ACCT 3342 Exam 2 Definitions

Not the whole study guide, just the definitions!

Corporations issue convertible debt for two main reasons. One is the desire to raise equity capital that, assuming conversion, will arise when the original debt is converted. The other is…

that many corporations can obtain debt financing at lower rates.

When convertible debt is retired by the issuer, any material difference between the cash acquisition price and the carrying amount of the debt should be…

reflected currently in the income.

Compensation expense resulting from a compensatory stock option plan is generally…

allocated to the periods benefitted by the employee’s required service.

In computing earnings per share for a simple capital structure, if the preferred stock is calmative, the amount that should be deducted as an adjustment to the numerator is the…

annual preferred dividend.

What effect will the acquisition of treasury stock have on stockholder’s equity and earnings per share?

a decrease and an increase.

When computing diluted earnings per share, convertible bonds are…

assumed converted only if they are dilutive.

Antidilutive securities…

should be ignored in all earnings per share calculations.

Equity securities acquired by a corporation which are accounted for by recognizing unrealized holding gains or losses are

Securities where a company has holdings of less than 20%

Which of the following is not correct regarding trading debt securities?

They are held with the intention of selling them in a short period of time, any discount of premium is amortized, and unrealized holding gains/losses are reported as part of net income.

An available-for-sale debt security is purchased at a discount. The entry to record the amortization of the discount includes a

Debit to debt investments and a credit to interest revenue

Unrealized holding gains or losses that are recognized in income are from debt securities classified as

Trading

Debt securities that are accounted for at amortized cost, not fair value, are

Held-to-maturity debt securities

Debt securities acquired by a corporation are accounted for by recognizing unrealized holding gains or losses that are included as other comprehensive income and as a separate component of stockholders' equity are

Available-for-sale debt securities

The third step in the process for revenue recognition is to

Determine the transaction price

Revenue from a contract with a customer

Cannot be recognized until a contract exists

Companies can use the expected value to estimate variable consideration when

A company has a large number of contracts with similar characteristics

If a contract involves a significant financing component,

The time value of money is used to determine the fair value of the transaction

Noncash consideration should be

Recognized on the basis of fair value of what is received

A company has satisfied its performance obligation when the

Company has transferred physical possession of the asset

The cost-to-cost basis measures progress towards completion by

Comparing costs incurred to date with total costs to complete the contract

When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a

Financing transaction

When a customer purchases product not yet ready for delivery, it is referred to as

A bill-and-hold arrangement

Consigned goods are recognized as revenues by the

Consignor when it receives payment from consignee for goods sold

The billings on construction in progress account is a(n)

contra-inventory account