Midterm 2 Flashcards
(42 cards)
Current liabilities are obligations payable within one year or within the firm’s operating cycle, whichever is longer. T/F
T
Current liabilities are ordinarily recorded at maturity amounts rather than present value. T/F
T
Current liabilities as those expected to be satisfied with current assets or by the creation of other current liabilities. T/F
T
Pledging accounts receivable:
When accounts receivable serves as a collateral
Factoring receivables:
When the receivables are sold outright to a finance company
Accrued Liability examples:
(3)
Salaries/Wages payable
Income taxes payable
Interest payable
Current obligation expected to be refinanced into 2-year bonds is a
Long-term liability
Expiration of gift cards is recorded as a revenue. T/F
T
Warranty liability is a contingent liability. T/F
T
Both probable gain contingencies and loss contingencies should be recognized. T/F
F
Employees’ withholding payroll tax is the employer’s liability. T/F
T
All investments in debt securities whose fair values are not readily determinable are carried at historical cost. T/F
F
Purchases and sales of trading securities are always reported as investing activities in a statement of cash flows. T/F
F
Securities classified as held-to-maturity could be reported as either current or long-term in a classified balance sheet, depending upon their maturity dates. T/F
T
The equity method of accounting for investments in voting common stock is appropriate when the investor:
Can significantly influence the investee
Bonds that are purchased with the intent of selling them in the near future to take advantage of short-term price changes are classified as:
Trading securities
In the statement of cash flows, inflows and outflows of cash from buying and selling available-for-sale debt securities are considered:
Investing activities
Trading securities are most commonly reported on the financial statements of:
Banks
Investments in debt securities available-for-sale are reported at:
Fair value on the reporting date
The income statement reports changes in fair value for which type of investment securities?
Trading securities
Under U.S. GAAP, all investment securities are initially recorded at:
Cost
When an investor accounts for an investment in common stock at fair value through net income, cash dividends are classified by the investor as:
Dividend income
If the fair value of an available-for-sale investment declines below cost, and the company does NOT believe it is more likely than not that it will have to sell the investment before fair value recovers, the investment is:
written down to fair value, the credit loss is recognized in net income, and any remaining impairment is recognized in other comprehensive income
On March 25, 2024, Phillips Corporation purchased bonds of Atlas Corporation for $163 million and classified the securities as trading securities. On December 31, 2024, these bonds were valued at $199 million. Three months later, on April 3, 2025, Phillips Corporation sold these bonds for $179 million.
As part of the multistep approach to record the 2025 transaction, Phillips Corporation should first update the fair value adjustment by recording a(n):
Unrealized holding loss of $20million in 2025.
$179million-$199million= ($20million)
