Question 1

GAAP stipulates that firms should do what with expenditures that increase the service potential of an asset beyond that originally anticipated?

Accepted Answer

A)  Expense the expenditure immediately. 
B)  Capitalize the expenditure and depreciate it over the remaining service life of the asset. 
C)  Capitalize the expenditure, but do not depreciate the asset. 
D)  Charge it off to shareholders' equity. 
A)  Expense the expenditure immediately. 
B)  Capitalize the expenditure and depreciate it over the remaining service life of the asset. 
C)  Capitalize the expenditure, but do not depreciate the asset. 
D)  Charge it off to shareholders' equity.

Question 2

On January 1, 2012, Brock Company purchased $200,000, 8% bonds of Universal Co. at par. Interest is payable annually on December 31. The bonds mature in five years on December 31, 2016.
Required
a. At the date of purchase at what amount should Brock record the bond investment?
b. Determine the amount of cash interest Brock would receive in 2012.
c. At December 31, 2012 the bonds have a fair market value of $203,500 how will this information affect Brock's financial statements given that the bonds are classified as:
1. Held-to-Maturity
2. Trading
3. Available for Sale

Accepted Answer

1. The bonds will be recorded at cost $2

Question 3

Held-to-maturity securities are accounted for at __________________________________________________.

Accepted Answer

amortized

Question 4

Discuss how firms should account for intangible assets under U.S. GAAP. Your answer should include discussion of the following areas:
a. Internally generated intangible assets versus specifically identifiable intangible assets acquired from others
b. Amortization and impairment testing

Accepted Answer

Recommended answer:
1. Firms expense the

Question 5

Under which of the following scenarios would an entity not be classified as a variable interest entity?

Accepted Answer

A)  The equity investing firms do not have the obligation to absorb the expected losses of the variable interest entity if they occur. 
B)  The investing firms do not have the right to receive the expected residual returns of the variable interest entity if they occur. 
C)  The total equity investment at risk is sufficient to permit the variable interest entity to finance its activities without additional subordinated financial support from other parties. 
D)  The equity investing firms do not have the direct or indirect ability to make decisions about the variable interest entity's activities through voting rights or similar rights. 
A)  The equity investing firms do not have the obligation to absorb the expected losses of the variable interest entity if they occur. 
B)  The investing firms do not have the right to receive the expected residual returns of the variable interest entity if they occur. 
C)  The total equity investment at risk is sufficient to permit the variable interest entity to finance its activities without additional subordinated financial support from other parties. 
D)  The equity investing firms do not have the direct or indirect ability to make decisions about the variable interest entity's activities through voting rights or similar rights.

Question 6

Although the organizational structure and operating policies of a particular foreign unit determine its functional currency, discuss two actions that a management team might take to ensure that the foreign currency is the functional currency.

Accepted Answer

1. Decentralize decision making to the f

Question 7

Based on the information concerning Snowflake Corp. what is the value of the goodwill related to the acquisition?

Accepted Answer

A)  $1,775,000 
B)  $475,000 
C)  $2,250,000 
D)  $1,325,000 
A)  $1,775,000 
B)  $475,000 
C)  $2,250,000 
D)  $1,325,000

Question 8

An analyst can estimate the average total life of depreciable assets by:

Accepted Answer

A)  dividing average depreciable assets by depreciation expense for the year. 
B)  dividing depreciation expense for the year by average depreciable assets. 
C)  dividing average gross depreciable assets by accumulated depreciation. 
D)  Subtracting depreciation expense from accumulated depreciation. 
A)  dividing average depreciable assets by depreciation expense for the year. 
B)  dividing depreciation expense for the year by average depreciable assets. 
C)  dividing average gross depreciable assets by accumulated depreciation. 
D)  Subtracting depreciation expense from accumulated depreciation.

Question 9

Unrealized holding gains and losses from investments classified as trading are reported in the ___________________________________.

