1. Trading securities are at reported fair value and included in net income. Tru

Question

1. Trading securities are at reported fair value and included in net income. True or False?

2. A loss carryback to prior years income tax, results in a reduction to the loss in the current year. True or False?

3. Payment of dividends is reported in the investing section of the statement of cash flows. True or False?

4. A change in accounting estimate should always be accounted for in current and future periods. True or False?

5. Interest revenue on municipal bonds results in a temporary tax difference True or False?

6. Service cost is a component of net periodic postretirement benefit cost. True or False?

7. Distribution of dividends increases retained earnings. True or False?

8. A change in inventory valuation method is a change in accounting estimate. True or False?

Explanation / Answer

1)The statement is true.

The unrealised gain or loss earned due to change in fair value are taken to income statement

2)The statement is false.

The carryback of prior year loss is setoff against current year net income (not loss) .If there is loss in current year ,such loss is also carry forward to next year.

3)False.

payment of dividend is a part of financing activity

4)False

Accounting estimates are part of accounting process ,so any change in estimates are not retrospectively undertaken .There cummulative effect is taken in current year.

5)False,

The difference is a permanent difference as interest on municipal bond is exempt for tax purpose

6)False.

service cost is presented as seperate line item

7)False

It is paid out of profits so it decreases retained earnings

8)False

It is a change in accounting principle not estimates.

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