Question 1

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 2

Regarding actuarial assumptions,firms must disclose in notes to the financial statements all of the following except:

Accepted Answer

A)  the discount rate used to compute the pension benefit obligation. 
B)  the expected rate of return on pension investments. 
C)  estimates of the number of retirees over the future 10 years. 
D)  the rate of compensation increase. 
A)  the discount rate used to compute the pension benefit obligation. 
B)  the expected rate of return on pension investments. 
C)  estimates of the number of retirees over the future 10 years. 
D)  the rate of compensation increase.

Question 3

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.

Accepted Answer

The answer of Assume that Madison Corp.has agreed to construct...

Question 4

A derivative has one or more ____________________,which are a specified interest rate,commodity price,foreign exchange rate,or other variable.

Accepted Answer

The answer of A derivative has one or more ____________________,which...

Question 5

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 6

Firm D holds 20,000 gallons of chemicals in inventory on October 31,Year 1,that cost $225
per gallon.Firm D contemplates selling the chemicals on March 31,Year 2,when it completes
the processing.Uncertainty about the selling price of the chemical on March 31,Year 2,leads
Firm D to acquire a forward contract on the chemical.The forward contract does not require an initial investment of funds.Firm D designates the forward commodity contract as a cash flow hedge of an anticipated transaction.The forward price on October 31,Year 1,for delivery on March 31,Year 2,is $320 per gallon.
Required
a.Using the financial statement effects template,show the financial statement effects,
if any,that Firm D would have on October 31,Year 1,when it acquires the forward
commodity price contract.
b.On December 31,Year 1,the end of the accounting period for Firm D,the forward
price of the chemical for March 31,Year 2,delivery is $310 per gallon.Show the financial
statement effects of recording the change in the value of the forward commodity
price contract.Ignore the discounting of cash flows in this part and in the remainder
of the problem.
c.Show the financial statement effects of the December 31,Year 1,decline in value of
the chemical inventory.
d.On March 31,Year 2,the price of the chemical declines to $270 per gallon.Show the
financial statement effects of revaluing the forward contract.
e.Show the financial statement effects on March 31,Year 2,to reflect the decline in
value of the inventory.
f.Show the financial statement effects on March 31,Year 2,to settle the forward contract.
g.Assume that Firm D sells the chemical on March 31,Year 2,for $270 a gallon.Show
the financial statement effects of recording the sale and recognizing the cost of
goods sold.

Accepted Answer

a.Firm D does not make an entry on Octob

Question 7

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 8

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 9

The accumulated 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 10

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

Accepted Answer

A)  requires that no income is recognized until all installments are received. 
B)  requires that gross profit is recognized as each installment payment is received. 
C)  requires that entire cost of the sale be recovered prior to any income being recognized. 
D)  allows revenue recognition at the time of the sale. 
A)  requires that no income is recognized until all installments are received. 
B)  requires that gross profit is recognized as each installment payment is received. 
C)  requires that entire cost of the sale be recovered prior to any income being recognized. 
D)  allows revenue recognition at the time of the sale.

Question 11

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 12

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

Accepted Answer

A)  Identifying at each balance sheet date all differences between the book basis of assets, liabilities, and tax loss carryforwards 
B)  Eliminating permanent differences between book and tax basis. 
C)  Eliminating deferred tax assets. 
D)  Assessing the likelihood that the firm will realize the benefits of deferred tax assets in the future. 
A)  Identifying at each balance sheet date all differences between the book basis of assets, liabilities, and tax loss carryforwards 
B)  Eliminating permanent differences between book and tax basis. 
C)  Eliminating deferred tax assets. 
D)  Assessing the likelihood that the firm will realize the benefits of deferred tax assets in the future.

Question 13

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 14

Derivative instruments acquired to hedge exposure may be classified as either a fair value hedge or a cash flow hedge.Distinguish between the two types of hedges.

Accepted Answer

Recommended Answer from the text:
Deriva

Question 15

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 16

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

Accepted Answer

A)  do not need to report an excess of the accumulated benefits obligations over assets in a postretirement benefits fund as a liability on the balance sheet. 
B)  do not need to disclose any estimates used in calculating projected benefits. 
C)  postretirement benefits are normally not material for most companies and do not need to be disclosed. 
D)  do not need to set aside funds for future postretirement benefits as they do for pension benefits. 
A)  do not need to report an excess of the accumulated benefits obligations over assets in a postretirement benefits fund as a liability on the balance sheet. 
B)  do not need to disclose any estimates used in calculating projected benefits. 
C)  postretirement benefits are normally not material for most companies and do not need to be disclosed. 
D)  do not need to set aside funds for future postretirement benefits as they do for pension benefits.

Question 17

___________________________________ is primarily a question of timing.

Accepted Answer

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

Question 18

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 19

Which of the following is not a distinguishing characteristic of a derivative instrument?

Accepted Answer

A)  Derivative instruments have terms that require or permit net settlement. 
B)  Derivative instruments have a low initial net investment. 
C)  Derivative instruments are highly effective throughout their term. 
D)  Derivative instruments have one or more underlyings and notional amounts. 
A)  Derivative instruments have terms that require or permit net settlement. 
B)  Derivative instruments have a low initial net investment. 
C)  Derivative instruments are highly effective throughout their term. 
D)  Derivative instruments have one or more underlyings and notional amounts.

Question 20

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...

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

Regarding actuarial assumptions,firms must disclose in notes to the financial statements all of the following except:

A derivative has one or more ____________________,which are a specified interest rate,commodity price,foreign exchange rate,or other variable.

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

Under the percentage-of-completion contract method

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

The accumulated benefit obligation measures

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

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

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

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

Derivative instruments acquired to hedge exposure may be classified as either a fair value hedge or a cash flow hedge.Distinguish between the two types of hedges.

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

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

___________________________________ is primarily a question of timing.

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

Which of the following is not a distinguishing characteristic of a derivative instrument?

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

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

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

Regarding actuarial assumptions,firms must disclose in notes to the financial statements all of the following except:

A derivative has one or more ____________________,which are a specified interest rate,commodity price,foreign exchange rate,or other variable.

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

Under the percentage-of-completion contract method

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

The accumulated benefit obligation measures

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

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

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

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

Derivative instruments acquired to hedge exposure may be classified as either a fair value hedge or a cash flow hedge.Distinguish between the two types of hedges.

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

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

___________________________________ is primarily a question of timing.

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

Which of the following is not a distinguishing characteristic of a derivative instrument?

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

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