Question 1: A correct valuation is
- available-for-sale at amortized cost
- held-to-maturity at amortized cost
- held-to-maturity at fair value
- None of the above
Question 2: Securities which could be classified as held-to-maturity are
- redeemable preferred stock
- warrants
- municipal bonds
- treasury stock
Question 3: Unrealized holding gains or losses which are recognized in income are from securities classified as
- held-to-maturity.
- available-for-sale.
- trading.
- none of these
Question 4: When an investor's accounting period ends on a date that does not coincide with an interest receipt date for bonds held as an investment, the investor must
- make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the amount of interest accrued since the last interest receipt date.
- notify the issuer and request that a special payment be made for the appropriate portion of the interest period.
- make an adjusting entry to debit Interest Receivable and to credit Interest Revenue for the total amount of interest to be received at the next interest receipt date.
- do nothing special and ignore the fact that the accounting period does not coincide with the bond's interest period
Question 5: Use of the effective-interest method in amortizing bond premiums and discounts results in
- a greater amount of interest income over the life of the bond issue than would result from use of the straight-line method.
- a varying amount being recorded as interest income from period to period.
- a variable rate of return on the book value of the investment.
- a smaller amount of interest income over the life of the bond issue than would result from use of the straight-line method.
Question 6: When the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, revenues are
- earned
- realized
- recognized
- All of the above
Question 7: Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract on each appliance sold. Although Dot Point sells the appliances on an installment basis, all service contracts are cash sales at the time of purchase by the buyer. Collections received for service contracts should be recorded as
- service revenue.
- deferred service revenue.
- a reduction in installment accounts receivable.
- a direct addition to retained earnings.
Question 8: The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met. Which of the following is not one of these six conditions?
- The amount of future returns can be reasonably estimated.
- The seller's price is substantially fixed or determinable at time of sale.
- The buyer's obligation to the seller would not be changed in the event of theft or damage of the product.
- The buyer is obligated to pay the seller upon resale of the product.
Question 9: How should earned but unbilled revenues at the balance sheet date on a long-term construction contract be disclosed if the percentage-of-completion method of revenue recognition is used?
- As construction in process in the current asset section of the balance sheet.
- As construction in process in the noncurrent asset section of the balance sheet.
- As a receivable in the noncurrent asset section of the balance sheet.
- In a note to the financial statements until the customer is formally billed for the portion of work completed.