Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Prior service cost is amortized on a:

immediate recognition in the period incurred

straight-line basis over the average remaining service period of employees

units-of-production basis over the expected output

declining balance basis over the useful life of the asset

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Verified step by step guidance

Understand the concept of prior service cost: It refers to the cost associated with granting retroactive benefits to employees for services they provided in the past, typically as part of a pension plan amendment.

Learn the accounting treatment for prior service cost: According to accounting standards, prior service cost is not recognized immediately in the period incurred but is amortized over time.

Identify the method of amortization: The straight-line basis is commonly used for amortizing prior service cost. This method spreads the cost evenly over the average remaining service period of the employees affected by the amendment.

Compare other methods mentioned in the problem: Units-of-production basis and declining balance basis are not applicable for amortizing prior service cost. These methods are typically used for depreciation of tangible assets, not for pension-related costs.

Conclude the correct approach: The straight-line basis over the average remaining service period of employees is the appropriate method for amortizing prior service cost, as it aligns with accounting standards and ensures systematic allocation of the cost.