Comprehensive B Flashcards
What are the two reasons foreign exchange contracts are entered into?
Hedging and speculation.
What determines if a foreign change contract is handles as a hedge or for speculation?
Unless the exchange is handles specifically for hedging purposes, it is considered speculation.
Where are gains and losses from foreign exchange contracts recorded?
Under continuing operations on the income statement.
Define the two “monetary” rates used in foreign exchange contracts.
- Spot rate - rate on a particular day
2. Forward rate - what the rate is expected to be on some date in the future.
What two methods are used when available-for-sale securities rise or fall in value
- Adjust investment account directly
2. Set up a specific valuation account
Held-to-Maturity
Trading
Available-for-Sale
Which of the above is always considered a current asset?
Trading
Where are unrealized gains and losses on AVS securities listed?
On the balance sheet as a part of OCI
Where on the balance sheet is OCI located?
In the stockholder’s equity section
What is another name for the balance sheet?
Statement of Financial Position
Where is accumulated other comprehensive income located?
On the balance sheet
According to IFRS, how should inventory be valued?
Lower of cost or NRV, net realizable value.
What is Lower of Cost or Market?
Method of valuing inventory that reinforces the conservatism principle of accounting.
Explain the LCM principle in detail.
Lower of Cost or Market means whichever is cheaper through production or purchase.
COST - original cost
CEILING - Net Realizable Value(selling price minus disposal cost)-UPPER LIMIT
MARKET - replacement cost
FLOOR - (NRV-normal profit) - LOWER LIMIT
How is interest capitalized during construction?
Lesser of actual interest or capitalized(weighted-average) interest.
What is “discount on bonds payable?
Contra account to bonds payable. Must be deducted from bonds payable when liabilities are totaled.
