Question 1

Analysts concerns with postretirement benefits include all of the following except:

Accepted Answer

A)  should the underfunded postretirement benefit obligation be added to liabilities in assessing risk? 
B)  How reasonable are the firms' assumptions regarding health care cost increases? 
C)  Is the postretirement benefit fund adequately paying benefits. 
D)  Is the postretirement benefit fund generating returns consistent with the expected rate of return? 
A)  should the underfunded postretirement benefit obligation be added to liabilities in assessing risk? 
B)  How reasonable are the firms' assumptions regarding health care cost increases? 
C)  Is the postretirement benefit fund adequately paying benefits. 
D)  Is the postretirement benefit fund generating returns consistent with the expected rate of return?

Question 2

Pronto, Inc. is a major producer of printing equipment. Pronto uses a LIFO cost-flow assumption for inventories. The company's tax rate is 35%. Below is selected financial data for the company.
 $\begin{array}{llcc}
  \text {Pronto, Inc.  } &  \
 \text { Selected Financial Data } &\
 \text { December31, } &2013&2012&2011\
 \text { (amounts in thousands) } &\
 \text {  Inventories(LIFO) } &\$48,454&\$42,369&\$45,388\
 \text {  Total Assets} &395,685&384,545&378,122\
 \text {  Common Shareholders'Equity} &102,754&98,564&89,455\
\
 \text {  Sales} &\$546,258&\$488,965&\
 \text {Cost of Goods Sold  } &393,857&348,920&\
 \text { Interest Expense } &14,253&15,689&\
 \text {Net Income  } &24,581&21,025&\
\end{array}$
 Required:
 a. The excess of FIFO over LIFO inventories was $ \$ 25 $ million on December $ 31,2013, \$ 28.5 $ million on December 31 , 2012 and $ \$ 22 $ million on December 31, 2006. Compute the cost of goods sold for Pronto, Inc. for years 2013 and 2012 assuming that it had used a FIFO assumption
b. Compute the invent ory tunover ratio for Pronto, Inc. for years 2013 and 2012 using a LIFO cost-flow assumption
c. Compute the inventory tunover ratio for Pronto, Inc. for years 2013 and 2012 using a FIFO cost-flow assumption
d. Compute the rate of return on assets for years 2013 and 2012 based on the reported amounts. Disaggregate ROA into profit margin and asset tunover components.
e. Compute the rate of retun on assets for years 2013 and 2012 assuming that Pronto, Inc. had used the FIFO method of accounting for inventories. Disaggregate ROA into profit margin and asset turnover components.

Accepted Answer

Required:
 a. The excess of FIFO over LI

Question 3

A company that uses LIFO will find that its ______________________________ account will be somewhat out of date.

Accepted Answer

The answer of A company that uses LIFO will find...

Question 4

Under the percentage-of-completion contract method

Accepted Answer

A)  revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. 
B)  revenue, cost, and gross profit are recognized during the production cycle. 
C)  revenue, cost, and gross profit are recognized at the time the contract is completed. 
D)  none of these 
A)  revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. 
B)  revenue, cost, and gross profit are recognized during the production cycle. 
C)  revenue, cost, and gross profit are recognized at the time the contract is completed. 
D)  none of these

Question 5

To calculate a company's average tax rate an analyst would

Accepted Answer

A)  Divide income tax payable by income before taxes 
B)  Divide income tax expense by income before taxes 
C)  Multiply the statutory income tax rate by income before tax 
D)  Average a firm's Federal, State, Local and Foreign tax rates. 
A)  Divide income tax payable by income before taxes 
B)  Divide income tax expense by income before taxes 
C)  Multiply the statutory income tax rate by income before tax 
D)  Average a firm's Federal, State, Local and Foreign tax rates.

