Question 1

Which of the following is not a disclosure for derivatives required under SFAS No. 133?

Accepted Answer

A)  Firms must describe their risk management strategy and how particular derivatives help accomplish their hedging objectives. 
B)  For fair value and cash flow hedges, firms must disclose the net gain or loss recognized in earnings resulting from the hedges' ineffectiveness and the line item on the income statement that includes this net gain or loss. 
C)  For cash flow hedges, firms must describe the transactions or events that will result in reclassifying gains and losses from other comprehensive income to net income
And the estimated amount of such reclassifications during the next 12 months. 
D)  The specifics of a model that simulates with a 95 percent or other confidence level the minimum, maximum, or average amount of loss that a firm would incur. 
A)  Firms must describe their risk management strategy and how particular derivatives help accomplish their hedging objectives. 
B)  For fair value and cash flow hedges, firms must disclose the net gain or loss recognized in earnings resulting from the hedges' ineffectiveness and the line item on the income statement that includes this net gain or loss. 
C)  For cash flow hedges, firms must describe the transactions or events that will result in reclassifying gains and losses from other comprehensive income to net income
And the estimated amount of such reclassifications during the next 12 months. 
D)  The specifics of a model that simulates with a 95 percent or other confidence level the minimum, maximum, or average amount of loss that a firm would incur.

Question 2

When firms use derivatives effectively to manage risks, the net gain or loss each period should be relatively ____________________.

Accepted Answer

The answer of When firms use derivatives effectively to manage...

Question 3

Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below:
$\text {Falcon Not works}$
$\text {Components of Income Tax Expense}$
$\text {(in millions)}$

$\begin{array}{llcc}
  \text {  } &2012&2011  \
 \text { Current - Federal } &\$55.65&\$47.52\
 \text {\quad\quad - Foreign } &83.85&78.95\
 \text { \quad\quad - State and Local} &\underline{14.69}&\underline{12.5}\
 \text {Total Current  } &\$154.19&\$138.97\
\
 \text {Deferred - Federal  } &\$30.28&\$42.90\
  \text { \quad\quad - Foreign} &\underline{23.89}&\underline{14.58}  \
 \text {Total Deferred  } &\$54.17&\$57.48\
\
 \text { Total Income Tax Expense } &\underline{\$208.36}&\underline{\$196.45}\
\
 \text { Note: Falcon Networks has no curent liability at year-end withrespect to total current taxes. } &\
\
 \text { Components of Income before Taxes } &2012&2011\
 \text { United States } &\$256.35&\$253.68\
 \text {Foreign  } &\underline{236.85}&\underline{198.85}\
 \text {Total  } &\underline{\$493.20}&\underline{\$452.53}\
\end{array}$
-
 Using the information provided by Falcon Networks determine the federal effective tax rate for 2012.

Accepted Answer

A)  33.52% 
B)  35.00% 
C)  42.25% 
D)  45.49% 
A)  33.52% 
B)  35.00% 
C)  42.25% 
D)  45.49%

Question 4

All of the following conditions signal that revenue recognition may have been recorded too early except:

Accepted Answer

A)  large and volatile amounts of uncollectible accounts receivable. 
B)  a decrease in the number of days accounts receivable are outstanding. 
C)  unusually large amounts of returned goods. 
D)  excessive warranty expenditures. 
A)  large and volatile amounts of uncollectible accounts receivable. 
B)  a decrease in the number of days accounts receivable are outstanding. 
C)  unusually large amounts of returned goods. 
D)  excessive warranty expenditures.

Question 5

The _____________________________________________ is equal to the actuarial present value of amounts that the employer expects to pay to retired employees based on the employees' service to date and using expected future salary amounts.

