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1. Recognition of tax benefits in the loss year due to a loss carryforward requiresAnswer the establishment of a deferred tax liability. the establishment of a deferred tax asset. the establishment of an income tax refund receivable. only a note to the financial statements.2. The fair value option allows a company toAnswer value its own liabilities at fair value. record income when the fair value of its bonds increases. report most financial instruments at fair value by recording gains and losses as a separate component of stockholders' equity. All of the above are true of the fair value option.3.Watt Co. purchased $300,000 of bonds for $315,000. If Watt intends to hold the securities to maturity, the entry to record the investment includesAnswer a debit to Held-to-Maturity Securities at $300,000. a credit to Premium on Investments of $15,000. a debit to Held-to-Maturity Securities at $315,000. none of these.4. 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?Answer 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.5.With regard to uncertain tax positions, the FASB requires that companies recognize a tax benefit whenAnswer it is probable and can be reasonably estimated. there is at least a 51% probability that the uncertain tax position will be approved by the taxing authorities. it is more likely than not that the tax position will be sustained upon audit. Any of the above exist.6. Yeager Co. maintains a defined-benefit pension plan for its employees. At each balance sheet date, Yeager should report a pension asset / liability equal to theAnswer accumulated benefit obligation. projected benefit obligation. accumulated benefit obligation. funded status relative to the projected benefit obligation.7. In accounting for investments in debt securities that are classified as trading securities,Answer a discount is reported separately. a premium is reported separately. any discount or premium is not amortized. none of these.
Hello Customer,
Thanks for your questions. The answers are:
1. the establishment of a deferred tax asset.
2. value its own liabilities at fair value.
3. a debit to Held-to-Maturity Securities at $315,000.
4. As construction in process in the current asset section of the balance sheet.
5. it is more likely than not that the tax position will be sustained upon audit.
6. status relative to the projected benefit obligation.
7. any discount or premium is not amortized.
Hope this helps!