Most components of the balance sheet are reported at
Answer(s): C
Most components of the balance sheet are reported at historical cost, that is, the exchange price at their acquisition date.
Holiday Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in 1994 for $120,000. On December 12, 1996, Holiday reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in increasing
Answer(s): A
Under the cost method, treasury stock is decreased by $120,000, cash is increased by $190,000 and the difference (which is like a gain) is reported as an increase in additional paid-in capital. Accounting rules do not allow a firm to record a gain or loss when it buys back treasury stock because the transaction is viewed as an equity transaction.
Which of the following would occur prior to the completion of a long-term contract when using the completed- contract method as opposed to the percentage-of-completion method?
A firm's income tax liability is lower under the competed-contract method because revenues and related income taxes on profits are deferred until the contract is completed. The percentage-of- completion method would recognize revenues earlier and would generate higher current period income tax liabilities.
A liability can be recognized when
The amount need not be certain and some future payments such as wages to be paid in the future may not be reported as liabilities.
Profit margin is a ratio that:
Profit margin, also called return on net sales, is calculated by dividing net income by net sales. This ratio measures the average portion of each dollar of revenue that ends up as profit.
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