Question 1

Explain the accounting for intercorporate investments in common stock.

Accepted Answer

INTERCORPORATE INVESTMENTS IN COMMON STO

Question 2

Both U.S.GAAP and IFRS require firms to report certain information about each of their operating segments. What segment information and disclosures are required?

Accepted Answer

ANALYSIS OF SEGMENT DATA
Both U.S.GAAP a

Question 3

Explain the accounting for employee stock options.

Accepted Answer

EMPLOYEE STOCK OPTIONS
Firms compute a f

Question 4

The FASB and IASB are working jointly to develop a revised, coordinated set of financial reporting objectives.

Accepted Answer

A) True 
 B)False

Question 5

Explain the accounting for derivative instruments.

Accepted Answer

DERIVATIVE INSTRUMENTS
Firms often acqui

Question 6

Regarding employee stock options, which of the following is/are true?

Accepted Answer

A) Firms compute a fair-value-based measure of employee stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected volatility of the stock, the expected dividends, and the risk-free interest rate. 
B) Total compensation cost is the number of options the firm expects to vest times the value per option. 
C) Firms amortize total compensation cost over the requisite service period, which is the expected period of benefit. 
D) The requisite service period is usually the period between the grant date and the vesting date. 
E) all of the above 
A) Firms compute a fair-value-based measure of employee stock options on the date of the grant using an option-pricing model that incorporates information about the current market price, the exercise price, the expected time between grant and exercise, the expected volatility of the stock, the expected dividends, and the risk-free interest rate. 
B) Total compensation cost is the number of options the firm expects to vest times the value per option. 
C) Firms amortize total compensation cost over the requisite service period, which is the expected period of benefit. 
D) The requisite service period is usually the period between the grant date and the vesting date. 
E) all of the above

Question 7

The FASB's conceptual framework does not include which of the following as financial reporting objectives?

Accepted Answer

A) Provide information useful for making suboptimal investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of future cash flows. 
C) Provide information about the economic resources of a firm and the claims on those resources. 
D) Provide information about a firm's operating performance during a period. 
E) Provide information about how an enterprise's lenders obtains and use cash. 
A) Provide information useful for making suboptimal investment and credit decisions. 
B) Provide information to help current and potential investors and creditors assess the amount, timing, and uncertainty of future cash flows. 
C) Provide information about the economic resources of a firm and the claims on those resources. 
D) Provide information about a firm's operating performance during a period. 
E) Provide information about how an enterprise's lenders obtains and use cash.

Question 8

The current FASB's financial reporting objectives states that the principal purpose of financial reports is to provide information to make investment and credit decisions.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is/are not true?

Accepted Answer

A) An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period. 
B) U.S.GAAP and IFRS do not require the employer to recognize changes in the funded status of a defined benefit retirement plan immediately in net income. 
C) Changes in the net funded status of a defined benefit retirement plan because investment performance differs from expectations, or because of changes in actuarial assumptions, or in the retirement benefit formula, initially affect other comprehensive income. 
D) Firms amortize the amounts in the contingency reserve for underfunded/overfunded retirement plans over the expected period of benefit as an adjustment to retirement plan cost. 
E) all of the above 
A) An employer must recognize changes in the funded status of a defined benefit retirement plan on its balance sheet each period. 
B) U.S.GAAP and IFRS do not require the employer to recognize changes in the funded status of a defined benefit retirement plan immediately in net income. 
C) Changes in the net funded status of a defined benefit retirement plan because investment performance differs from expectations, or because of changes in actuarial assumptions, or in the retirement benefit formula, initially affect other comprehensive income. 
D) Firms amortize the amounts in the contingency reserve for underfunded/overfunded retirement plans over the expected period of benefit as an adjustment to retirement plan cost. 
E) all of the above

Question 10

Which of the following is/are not true?

Accepted Answer

A) U.S.GAAP and IFRS require firms to recognize the cost of retirement benefits (pensions, health care, life insurance) as an expense when the employees receive payments or other benefits during retirement, not while employees work. 
B) Employers often contribute cash to a trust, an entity legally separate from the employer, to fund their retirement obligations. 
C) The accounting records of the trust established to fund the retirement obligations are separate from the accounting records of the employer, and the amounts on the two sets of books usually differ. 
D) Payments to employees come from both the employer's contributions and investment returns of the trust established to fund the retirement obligations. 
E) all of the above 
A) U.S.GAAP and IFRS require firms to recognize the cost of retirement benefits (pensions, health care, life insurance) as an expense when the employees receive payments or other benefits during retirement, not while employees work. 
B) Employers often contribute cash to a trust, an entity legally separate from the employer, to fund their retirement obligations. 
C) The accounting records of the trust established to fund the retirement obligations are separate from the accounting records of the employer, and the amounts on the two sets of books usually differ. 
D) Payments to employees come from both the employer's contributions and investment returns of the trust established to fund the retirement obligations. 
E) all of the above

Question 11

Which of the following is not true?

