DETERMINE WHETHER EACH STATEMENT IS TRUE OR FALSE AND EXPLAIN FULLY!

1- GAAP dictates that an investor company which owns greater than 50% of an investee company should use the equity method of accounting.

2- The realized gain or loss for the difference between the carrying value and the cash received from selling an available-for-sale security is excluded from net income since it flows through OCI.

3- In accounting for income taxes, companies use a balance sheet approach to account for temporary differences.

4- A reduction in future tax rates, enacted by Congress, will result in a reduction in deferred tax liabilities.

5- Under the new ASU (840 and 842) which dictates the accounting for leases by lessees, the classification of a lease as financing or operating determines the recognition, measurement, and presentation of expenses and cash flows.

6- In a lease transaction, executory and initial direct costs have the same impact on a lessor and are therefore expensed as incurred.