1. Consider the following facts: - Company A sells contracts that have multiple
ID: 2501786 • Letter: 1
Question
1. Consider the following facts:
- Company A sells contracts that have multiple performance obligations.
Company A should account for the contracts as a single performance obligation when:
a. the product is distinct within the contract.
b. determination cannot be made.
c. both performance obligations are distinct but interdependent.
d. None of these answers are correct
e. each service is interdependent and interrelated.
2. Companies often issue detachable warrants with their bonds to make the bonds more attractive to investors. From an accounting perspective, when the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to:
a. additional paid-in capital from stock warrants.
b. a liability account.
c. none of these answers are correct
d. discount on bonds payable.
e. retained earnings.
3. Companies are required to file income tax returns according to the guidelines established by which of the following authorities?
a. None of these answers are correct
b. Securities and Exchange Commission (SEC)
c. Generally Accepted Accounting Principles (GAAP)
d. Internal Revenue Service (IRS)
e. Financial Accounting Standards Board (FASB)
Explanation / Answer
Company A should account for the contracts as a single performance obligation when the product is distinct within the contract. From an accounting perspective, when the cash proceeds from a bond issued with detachable stock warrants exceed the sum of the par value of the bonds and the fair market value of the warrants, the excess should be credited to a Liability account. Companies are required to file income tax returns according to the guidelines established by Internal Revenue Service (IRS).
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