Under US GAAP, What Method of Amortizing Discounts or Premiums on on Forward

question 55

Multiple Choice

Under U.S. GAAP, what method of amortizing discounts or premiums on forward contracts must be used?

• A) Weighted average method or accelerated method
• B) Sum of digit method only
• C) Effective interest rate method or straight line method
• D) Straight line method only

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Definitions:

Profitable

A term used to describe a business or activity that generates more revenue than the expenses incurred in operating.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the cost per unit of output decreases with increasing scale.

Specialization of Labor

The division of labor where individuals focus on a limited scope of tasks or skills, leading to increased efficiency and productivity.

Average Fixed Costs

The fixed costs of production (costs that do not vary with the level of output) divided by the quantity of output produced.