Accepted Answer

The answer of Unrealized holding gains and losses from investments...

Question 10

Managers are typically faced with all of the following primary choices and estimates when allocating acquisition costs of tangible assets and intangible assets to the periods benefited except :

Accepted Answer

A)  choosing an allocation method 
B)  estimating useful life 
C)  estimating salvage value 
D)  establishing a reserve for obsolescence 
A)  choosing an allocation method 
B)  estimating useful life 
C)  estimating salvage value 
D)  establishing a reserve for obsolescence

Question 11

Securities that are purchased in order to take advantage of short-term changes in market value should be classified as ____________________ securities.

Accepted Answer

The answer of Securities that are purchased in order to...

Question 12

All of the following are typically costs that fail the future benefits test of long-lived operating assets except :

Accepted Answer

A)  costs related to research and development 
B)  costs related to marketing 
C)  costs related to brand-building activities 
D)  costs of equipment used in production 
A)  costs related to research and development 
B)  costs related to marketing 
C)  costs related to brand-building activities 
D)  costs of equipment used in production

Question 13

If Ashley Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then Ashley will recognize what amount of 2010 income from the investment?

Accepted Answer

A)  $4,000 
B)  $10,000 
C)  $25,000 
D)  $15,000 
A)  $4,000 
B)  $10,000 
C)  $25,000 
D)  $15,000

Question 14

When a foreign entity has the foreign currency as its functional currency, it uses which exchange rate to translate revenues and expenses in the income statement?

Accepted Answer

A)  the average exchange rate during the period 
B)  the end of the period exchange rate 
C)  the historical exchange rate 
D)  the exchange rate on the date the asset or liability was obtained 
A)  the average exchange rate during the period 
B)  the end of the period exchange rate 
C)  the historical exchange rate 
D)  the exchange rate on the date the asset or liability was obtained

Question 15

An investing firm consolidates the variable interest entity if it absorbs the majority of the entity's expected ____________________ if they occur, receives a majority of the entity's expected ______________________________ if they occur, or both.

Accepted Answer

losses, re

Question 16

Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP. GAAP defines a carrying amount as "not recoverable" if:

Accepted Answer

A)  it is greater than the sum of the cash flows expected from the asset's use and disposal. 
B)  it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal. 
C)  it is less valuable than its current carrying value. 
D)  it is less valuable than its current fair value. 
A)  it is greater than the sum of the cash flows expected from the asset's use and disposal. 
B)  it is greater than the sum of the undiscounted cash flows expected from the asset's use and disposal. 
C)  it is less valuable than its current carrying value. 
D)  it is less valuable than its current fair value.

Question 17

All of the following are types of intercorporate investments in capital stock except :

Accepted Answer

A)  minority, passive 
B)  minority, active 
C)  majority, active 
D)  majority, passive 
A)  minority, passive 
B)  minority, active 
C)  majority, active 
D)  majority, passive

Question 18

The ____________________ method views a corporate acquisition as conceptually identical to the purchase of any single asset.

Accepted Answer

The answer of The ____________________ method views a corporate acquisition...

Question 19

___________________________________ include trade and brand names, trademarks, patents, copyrights, franchise rights, customer lists and goodwill.

Accepted Answer

The answer of ___________________________________ include trade and brand names, trademarks,...

Question 20

Using the information below, calculate the average total depreciable life of the assets:
Information from the Balance Sheet:

Accepted Answer

A)  6.54 years 
B)  7.25 years 
C)  6.91 years 
D)  9.15 years 
A)  6.54 years 
B)  7.25 years 
C)  6.91 years 
D)  9.15 years

GAAP stipulates that firms should do what with expenditures that increase the service potential of an asset beyond that originally anticipated?

Held-to-maturity securities are accounted for at __________________________________________________.

