Which of the Following Statements About the Gross Method of Recording

question 49

Multiple Choice

Which of the following statements about the gross method of recording a hedge is true?

• A)It can only be used for internal record-keeping.
• B)The receivable and payable under the forward contract are recorded separately at fair value.
• C)The receivable and payable under the forward contract are netted together and only the net amount is recorded.
• D)The gross method provides a slightly different result than the net method.

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Definitions:

Stock Dividends Distributable

A portion of a company's earnings decided by the board of directors to be distributed to its shareholders in the form of additional shares.

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders but retained by the company for reinvestment.

Noncumulative Preferred Shares

Type of preferred stock where dividends not paid in a particular year do not accumulate and must be forfeited.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.