Exam 7: Investing Activities

Firms that capitalize routine maintenance and repair charges will end up with the result of having the current period's income being ____________________.

The functional currency of a foreign unit whose receivables and payables are denominated in foreign currency and not usually remitted to parent company is the ______________________________.

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.

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

When the purchase price of another entity exceeds the book value of the entity's net assets the purchaser allocates the excess to identifiable assets and liabilities in order to revalue them to market value and any additional excess is allocated to ____________________.

Specifically identifiable intangible assets acquired from others may have either a ____________________ useful life or an ____________________ useful life.

Below you will find the balance sheet and income statement of a US Corp.'s foreign subsidiary at the end of its first year of operations. The following exchange rates were in effect during the period: Jan. 1, 2012 - $1 = 1FC Dec. 31, 2012 - $1.70 = 1FC The average exchange rate during the period was $1.40=1FC. The common stock was issued on January 1, 2012. Assuming that the foreign currency is the functional currency translate the financial statements into U.S. dollars. Balance Sheet As of December 31 , (Amounts in Foreign Currency) Assets: Cash and cash equivalents Accounts Receivable Inventory Current Assets Equipment Less: Accumulated depreciation Equipment-Net Land Total assets Liabilities Accounts Payable Accrued Salaries Payable Rent Expense Payable Income Tax Payable Current Liabilities Long-term note payable Total Liabilities Stockholders' Equity: Common stock Retained earnings Total liabilities and stockholders' equity 2012 18,000 33,000 75,000 42,225 40,500 48,000 14,758 7,500 73,258 118,258 30,000 Income Statement For the year ended December 31,2012 (Amounts in foreign currency) Revenues 97,500 Cost of goods sold (58,500) Gross Profit 39,000 Depreciation expense (1,725) Salary expense (24,625) Insurance Expense (1,700) Rent Expense (4,875) Interest Expense Total Operating Expenses Income from Operations 3,555 Income Tax Expense Net income Dividends paid to Common Shareholders 747

All of the following are consistent with the purpose of determining the useful life of a long-lived asset except:

Which of the following terms is least consistent with the allocation of costs using a rational and systematic method?

Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd, Inc.'s common stock for $60,000 on January 1, 2010. During 2010, Judd declared a dividend of $5 per share and reported net income of $75,000. At the end of 2010 the market value of a share of Judd, Inc. stock has increased to $32 per share. - If Ashley Company accounts for the investment as a minority, active investment and uses the equity method to account for the investment, the investment will appear in the December 31, 2010 balance sheet at what amount?

Olivia Co. owns 4,000 of the 10,000 outstanding shares of Hobbitt Corp. common stock and exercises significant influence over the company. During 2011, Hobbitt earns $80,000 and pays cash dividends of $30,000. For the year ended December 31, 2011 Olivia should report income related to the investment equal to

When the functional currency is the U.S. dollar, financial reporting requires firms to use the ___________________________________ translation method.

Which of the following is not a classification for a minority, passive investment?

Solo Corp. purchased $500,000 of bonds for $515,000 as an investment. If Solo expects to hold the bonds until they mature the initial investment should be recorded at

For some transactions U.S. GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur, even if not realized. Discuss what types of transactions get this type of treatment and the logic behind this accounting.

Most publicly traded firms in the United States use the _________________________ method of depreciation.

When a long-lived asset loses its ability to generate future benefits U.S. GAAP requires firms to write down the assets to their fair values and recognize an ______________________________ in income from continuing operations.

The term used to describe the amount of a company's annual interest cost that should be capitalized is known as:

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

The need to incur costs to reclaim a natural resource is an example of a(n)