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

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Which of the following statements related to investment interest expense is incorrect?

Any disallowed investment interest expense can be carried forward to future years.

Investment interest expense does not include interest on debt incurred to acquire property held for personal use.

Investment interest expense is deductible only to the extent of net investment income.

Investment interest expense includes interest paid on loans used to purchase tax-exempt securities.

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Verified step by step guidance

Understand the concept of investment interest expense: Investment interest expense refers to the interest paid on loans used to purchase investment property, such as stocks, bonds, or other assets held for investment purposes. It does not include interest on loans for personal use or tax-exempt securities.

Review the rules for deductibility: Investment interest expense is deductible only to the extent of net investment income. Net investment income is the income earned from investments, such as interest, dividends, and capital gains, minus any related expenses.

Consider the carryforward provision: If the investment interest expense exceeds the net investment income in a given year, the excess amount can be carried forward to future years to offset net investment income in those years.

Analyze the incorrect statement: The statement 'Investment interest expense includes interest paid on loans used to purchase tax-exempt securities' is incorrect because interest paid on loans for tax-exempt securities is not deductible. This is due to the fact that the income from tax-exempt securities is not taxable, and therefore, the related interest expense cannot be deducted.

Summarize the correct understanding: Investment interest expense is deductible only to the extent of net investment income, excludes interest on loans for personal use or tax-exempt securities, and can be carried forward if disallowed in the current year.