FAR: ALL: TBS 4/7/2018 Flashcards
Select the best term for each item.
An agreement between the two parties to buy and sell a specific quantity of a commodity, foreign currency, or financial instrument at an agreed-upon price, with delivery and/or settlement at a designated future date.
Forward contract
(Forward contract) A forward contract is an agreement between two parties to buy and sell a specific quantity of a commodity, foreign currency, or financial instrument at an agreed-upon price, with delivery and/or settlement at a designated future date. Because a forward contract is not formally regulated by an organized exchange, each party to the contract is subject to the default of the other party.
Select the best term for each item.
A forward-based contract to make or take delivery of a designated financial instrument, foreign currency, or commodity during a designated period, at a specified price or yield.
Futures contract
(Futures contract) A futures contract is a forward-based contract to make or take delivery of a designated financial instrument, foreign currency, or commodity during a designated period, at a specified price or yield. The contract frequently has provisions for cash settlement. A future contract is traded on a regulated exchange and, therefore, involves less credit risk than a forward contract.
Select the best term for each item.
The referenced associated asset or liability, commonly a number of units.
Notional amount (UOM)
The notional amount (or payment provision) is the referenced associated asset or liability. A notional amount is commonly a number of units such as shares of stock, principal amount, face value, stated value, basis points, barrels of oil, etc. It may be that amount plus a premium or minus a discount. The interaction of the price or rate (underlying) with the referenced associated asset or liability (notional amount) determines whether settlement is required and, if so, the amount.amount
Select the best term for each item.
Provides the holder the right to sell the underlying at an exercise or strike price, anytime during the option term.
Put Option
An American put option provides the holder the right to sell the underlying at an exercise or strike price, anytime during the option term. A gain accrues to the holder as the market price of the underlying falls below the strike price.
Select the best term for each item.
A specified price or rate such as a stock price, interest rate, or commodity price.
Underlying ($$$)
(Underlying) An underlying is commonly a specified price or rate such as a stock price, interest rate, currency rate, commodity price, or a related index. However, any variable (financial or physical) with (1) observable changes or (2) objectively verifiable changes such as a credit rating, insurance index, climatic or geological condition (temperature, rainfall) qualifies. Unless it is specifically excluded, a contract based on any qualifying variable is accounted for under the rules for derivatives if it has the distinguishing characteristics stated above.
Select the best term for each item.
A call option where the price of the underlying is greater than the strike or exercise price of the underlying.
In the money
(In the money) A call option is in the money if the price of the underlying is greater than the strike or exercise price of the underlying.
Select the best term for each item.
A call option where the strike or exercise price is greater than the price of the underlying.
Out of the Money
(Out of the money) A call option is out of the money if the strike or exercise price is greater than the price of the underlying. A put option is out of the money if the price of the underlying is greater than the strike or exercise option.
Event 1 - The Blake County commissioners pass a property tax levy totaling $5,100,000. Based on prior year collection rates, it is estimated that $100,000 in property taxes will be uncollectible.
The Blake County commissioners pass the property tax levy and taxpayers are billed for property taxes.
What are the journal entries?
DR Property Taxes Receivable $5,100,000
CR Revenues (control) $5,000,000
CR Allowance for Doubtful Accounts $100,000
Under the modified accrual basis of accounting property tax levy will record revenues at the amount that is both measurable and available; that is, when the tax levy is set. Moreover, bad debt expense is an accrual accounting concept and is not compatible with modified accrual accounting.
An increase in the cash-surrender value of a life insurance policy owned by a company would be recorded by:
1) Decreasing annual insurance expense.
2) Increasing investment income.
3) Recording a memorandum entry only.
4) Decreasing a deferred charge.
Decreasing annual insurance expense.
The firm has received a definite increase in assets and, therefore, earnings.
A memo entry would not recognize these two effects.