Accepted Answer

projected

Question 6

Parnell Industries sold a copy machine to Ranger Inc. on January 1, 2012. The sale price of the machine was $4,000,000 and the machine cost $3,200,000 for Parnell to manufacture. Ranger will make four payments at the end of each year, beginning with 2012, of $1,261,883 each. The four payments of $1,261,883 when discounted at 10% have a present value of $4,000,000. An amortization table appears below:
\(\begin{array}{c}
\begin{array}{|l|}
 \hline\
 \hline\
 \hline \text {Year}\
 \hline2012\
 \hline2013\
 \hline2014\
 \hline2015\
 \hline\
 \hline
\end{array}
\begin{array}{l|}
 \hline \
 \hline \text {Note Rec.}\
 \hline \text {Jan. 1}\
 \hline  \$ 4,000,000\
 \hline 3,138,117 \
 \hline  2,190,046 \
 \hline 1,147,168 \
 \hline \
 \hline 
\end{array}
\begin{array}{l|}
\hline\text { Interest } \
\hline \text { Revenue } \
\hline \text { at } 10 \% \
\hline \$ 400,000 \
\hline 313,812 \
\hline 219,005 \
\hline 114,716 \
\hline \$ 1,047,533\
\hline 
\end{array}
\begin{array}{l|}
\hline\
\hline\text {Cash Pint}\
\hline\text {Rec'd}\
\hline \$ 1,261,883 \
\hline 1,261,883 \
 \hline  1,261,883  \
 \hline1,261,883 \
 \hline\$ 5,047,532\
 \hline 
\end{array}
\begin{array}{l|}
\hline\text {Repay.}\
\hline\text {of}\
\hline\text {Princ.}\
\hline\$ 861,883  \
\hline 948,071 \
\hline 1,042,878  \
\hline 1,147,168  \
\hline\$ 4,000,000 \
\hline
\end{array}
\begin{array}{l|}
\hline\
\hline\text {Note Rec.}\
\hline\text {Dec. 31}\
\hline \$ 3,138,117 \
\hline2,190,046\
\hline 1,147,168\
\hline0\
\hline \
\hline 
\end{array}
\end{array}\)
-
  If Parnell Industries is uncertain that it will collect all four payments from Ranger Inc. and uses the installment method of accounting for revenue recognition what amount of gross profit should Parnell recognize in 2012 from the sale?

Accepted Answer

A)  $0 
B)  $861,883 
C)  $172,377 
D)  $800,000 
A)  $0 
B)  $861,883 
C)  $172,377 
D)  $800,000

Question 7

Although LIFO generally provides higher quality earnings measures, FIFO generally provides higher _____________________________________________ measures.

Accepted Answer

quality fi

Question 8

Under the accrual method of accounting when a firm has substantially completed its value-adding activities it should recognize ____________________.

Accepted Answer

The answer of Under the accrual method of accounting when...

Question 9

A minimum liability for pension expense is reported when

Accepted Answer

A)  the projected benefit obligation exceeds the fair value of pension plan assets. 
B)  the pension expense reported for the period is greater than the funding amount for the same period. 
C)  the accumulated benefit obligation exceeds the fair value of pension plan assets. 
D)  vested benefits exceed the fair value of pension plan assets. 
A)  the projected benefit obligation exceeds the fair value of pension plan assets. 
B)  the pension expense reported for the period is greater than the funding amount for the same period. 
C)  the accumulated benefit obligation exceeds the fair value of pension plan assets. 
D)  vested benefits exceed the fair value of pension plan assets.

Question 10

Which of the following calculations is used to determine the amount of the liability reported on the balance sheet for underfunding?

Accepted Answer

A)  Plan assets less projected benefit obligation. 
B)  Projected benefit obligation less plan assets. 
C)  Plan assets less accumulated benefit obligation. 
D)  Accumulated benefit obligation less plan assets. 
A)  Plan assets less projected benefit obligation. 
B)  Projected benefit obligation less plan assets. 
C)  Plan assets less accumulated benefit obligation. 
D)  Accumulated benefit obligation less plan assets.

Question 11

Differences between income before taxes and taxable income are either ____________________ or ____________________.

Accepted Answer

permanent,

Question 12

A company that uses LIFO will experience a ______________________________ during a period it sells more units than it purchases.

