There Are Certain Situations Where It Is Necessary to Recast

question 137

Multiple Choice

There are certain situations where it is necessary to recast the financial statements in order to analyze them.All of the following are examples of the need to recast except:

• A)Interest on long-term debt amounted to $1,000,000.
• B)The income statement contains a number of gains not expected to occur in the future.
• C)There have been a number of temporary differences.They remain on the balance sheet.
• D)Asset purchases were made during the year.

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Definitions:

Callable Bonds

Bonds that can be redeemed by the issuer prior to their maturity date, usually at a premium above the face value.

Financing Activities

Transactions involving changes in equity and long-term liabilities on the balance sheet, reflective of how a company raises capital and repays its investors.

Amortization

Amortization is the process of gradually writing off the initial cost of an intangible asset over its useful life, reflecting its consumption or expiration.

Straight-Line Amortization

An alternative method of amortizing bond discounts and premiums that allocates an equal dollar amount to each interest period. It is only permitted by GAAP under specific circumstances.