Question 6

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is

Accepted Answer

A)  FIFO 
B)  LIFO 
C)  Base stock 
D)  Weighted-average 
A)  FIFO 
B)  LIFO 
C)  Base stock 
D)  Weighted-average

Question 7

The following information is available from Sheldon Corp.:
 $\text { Information from the Balance Sheet: }$

$\begin{array}{llll}
&2012&2011\
\text { Depreciable Assets } & \$ 2,458,600 & \$ 1,985,400 \
\text { Accumulated Depreciation } &\underline{ (1,350,700)} & \underline{(1,046,000 )}\
\text { Depreciable Assets(Net) } & \$ 1,107,900 & \$ 939,400
\end{array}$  $\begin{array}{llcc}
  \text {From the Income Statement  } & 2012 \
 \text { Depreciation Expense } &\$384,500\
\end{array}$
 Use the information above to calculate the following:
a. Average age of the depreciable assets
b. Average remaining useful life of the depreciable assets

Accepted Answer

a. $1,350,00 / $384,

Question 8

Dividing a company's income tax expense by its book income before income taxes provides the company's ___________________________________.

Accepted Answer

The answer of Dividing a company's income tax expense by...

Question 9

Which of the following accounts would not be considered a reserve account?

Accepted Answer

A)  Allowance of Doubtful Accounts 
B)  Estimated Warranty Liability 
C)  Prepaid Expense 
D)  Accumulated Depreciation 
A)  Allowance of Doubtful Accounts 
B)  Estimated Warranty Liability 
C)  Prepaid Expense 
D)  Accumulated Depreciation

Question 10

Typical U.S. GAAP disclosures for deferred income taxes include all of the following except:

Accepted Answer

A)  Components of income tax expense 
B)  Components of income before taxes 
C)  Reconciliation of income taxes at statutory rate with income tax expense 
D)  Components of permanent tax differences 
A)  Components of income tax expense 
B)  Components of income before taxes 
C)  Reconciliation of income taxes at statutory rate with income tax expense 
D)  Components of permanent tax differences

Question 11

Derivatives are financial instruments that derive their value from changes in any of the following underlyings except:

Accepted Answer

A)  Stock prices 
B)  Percentage discount on accounts receivable 
C)  Interest rates 
D)  Commodity prices 
A)  Stock prices 
B)  Percentage discount on accounts receivable 
C)  Interest rates 
D)  Commodity prices

Question 12

Assume that Funtime Corp. has agreed to construct a new playground for Durrey County for $2,300,000. Construction of the new playground will begin on March 17, 2012 and is expected to be completed in August 2013. At the signing of the contract Funtime Corp. estimates that the it will cost $1,600,000 to build the playground.
At the end of 2012 Funtime provided the following information about the project:
$\begin{array}{llcc}
&  \text {Costsincurred  } & \text {Estimated costs  }   \
\underline{ \text {  Year} }& \underline{\text {to date } } & \underline{\text {  remaining} }\
2012&\$1,000,000&\$800,000\

\end{array}$
- What percentage is playground complete?

Accepted Answer

A)  62.5% 
B)  43.5% 
C)  55.6% 
D)  50.0% 
A)  62.5% 
B)  43.5% 
C)  55.6% 
D)  50.0%

Question 13

Gains and losses on cash flow hedges affect earnings ____________________ than those on fair value hedges.

Accepted Answer

The answer of Gains and losses on cash flow hedges...

Question 14

___________________________________ is primarily a question of timing.

Accepted Answer

The answer of ___________________________________ is primarily a question of timing....

Question 15

Given the following information, compute December 31, 2012 projected benefit obligation (PBO) and fair market value (FMV) of plan assets for Eagan Company.
 $\begin{array}{|l|l|}
\hline \text { Prior service cost ganted in a } 2012 \text { plan amencment } & \$ 115,000 \
\hline \text { Interest on PBO } & 73,000 \
\hline \text { Actual return on plan assets } & 101,000 \
\hline \text { Service cost } & 84,000 \
\hline \text { Contribution sent to plan trustee } & 62,000 \
\hline \text { Benefit payments to retirees } & 24,000 \
\hline \text { Liability loss(gain) } & (37,000 \
\hline \text { FMV of plan assets, January 1, 2012 } & 735,000 \
\hline \text { PBO, Jamury 1, 2012 } & 814,000 \
\hline &
\end{array}$  What amount of asset or liability will be reported on the balance sheet at December 31, 2012?