Accepted Answer

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

Question 13

A typical defined benefit pension plan formula includes all of the following except:

Accepted Answer

A)  the number of years of employee service 
B)  the fair market value of pension plan assets 
C)  a credit for each year of annual service 
D)  the final salary at retirement date 
A)  the number of years of employee service 
B)  the fair market value of pension plan assets 
C)  a credit for each year of annual service 
D)  the final salary at retirement date

Question 14

Derivative instruments acquired to hedge exposure to changes in the fair value of an asset or liability are ______________________________ hedges.

Accepted Answer

The answer of Derivative instruments acquired to hedge exposure to...

Question 15

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}$
-
 If Funtime uses the percentage of completion to recognize revenue on the long-term contract how much gross margin should Funtime recognize in 2012?

Accepted Answer

A)  $389,200 
B)  $278,000 
C)  $556,000 
D)  $0 
A)  $389,200 
B)  $278,000 
C)  $556,000 
D)  $0

Question 16

The process of allocating the historical cost of certain assets to the periods of their use in a reasonably systematic manner is referred to as ____________________.

Accepted Answer

The answer of The process of allocating the historical cost...

Question 17

Cooke Industries imports and sells quality merchandise. The company had the following layers in its LIFO inventory at January 1, 2012, at which time the replacement cost of the inventory was $600 per unit.
 $$\begin{array} { | l | l | l } 
\hline \text { Year IIFO L.Gyer Added } & \text { Urits } & \text { UritCost } \
\hline 2009 & 40 & \$ 400 \
\hline 2010 & 40 & \$ 475 \
\hline 2011 & 50 & \$ 575 \
\hline & &
\end{array}$$ The replacement cost of the merchandise remained constant throughout 2012. Cooke sold 300 units during 2012. The company established the selling price of each unit by doubling its replacement cost at the time of sale.
Required:
1. Determine the gross margin and the gross margin percentage for 2012 assuming that Cooke purchased 310 units during the year.
2. Determine the gross margin and the gross margin percentage for 2012 assuming that Cooke purchased 200 units during the year.
3. Explain why the assumed number of units purchased makes a difference in your answers.

Accepted Answer

The answer of Cooke Industries imports and sells quality merchandise....

Question 18

All of the following are events that can change the projected benefit obligation (PBO) during a period except:

Accepted Answer

A)  The payment of retirement benefits. 
B)  Amendments to the pension plan agreement 
C)  The interest accumulated on the liability. 
D)  All of these can change the PBO. 
A)  The payment of retirement benefits. 
B)  Amendments to the pension plan agreement 
C)  The interest accumulated on the liability. 
D)  All of these can change the PBO.

Question 19

All of the following are most likely to change the FMV of pension plan assets during a given period except:

Accepted Answer

A)  Employer cash payments are made to the plan trustee. 
B)  Changes in Internal Revenue Service regulations for future tax deductible amounts of contributions. 
C)  Actual returns on invested plan assets. 
D)  Retirement benefits paid. 
A)  Employer cash payments are made to the plan trustee. 
B)  Changes in Internal Revenue Service regulations for future tax deductible amounts of contributions. 
C)  Actual returns on invested plan assets. 
D)  Retirement benefits paid.

