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

Adjusting Entries: Accrued Revenues

Financial Accounting

3. Accrual Accounting Concepts

Adjusting Entries: Accrued Revenues

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Multiple Choice

When accounting for accrued revenues, how should changes in estimated option forfeitures be recognized?

Retroactively to all prior periods

Only when the options are exercised

In the period in which the estimate changes

Only at the end of the fiscal year

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Verified step by step guidance

Understand the concept of accrued revenues: Accrued revenues are revenues earned but not yet received in cash or recorded. They are recognized in the period they are earned, regardless of when the cash is received.

Learn about option forfeitures: Option forfeitures refer to the cancellation or expiration of stock options before they are exercised. Changes in estimated option forfeitures impact the accounting for stock-based compensation.

Recognize the principle of accounting for changes in estimates: According to accounting standards, changes in estimates should be recognized in the period in which the estimate changes. This ensures that financial statements reflect the most accurate and current information.

Apply the principle to the problem: Changes in estimated option forfeitures should be recognized in the period in which the estimate changes, as this aligns with the accounting treatment for changes in estimates.

Avoid retroactive adjustments or deferring recognition: Retroactive adjustments to prior periods or recognizing changes only at the end of the fiscal year or when options are exercised would not comply with the principle of recognizing changes in estimates in the current period.