1. Which statement is TRUE?
a) Software development costs are treated the same way as research and development costs under GAAP (Generally Accepted Accounting Principles).
b) Capitalization of interest costs results in higher reported net income in the period of capitalization and lower net income in future periods.
c) When the discounted amount of expected cash flows from an asset is greater than the asset's book value, the asset is deemed to be impaired.
d) The cost of software developed for internal use should be capitalized only after it has reached technological feasibility.
2. Which statement is TRUE?
a) Held-to-maturity securities are equity securities that management intends and has the ability to hold to maturity.
b) Held-to-maturity securities are always classified as noncurrent assets.
c) When a security is reclassified from available-for-sale to trading, it is transferred at fair market value, and any unrealized gains or losses must be recognized in the income statement.
d) Investment securities should always be reported at lower of cost or market.
3. Which Statement is TRUE?
a) The equity conformity rule requires that marketable securities must be marked to market for tax purposes.
b) The equity method of accounting for investments should be used when a company has a controlling interest in the investee.
c) All derivatives are recorded at market value on the balance sheet.
d) When purchase accounting is used for acquisitions, prior year financial statements presented for comparative purposes should be restated as if the companies had always been combined.