Question 20

Parnell Industries sold a copy machine to Ranger Inc. on January 1, 2012. The sale price of the machine was $4,000,000 and the machine cost $3,200,000 for Parnell to manufacture. Ranger will make four payments at the end of each year, beginning with 2012, of $1,261,883 each. The four payments of $1,261,883 when discounted at 10% have a present value of $4,000,000. An amortization table appears below:
\(\begin{array}{c}
\begin{array}{|l|}
 \hline\
 \hline\
 \hline \text {Year}\
 \hline2012\
 \hline2013\
 \hline2014\
 \hline2015\
 \hline\
 \hline
\end{array}
\begin{array}{l|}
 \hline \
 \hline \text {Note Rec.}\
 \hline \text {Jan. 1}\
 \hline  \$ 4,000,000\
 \hline 3,138,117 \
 \hline  2,190,046 \
 \hline 1,147,168 \
 \hline \
 \hline 
\end{array}
\begin{array}{l|}
\hline\text { Interest } \
\hline \text { Revenue } \
\hline \text { at } 10 \% \
\hline \$ 400,000 \
\hline 313,812 \
\hline 219,005 \
\hline 114,716 \
\hline \$ 1,047,533\
\hline 
\end{array}
\begin{array}{l|}
\hline\
\hline\text {Cash Pint}\
\hline\text {Rec'd}\
\hline \$ 1,261,883 \
\hline 1,261,883 \
 \hline  1,261,883  \
 \hline1,261,883 \
 \hline\$ 5,047,532\
 \hline 
\end{array}
\begin{array}{l|}
\hline\text {Repay.}\
\hline\text {of}\
\hline\text {Princ.}\
\hline\$ 861,883  \
\hline 948,071 \
\hline 1,042,878  \
\hline 1,147,168  \
\hline\$ 4,000,000 \
\hline
\end{array}
\begin{array}{l|}
\hline\
\hline\text {Note Rec.}\
\hline\text {Dec. 31}\
\hline \$ 3,138,117 \
\hline2,190,046\
\hline 1,147,168\
\hline0\
\hline \
\hline 
\end{array}
\end{array}\)
-
 If Parnell Industries is certain that it will collect all four payments from Ranger Inc. what amount of gross profit should Parnell recognize in 2012 from the sale?

Accepted Answer

A)  $0 
B)  $861,883 
C)  $172,377 
D)  $800,000 
A)  $0 
B)  $861,883 
C)  $172,377 
D)  $800,000

Which of the following is not a disclosure for derivatives required under SFAS No. 133?

When firms use derivatives effectively to manage risks, the net gain or loss each period should be relatively ____________________.

All of the following conditions signal that revenue recognition may have been recorded too early except:

The _____________________________________________ is equal to the actuarial present value of amounts that the employer expects to pay to retired employees based on the employees' service to date and using expected future salary amounts.

Although LIFO generally provides higher quality earnings measures, FIFO generally provides higher _____________________________________________ measures.

Under the accrual method of accounting when a firm has substantially completed its value-adding activities it should recognize ____________________.

A minimum liability for pension expense is reported when

Which of the following calculations is used to determine the amount of the liability reported on the balance sheet for underfunding?

Differences between income before taxes and taxable income are either or .

A company that uses LIFO will experience a ______________________________ during a period it sells more units than it purchases.

A typical defined benefit pension plan formula includes all of the following except:

Derivative instruments acquired to hedge exposure to changes in the fair value of an asset or liability are ______________________________ hedges.

The process of allocating the historical cost of certain assets to the periods of their use in a reasonably systematic manner is referred to as ____________________.

All of the following are events that can change the projected benefit obligation (PBO) during a period except:

All of the following are most likely to change the FMV of pension plan assets during a given period except:

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

Which of the following is not a disclosure for derivatives required under SFAS No. 133?

When firms use derivatives effectively to manage risks, the net gain or loss each period should be relatively ____________________.

All of the following conditions signal that revenue recognition may have been recorded too early except:

The _____________________________________________ is equal to the actuarial present value of amounts that the employer expects to pay to retired employees based on the employees' service to date and using expected future salary amounts.

Although LIFO generally provides higher quality earnings measures, FIFO generally provides higher _____________________________________________ measures.

Under the accrual method of accounting when a firm has substantially completed its value-adding activities it should recognize ____________________.

A minimum liability for pension expense is reported when

Which of the following calculations is used to determine the amount of the liability reported on the balance sheet for underfunding?

Differences between income before taxes and taxable income are either ____________________ or ____________________.

A company that uses LIFO will experience a ______________________________ during a period it sells more units than it purchases.

A typical defined benefit pension plan formula includes all of the following except:

Derivative instruments acquired to hedge exposure to changes in the fair value of an asset or liability are ______________________________ hedges.

The process of allocating the historical cost of certain assets to the periods of their use in a reasonably systematic manner is referred to as ____________________.

All of the following are events that can change the projected benefit obligation (PBO) during a period except:

All of the following are most likely to change the FMV of pension plan assets during a given period except:

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

Differences between income before taxes and taxable income are either or .