Accepted Answer

A) Gains (losses) are increases (decreases) in net assets from peripheral or incidental transactions of an entity and from other transactions and events affecting the entity except those that result from revenues (expenses) or investments by (distributions to) owners. 
B) Firms usually report gains and losses from sales of assets or settlements of liabilities at a net amount; that is, equal to the difference between the net asset received and the carrying value of the asset sold or between the net asset given and the carrying value of the liability settled. 
C) Gains and losses may arise from the remeasurement of assets and liabilities. 
D) Firms recognize gains and losses when they sell or exchange assets or settle liabilities in market transactions. 
E) Firms recognize gains and losses when those items enter the measurement of net income or other comprehensive income. 
A) Gains (losses) are increases (decreases) in net assets from peripheral or incidental transactions of an entity and from other transactions and events affecting the entity except those that result from revenues (expenses) or investments by (distributions to) owners. 
B) Firms usually report gains and losses from sales of assets or settlements of liabilities at a net amount; that is, equal to the difference between the net asset received and the carrying value of the asset sold or between the net asset given and the carrying value of the liability settled. 
C) Gains and losses may arise from the remeasurement of assets and liabilities. 
D) Firms recognize gains and losses when they sell or exchange assets or settle liabilities in market transactions. 
E) Firms recognize gains and losses when those items enter the measurement of net income or other comprehensive income.

Question 12

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data in the body of the income statement.

Accepted Answer

A) True 
 B)False

Question 13

Accumulated Other Comprehensive Income

Accepted Answer

A) is a shareholders' equity account that acts for other comprehensive income the way retained earnings acts for net income. 
B) equals net income plus other comprehensive income. 
C) includes gains and losses from sales or exchanges of assets or settlements of liabilities related incidentally or peripherally to the firm's core business. 
D) Firms close amounts in net income for a period to Accumulated Other Comprehensive Income at the end of the period. 
E) all of the above 
A) is a shareholders' equity account that acts for other comprehensive income the way retained earnings acts for net income. 
B) equals net income plus other comprehensive income. 
C) includes gains and losses from sales or exchanges of assets or settlements of liabilities related incidentally or peripherally to the firm's core business. 
D) Firms close amounts in net income for a period to Accumulated Other Comprehensive Income at the end of the period. 
E) all of the above

Question 14

Under U.S.GAAP, a discontinued operation is a component of an entity, comprising operations and cash flows that clearly differ from the rest of the entity, both operationally and for financial reporting. Segments, divisions, subsidiaries, and groups of assets can qualify as a component of an entity.

Accepted Answer

A) True 
 B)False

Question 15

The current FASB's financial reporting objectives identify current and potential investors and creditors as the principal users of financial reports.

Accepted Answer

A) True 
 B)False

Question 16

Firms recognize revenue

Accepted Answer

A) when they have completed an earnings process or performed most or all of their obligations to customers, usually the delivery of a product or service. 
B) when they have received cash or a receivable capable of sufficiently reliable measurement. 
C) using the percentage-of-completion method when the firms sell products under long-term contracts, such as construction companies. 
D) using the completed contract method [U.S.GAAP, only] when firms cannot reasonably estimate revenues and costs. 
E) all of the above 
A) when they have completed an earnings process or performed most or all of their obligations to customers, usually the delivery of a product or service. 
B) when they have received cash or a receivable capable of sufficiently reliable measurement. 
C) using the percentage-of-completion method when the firms sell products under long-term contracts, such as construction companies. 
D) using the completed contract method [U.S.GAAP, only] when firms cannot reasonably estimate revenues and costs. 
E) all of the above

Question 17

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

Accepted Answer

A) The criteria attempt to identify the entity, whether lessor or lessee, that enjoys the benefits and incurs the risk of the leased asset. 
B) When the lessor enjoys the benefits and bears the risk, the lease is an operating lease. 
C) When the lessee enjoys the benefits and bears the risk, the lease is an operating lease. 
D) IFRS provides more general criteria for identifying the entity enjoying the rewards and incurring the risk. 
E) Firms cannot currently apply the fair value option to capital leases 
A) The criteria attempt to identify the entity, whether lessor or lessee, that enjoys the benefits and incurs the risk of the leased asset. 
B) When the lessor enjoys the benefits and bears the risk, the lease is an operating lease. 
C) When the lessee enjoys the benefits and bears the risk, the lease is an operating lease. 
D) IFRS provides more general criteria for identifying the entity enjoying the rewards and incurring the risk. 
E) Firms cannot currently apply the fair value option to capital leases

Question 18

Identifying accounting principles. Indicate the accounting principle or method described in each of the following statements.

