Exam 8: Operating Activities

The major difference between accounting for pensions and the accounting for other postretirement benefits is that firms

____________________ over sufficiently long time periods equals cash inflows minus cash outflows from operating, investing, and financing activities

Which of the following is not part of the balance sheet approach when computing income tax expense?

The installment method of revenue recognition can be used when cash collectibility is uncertain. The installment method

A large manufacturer recently changed its cost-flow assumption method for inventories at the beginning of 2012. The manufacturer has been in operation for almost 40 years, and for the last decade, it has reported moderate growth in revenues. The firm changed from the LIFO method to the FIFO method and reported the following information: December 31: (amounts in millions) 2011 2012 Inventories at FIFO cost \ 388.1 \ 419.7 Excess of FIFO cost over LIFO cost (229.0) (210.4) Cost of goods sold(FIFO) \ 2,050.8 Cost of goods sold(LIFO) \ 2,417.1 Calculate the inventory turnover ratio for 2012 using the LIFO and FIFO cost-flow assumption methods. Explain why the costs assigned to inventory under LIFO at the end of 2011 and 2012 are so much less than they are under FIFO.

Assume that Madison Corp. has agreed to construct a new basketball arena for Gator Town for $70 million dollars. Construction of the new arena begins in July, 2012 and is expected to be completed in March 2009. At the signing of the contract Madison Corp. estimates that the new arena will cost $60 million dollars to build. Given the following cost and building schedule determine the cumulative degree of completion and how much revenue and gross margin Madison Corp. should recognize in years 2012, 2013 and 2014.

The difference between the economic resources received from customers and the economic resources paid to suppliers, employees and other providers of goods and services is called ____________________.

Under current U.S. GAAP unrealized gains and losses from four balance sheet items are reported in accumulated other comprehensive income or loss. Which of the following is not one of the balance sheet items?

When input prices are increasing, companies that use the LIFO method of accounting for inventory will report

____________________ differences arise from revenues and expenses that GAAP requires firms to include in income before taxes but that the income tax law excludes from taxable income.

Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below: $\text {Falcon Not works}$ $\text {Components of Income Tax Expense}$ $\text {(in millions)}$ 2012 2011 Current - Federal \5 5.65 \4 7.52 - Foreign 83.85 78.95 - State and Local Total Current \1 54.19 \1 38.97 Deferred - Federal \3 0.28 \4 2.90 - Foreign Total Deferred \5 4.17 \5 7.48 Total Income Tax Expense Note: Falcon Networks has no curent liability at year-end withrespect to total current taxes. Components of Income before Taxes 2012 2011 United States \2 56.35 \2 53.68 Foreign Total - Using the information provided by Falcon Networks determine the foreign effective tax rate for 2012.

Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below: $\text {Falcon Not works}$ $\text {Components of Income Tax Expense}$ $\text {(in millions)}$ 2012 2011 Current - Federal \5 5.65 \4 7.52 - Foreign 83.85 78.95 - State and Local Total Current \1 54.19 \1 38.97 Deferred - Federal \3 0.28 \4 2.90 - Foreign Total Deferred \5 4.17 \5 7.48 Total Income Tax Expense Note: Falcon Networks has no curent liability at year-end withrespect to total current taxes. Components of Income before Taxes 2012 2011 United States \2 56.35 \2 53.68 Foreign Total - Based on the information provided by Falcon Networks how much cash did income taxes use during 2012?

Income tax expense consists of two components, the ____________________ portion and the ____________________ portion.

When cash collectibility is uncertain the ___________________________________ method matches the costs of generating revenues dollar for dollar with cash receipts until the firm recovers all such costs.

Which of the following statements best describes the difference between U.S. GAAP and IFRS with respect to revenue recognition?

The accumulated benefit obligation measures

U.S. GAAP requires firms to report the assets and liabilities of defined benefit plans _______________________________________________________.

Companies that engage in long-term contracts can recognize income using either the _____________________________________________ method or the ________________________________________ method.

Many firms use derivative instruments to hedge exposure to changes in the fair value an asset or liability or to hedge exposure to variability in expected future cash flows. As an analyst examining the financial reports of a company that uses derivative instruments to hedge, what questions should be asked when thinking about derivatives and accounting quality?

When cash collectibility is uncertain, a firm using the ____________________ method recognizes revenue as it collects portions of the selling price in cash.