Question

1. Trading securities are at reported on the balance sheet at amortized cost.

True or False?

Answer ______

2. Warranty expense estimates are higher than warranty returns in a given year. This will result in a deferred tax asset.

True or False?

Answer ______

3. An increase in bonds payable is reported in the financing section of the indirect method statement of cash flows.

True or False?

Answer ______

4. A change in accounting estimate should be accounted for in current and future periods.

True or False?

Answer ______

5. Interest revenue on municipal bonds results in a permanent tax difference.

True or False?

Answer ______

6. A component of net periodic post retirement benefit cost is service cost.

True or False?

Answer ______

7. Retained Earnings is increased by the distribution of dividends.

True or False?

Answer ______

8. A change in the useful life of a fixed asset is a change in accounting estimate.

True or False?

Answer ______

Answer 1

1)

False(Trading securities are reported on the balance sheet at fair value with the unrealized gain or loss reported in income.)

2)

True.,when warranty expenses are higher it results in defferd tax asset

3)

True, bonds payables falls under financing activities

4)

True. changes in accounting estimates should be recorded in current and future periods and a prospective application is required

5)

True, Interest revenue on municipal bonds will result in a permanent tax difference because they are not taxable for income tax purposes. Note that municipal bonds are tax-free thus they are treated as a permanent difference in the computation of the company's taxable income.

6)True

net periodic benefit cost is the amount recognized in employer's financial statements as the cost of a post retirement benefit for the period. It's a period cost. So, the components of the net periodic post retirement benefit class will be the service cost.

7)

False, retained earnings is decreased by the payment of dividend..a company can either retain or declare dividend , so as the amout of dividend increses , retained earnings decreases

8)

True ,change in depreciation method is not a change in accounting policy rather it is a change in accounting estimate. Change in accounting policy only occurs if rules of either recognition, measurement or presentation of line item are changed. ... Therefore, it is a change in accounting estimate.