inventory account
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In selecting an accounting method for a newly contracted long-term construction project, the principal factor to be considered should be
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the degree to which a reliable estimate of the costs to complete and extent of progress toward completion is practicable
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Cost estimates at the end of the second year indicate that a loss will result in completion of the entire contract. Which of the following statements is correct?
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Under the completed-contract method, when the billings exceed the accumulated costs, the amount of the estimated loss is reported as a current liability.
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Bill and Hold Situation
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Delivery of the product is delayed at the buyer's request, but the buyer takes title and accepts billing.
