WGU D105 Intermediate accounting (LIV1)

1. A company has a positive intent and the ability to hold a security until the date at which the principal is to be repaid. How should this security be classified on the balance sheet?

• Trading security

• Held-to-maturity security

• Equity security

• Available-for-sale security

2. How are unrecognized gains or losses treated for held-to-maturity securities?

• Recognized as an adjustment to retained earnings

• Recognized as net income

• Not recognized

• Recognized as other comprehensive income

3. Which valuation method should be used to record securities classified as available-for-sale?

• Fair value

• Acquisition cost plus interest

• Acquisition cost

• Amortized value

4. Which situation is recognized in a deferred tax valuation allowance account?

• Decrease in a deferred tax liability

• Increase in a deferred tax asset

• Decrease in a deferred tax asset

• Increase in a deferred tax liability

5. What is income tax payable?

• A company’s liability, based on profitability, that is paid in advance to the government

• A payment to a company, based on profitability, that is paid in advance from the government

• A payment to a company, based on profitability, to be paid from the government

• A company’s liability, based on profitability, to be paid to the government

6. Which characteristic is associated with taxable income?

• It is based on international financial reporting standards.

• It differs from accounting income due to timing differences.

• It differs from accounting income due to allocation differences.

• It is based on generally accepted accounting principles.

7. Corporation A gains a 50% controlling interest in Corporation B. Which valuation method should be used to record the purchase?

• Consolidation

• Equity method

• Fair value method

• Amortized cost

8. Which valuation may be used for debt securities?

• Primarily-for-sale at amortized cost

• Held-to-maturity at fair value

• Trading securities at amortized cost

• Available-for-sale at fair value

9. A company purchased common stock which represents a 10% interest in another company. Which valuation method should be used to record this purchase?

• Historical cost

• Equity

• Fair value

• Consolidation

10. On August 1, Year 1, Company A acquired $1,500,000 face value 8% bonds of Company B at 105 plus accrued interest. Which amount should Company A report in the debt investments account?

• $1,425,000

• $1,500,000

• $1,575,000

• $1,620,000

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