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INTERMEDIATE ACCOUNTING: CHAPTER #6 EXAM QUESTIONS WITH COMPLETE ANSWERS
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INTERMEDIATE ACCOUNTING: CHAPTER #6 EXAM QUESTIONS WITH COMPLETE ANSWERS
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INTERMEDIATE ACCOUNTING:CHAPTER #6 EXAM QUESTIONS WITH
COMPLETE ANSWERS
Time value of money - answer-time value of money - the relationship between time and
money. A dollar received today is worth more than a dollar promised at some time in the
future because of the opportunity to invest today's dollar and receive interest on the
investment.
Present value-based accounting measurements - answer-1. Notes. Valuing noncurrent
receivables and payables that carry no stated interest rate or a lower than market
interest rate.
2. Leases. Valuing assets and obligations to be capitalized under long-term leases and
measuring the amount of the lease payments and annual leasehold amortization.
3. Pensions and other postretirement benefits. Measuring service cost components of
employers' postretirement benefits expense and postretirement benefits obligation.
4. Long-term assets. Evaluating alternative long-term investments by discounting future
cash flows. Determining the value of assets acquired under deferred payment contracts.
Measuring impairments of assets.
5. Stock-based compensation. Determining the fair value of employee services in
compensatory stock-option plans.
6. Business combinations. Determining the value of receivables, payables, liabilities,
accruals, and commitments acquired or assumed in a "purchase."
7. Disclosures. Measuring the value of future cash flows from oil and gas reserves for
disclosure in supplementary information.
8. Environmental liabilities. Determining the fair value of future obligations for asset
retirements.
Interest - answer-interest - payment for the use of someone else's money. It is the
excess cash received/repaid over and above the amount lent/borrowed.
Principa - answer-principal - the amount borrowed or invested.
Simple interest - answer-simple interest - interest on principal only, regardless of
interest that may have accrued in past periods (compounded).
Compound interest - answer-compound interest - interest that accrues on both the
principal and the interest earned in past periods (interest not withdrawn or paid out).
Interest tables and their contents - answer-1. Future value of 1table. Contains the
amounts to which 1 will accumulate if deposited now at a specified rate and left for a
specified number of periods. (table 1)
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