Discuss how firms should account for intangible assets under U.S. GAAP. Your answer should include discussion of the following areas: a. Internally generated intangible assets versus specifically identifiable intangible assets acquired from others b. Amortization and impairment testing

Under which of the following scenarios would an entity not be classified as a variable interest entity?

Although the organizational structure and operating policies of a particular foreign unit determine its functional currency, discuss two actions that a management team might take to ensure that the foreign currency is the functional currency.

Based on the information concerning Snowflake Corp. what is the value of the goodwill related to the acquisition?

An analyst can estimate the average total life of depreciable assets by:

Unrealized holding gains and losses from investments classified as trading are reported in the ___________________________________.

Managers are typically faced with all of the following primary choices and estimates when allocating acquisition costs of tangible assets and intangible assets to the periods benefited except :

Securities that are purchased in order to take advantage of short-term changes in market value should be classified as ____________________ securities.

All of the following are typically costs that fail the future benefits test of long-lived operating assets except :

If Ashley Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then Ashley will recognize what amount of 2010 income from the investment?

When a foreign entity has the foreign currency as its functional currency, it uses which exchange rate to translate revenues and expenses in the income statement?

An investing firm consolidates the variable interest entity if it absorbs the majority of the entity's expected if they occur, receives a majority of the entity's expected __________ if they occur, or both.

Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP. GAAP defines a carrying amount as "not recoverable" if:

All of the following are types of intercorporate investments in capital stock except :

The ____________________ method views a corporate acquisition as conceptually identical to the purchase of any single asset.

___________________________________ include trade and brand names, trademarks, patents, copyrights, franchise rights, customer lists and goodwill.

Using the information below, calculate the average total depreciable life of the assets: Information from the Balance Sheet:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Recognition

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

GAAP stipulates that firms should do what with expenditures that increase the service potential of an asset beyond that originally anticipated?

Held-to-maturity securities are accounted for at __________________________________________________.

Discuss how firms should account for intangible assets under U.S. GAAP. Your answer should include discussion of the following areas: a. Internally generated intangible assets versus specifically identifiable intangible assets acquired from others b. Amortization and impairment testing

Under which of the following scenarios would an entity not be classified as a variable interest entity?

Although the organizational structure and operating policies of a particular foreign unit determine its functional currency, discuss two actions that a management team might take to ensure that the foreign currency is the functional currency.

Based on the information concerning Snowflake Corp. what is the value of the goodwill related to the acquisition?

An analyst can estimate the average total life of depreciable assets by:

Unrealized holding gains and losses from investments classified as trading are reported in the ___________________________________.

Managers are typically faced with all of the following primary choices and estimates when allocating acquisition costs of tangible assets and intangible assets to the periods benefited except :

Securities that are purchased in order to take advantage of short-term changes in market value should be classified as ____________________ securities.

All of the following are typically costs that fail the future benefits test of long-lived operating assets except :

If Ashley Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, then Ashley will recognize what amount of 2010 income from the investment?

When a foreign entity has the foreign currency as its functional currency, it uses which exchange rate to translate revenues and expenses in the income statement?

An investing firm consolidates the variable interest entity if it absorbs the majority of the entity's expected ____________________ if they occur, receives a majority of the entity's expected ______________________________ if they occur, or both.

Firms recognize an impairment loss when the carrying amount of a tangible fixed asset is deemed "not recoverable" as specified by GAAP. GAAP defines a carrying amount as "not recoverable" if:

All of the following are types of intercorporate investments in capital stock except :

The ____________________ method views a corporate acquisition as conceptually identical to the purchase of any single asset.

___________________________________ include trade and brand names, trademarks, patents, copyrights, franchise rights, customer lists and goodwill.

Using the information below, calculate the average total depreciable life of the assets: Information from the Balance Sheet:

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Asset and Liability Valuation and Income Recognition

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

An investing firm consolidates the variable interest entity if it absorbs the majority of the entity's expected if they occur, receives a majority of the entity's expected __________ if they occur, or both.