a. This inventory cost-flow assumption results in reporting the largest net income during periods of rising acquisition costs and nondecreasing inventory levels.

b. This method of accounting for uncollectible accounts recognizes the implied income reduction in the period of sale.

c. This method of accounting for long-term investments in the common stock of other corporations usually requires an adjustment to net income to calculate cash flow from operations under the indirect method in the statement of cash flows.

d. This method of accounting for long-term leases by the lessee gives rise to a noncurrent liability.

e. This method of recognizing interest expense on bonds provides a uniform annual rate of interest expense over the life of the bond.

f. The accounting for this type of hedging instrument designated as a hedge results in a change in other comprehensive income each period.

g. This method of accounting for intercorporate investments in securities can result in a decrease in the investor’s total shareholders’ equity without affecting the Retained Earnings account.

h. This method of recognizing income from a long-term contract generally results in the least amount of fluctuation in earnings over several periods.

i. When a firm identifies specific customers’ accounts as uncollectible and writes them off, this method of accounting results in no change in working capital.

j. The accounting for this type of hedging instrument designated as a hedge affects net 
income each period but not other comprehensive income.

k. This method of accounting for long-term leases of equipment by the lessor shows on the income statement an amount for depreciation expense.

l. This inventory cost-flow assumption results in inventory balance sheet amounts closest to current replacement cost.

m. This method of accounting for long-term investments in common stock results in recognizing revenue for dividends received or receivable.

n. This method of depreciation generally results in the largest amounts for depreciable assets on the balance sheet during the first several years of an asset’s life.

o. This inventory cost-flow assumption results in reporting the smallest net income during 
periods of falling acquisition costs.

p. This method of accounting for long-term leases of equipment by the lessee results in 
showing an amount for rent expense on the income statement.

q. This inventory cost-flow assumption results in inventory balance sheet amounts that may differ significantly from current replacement cost.

r. This method of accounting for long-term leases of equipment by the lessor results in showing revenue at the time of signing a lease.

s. This inventory cost-flow assumption can result in substantial changes in the relation between cost of goods sold and sales if inventory quantities decrease during a period. 
(Identifying accounting principles.)

Accepted Answer

(Identifying accounting principles.)
a.F

Question 19

Discuss GAAP reporting of income transactions.

Accepted Answer

OVERVIEW OF GAAP REPORTING OF INCOME TRA

Question 20

U.S.GAAP permits firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.

Accepted Answer

A) True 
 B)False

Explain the accounting for intercorporate investments in common stock.

Both U.S.GAAP and IFRS require firms to report certain information about each of their operating segments. What segment information and disclosures are required?

Explain the accounting for employee stock options.

The FASB and IASB are working jointly to develop a revised, coordinated set of financial reporting objectives.

Explain the accounting for derivative instruments.

Regarding employee stock options, which of the following is/are true?

The FASB's conceptual framework does not include which of the following as financial reporting objectives?

The current FASB's financial reporting objectives states that the principal purpose of financial reports is to provide information to make investment and credit decisions.

Which of the following is/are not true?

Which of the following is/are not true?

Which of the following is not true?

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data in the body of the income statement.

Accumulated Other Comprehensive Income

Under U.S.GAAP, a discontinued operation is a component of an entity, comprising operations and cash flows that clearly differ from the rest of the entity, both operationally and for financial reporting. Segments, divisions, subsidiaries, and groups of assets can qualify as a component of an entity.

The current FASB's financial reporting objectives identify current and potential investors and creditors as the principal users of financial reports.

Firms recognize revenue

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

Discuss GAAP reporting of income transactions.

U.S.GAAP permits firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Filters

Exam 17: Synthesis and Extensions

Explain the accounting for intercorporate investments in common stock.

Both U.S.GAAP and IFRS require firms to report certain information about each of their operating segments. What segment information and disclosures are required?

Explain the accounting for employee stock options.

The FASB and IASB are working jointly to develop a revised, coordinated set of financial reporting objectives.

Explain the accounting for derivative instruments.

Regarding employee stock options, which of the following is/are true?

The FASB's conceptual framework does not include which of the following as financial reporting objectives?

The current FASB's financial reporting objectives states that the principal purpose of financial reports is to provide information to make investment and credit decisions.

Which of the following is/are not true?

Which of the following is/are not true?

Which of the following is not true?

Publicly held firms that apply U.S.GAAP or IFRS must show earnings per common share data in the body of the income statement.

Accumulated Other Comprehensive Income

The current FASB's financial reporting objectives identify current and potential investors and creditors as the principal users of financial reports.

Firms recognize revenue

U.S.GAAP and IFRS provide criteria for distinguishing operating leases from capital leases.Which of the following is not true?

Discuss GAAP reporting of income transactions.

U.S.GAAP permits firms to remeasure property, plant, and equipment upward for increases in fair value under certain conditions.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Filters