Accepted Answer

Reconcile PBO/FMV of Plan Assets.
PBO, J

Question 16

A LIFO liquidation during periods when prices are increasing results in a company

Accepted Answer

A)  recording a large inventory write down. 
B)  recording higher earnings than it would have if it had used FIFO. 
C)  recording lower earnings than it would have if it had used FIFO. 
D)  having operational problems, but no financial statement effects. 
A)  recording a large inventory write down. 
B)  recording higher earnings than it would have if it had used FIFO. 
C)  recording lower earnings than it would have if it had used FIFO. 
D)  having operational problems, but no financial statement effects.

Question 17

The projected benefit obligation measures

Accepted Answer

A)  the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels. 
B)  an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement. 
C)  the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels. 
D)  the shortest possible period for funding to maximize the tax deduction. 
A)  the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels. 
B)  an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement. 
C)  the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels. 
D)  the shortest possible period for funding to maximize the tax deduction.

Question 18

All of the following are conditions for revenue recognition outlined by SAB 104 except:

Accepted Answer

A)  There is pervasive evidence that an arrangement exists. 
B)  Delivery has occurred or services have been performed. 
C)  The seller's price to the buyer can be variable. 
D)  Collectability is reasonably assured. 
A)  There is pervasive evidence that an arrangement exists. 
B)  Delivery has occurred or services have been performed. 
C)  The seller's price to the buyer can be variable. 
D)  Collectability is reasonably assured.

Question 19

Which of the following is not one of the GAAP classifications for derivatives?

Accepted Answer

A)  Speculative investment 
B)  Fair value hedge 
C)  Asset-Liability hedge 
D)  Cash flow hedge 
A)  Speculative investment 
B)  Fair value hedge 
C)  Asset-Liability hedge 
D)  Cash flow hedge

Question 20

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

Accepted Answer

A)  Record as an asset or liability and recognize changes in fair value in other comprehensive income. 
B)  Do not record as an asset or liability, record income from the transaction at maturity and recognize in earnings. 
C)  Record as an asset or liability, recognize changes in fair value currently in earnings. 
D)  Record as an asset or liability if off-balance sheet risk is material. 
A)  Record as an asset or liability and recognize changes in fair value in other comprehensive income. 
B)  Do not record as an asset or liability, record income from the transaction at maturity and recognize in earnings. 
C)  Record as an asset or liability, recognize changes in fair value currently in earnings. 
D)  Record as an asset or liability if off-balance sheet risk is material.

Analysts concerns with postretirement benefits include all of the following except:

A company that uses LIFO will find that its ______________________________ account will be somewhat out of date.

Under the percentage-of-completion contract method

To calculate a company's average tax rate an analyst would

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is

Dividing a company's income tax expense by its book income before income taxes provides the company's ___________________________________.

Which of the following accounts would not be considered a reserve account?

Typical U.S. GAAP disclosures for deferred income taxes include all of the following except:

Derivatives are financial instruments that derive their value from changes in any of the following underlyings except:

Gains and losses on cash flow hedges affect earnings ____________________ than those on fair value hedges.

___________________________________ is primarily a question of timing.

A LIFO liquidation during periods when prices are increasing results in a company

The projected benefit obligation measures

All of the following are conditions for revenue recognition outlined by SAB 104 except:

Which of the following is not one of the GAAP classifications for derivatives?

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

Exam 8: Operating Activities

Analysts concerns with postretirement benefits include all of the following except:

A company that uses LIFO will find that its ______________________________ account will be somewhat out of date.

Under the percentage-of-completion contract method

To calculate a company's average tax rate an analyst would

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is

Dividing a company's income tax expense by its book income before income taxes provides the company's ___________________________________.

Which of the following accounts would not be considered a reserve account?

Typical U.S. GAAP disclosures for deferred income taxes include all of the following except:

Derivatives are financial instruments that derive their value from changes in any of the following underlyings except:

Gains and losses on cash flow hedges affect earnings ____________________ than those on fair value hedges.

___________________________________ is primarily a question of timing.

A LIFO liquidation during periods when prices are increasing results in a company

The projected benefit obligation measures

All of the following are conditions for revenue recognition outlined by SAB 104 except:

Which of the following is not one of the GAAP classifications for derivatives?

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Measurement

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters