Question 1

Under IFRS, cash payments for purchase of treasury stock:

Accepted Answer

A)  operating cash outflow 
B)  investing cash outflow 
C)  financing cash outflow 
D)  Both operating cash outflow and financing cash outflow are correct. 
A)  operating cash outflow 
B)  investing cash outflow 
C)  financing cash outflow 
D)  Both operating cash outflow and financing cash outflow are correct.

Question 2

Under U.S. GAAP, which of the following items would require a lessee to classify a lease of equipment as a capital lease?

Accepted Answer

A)  There is no transfer of ownership to the lessee at the end of the lease term. 
B)  The lease does not contain a bargain purchase option. 
C)  The lease term is 90% of the estimated economic life of the lease property. 
D)  The present value of the contractual minimum lease payments is 75% of the fair value of the leased property. 
A)  There is no transfer of ownership to the lessee at the end of the lease term. 
B)  The lease does not contain a bargain purchase option. 
C)  The lease term is 90% of the estimated economic life of the lease property. 
D)  The present value of the contractual minimum lease payments is 75% of the fair value of the leased property.

Question 3

Discuss the method of accounting for employee stock options. In your answer discuss the how the accounting has changed during recent years.

Accepted Answer

The FASB requires the fair value method

Question 4

Porter Corporation
NOTE: The following multiple choice questions require present value information.
On January 1, 2012, Porter Corporation signed a five-year non-cancelable lease for certain machinery. The terms of the lease called for:
1) Price to make annual payments of $60,000 at the end of each year (starting on Dec. 31, 2012) for five years. Porter must return the equipment to the lessor end of this period.
2) The machinery has an estimated useful life of 6 years and no expected salvage value.
3) Porter uses the straight-line method of depreciation for all of its fixed assets.
4) Porter's incremental borrowing rate is 8%.
5) The fair value of the asset at January 1, 2012 is $275,000.
What accounting method should Porter use to account for the equipment lease?

Accepted Answer

A)  Operating Lease method 
B)  Capital Lease method 
C)  Equipment Lease method 
D)  Lessee Accounting method 
A)  Operating Lease method 
B)  Capital Lease method 
C)  Equipment Lease method 
D)  Lessee Accounting method

Question 5

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 6

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 7

Which is the first date when employees can exercise their stock options?

Accepted Answer

A)  vesting date 
B)  grant date 
C)  exercise date 
D)  liquidating date 
A)  vesting date 
B)  grant date 
C)  exercise date 
D)  liquidating date

Question 8

For the year ended December 31, 2012, Porter should record depreciation expense for the leased equipment equal to:

Accepted Answer

A)  $55,000 
B)  $39,927 
C)  $47,912 
D)  $0 
A)  $55,000 
B)  $39,927 
C)  $47,912 
D)  $0

Question 9

The first date at which employees can exercise their stock options is termed the _________________________.

Accepted Answer

The answer of The first date at which employees can...

Question 10

Which of the following is not true concerning the recognition of unrealized gains and losses on foreign currency translation during the consolidation process?

Accepted Answer

A)  Firms do not recognize these gains/losses in current income. 
B)  Firms recognize these gain/losses in the statement of other comprehensive income 
C)  Firms increase/reduce their investment accounts by the translation gains/losses 
D)  Unrealized gains and losses increase/decrease other accumulated comprehensive income in shareholders' equity. 
A)  Firms do not recognize these gains/losses in current income. 
B)  Firms recognize these gain/losses in the statement of other comprehensive income 
C)  Firms increase/reduce their investment accounts by the translation gains/losses 
D)  Unrealized gains and losses increase/decrease other accumulated comprehensive income in shareholders' equity.

Question 11

Using the information provided by Santa Corporation, calculate the present value of the operating leases.

Accepted Answer

A)  $2,155,843 
B)  $2,024,945 
C)  $1,482,390 
D)  $2,854,452 
A)  $2,155,843 
B)  $2,024,945 
C)  $1,482,390 
D)  $2,854,452

Question 12

Derivative instruments acquired to hedge exposure to variability in expected future cash are _________________________ hedges.

Accepted Answer

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

Question 13

Which kind of dividend has an interest-bearing promise to pay dividends?

Accepted Answer

A)  property dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend 
A)  property dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend

Question 14

All of the following are benefits of leasing except :

Accepted Answer

A)  They have the ability to shift the tax benefits from depreciation and other deductions from a lessee that has little or no taxable income to a lessor that has substantial taxable income. 
B)  They provide flexibility to change capacity as needed without having to purchase or sell assets. 
C)  They have the ability to reduce the risk of technological obsolescence, relative to outright ownership, by maintaining the flexibility to shift to technologically more advanced assets. 
D)  In an operating lease, the lessee recognizes the signing of the lease as the simultaneous acquisition of a long-term asset and the incurring of a long-term liability for lease payments. 
A)  They have the ability to shift the tax benefits from depreciation and other deductions from a lessee that has little or no taxable income to a lessor that has substantial taxable income. 
B)  They provide flexibility to change capacity as needed without having to purchase or sell assets. 
C)  They have the ability to reduce the risk of technological obsolescence, relative to outright ownership, by maintaining the flexibility to shift to technologically more advanced assets. 
D)  In an operating lease, the lessee recognizes the signing of the lease as the simultaneous acquisition of a long-term asset and the incurring of a long-term liability for lease payments.

Question 15

One criterion that must be satisfied for a firm to recognize an obligation is that the transaction or event giving rise to the obligation has already ____________________.

Accepted Answer

The answer of One criterion that must be satisfied for...

Question 16

Which kind of dividend is a return of the original investment by shareholders?

Accepted Answer

A)  cash dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend 
A)  cash dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend

Question 17

Which kind of dividend typically pays dividends with additional shares of the corporation's stock?

Accepted Answer

A)  property dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend 
A)  property dividend 
B)  stock dividend 
C)  liquidating dividend 
D)  scrip dividend

Question 18

FASB has set forth all of the following conditions for recognizing transfers of receivables as sales only if the following conditions of surrendering control of the receivables are met except :

Accepted Answer

A)  The assets transferred have been isolated from the selling firm. 
B)  The buying firm obtains the right to pledge or exchange the transferred assets, and no condition both constrains the transferee from taking advantage of its right and provides more than a trivial benefit to the transferor. 
C)  The selling firm does not maintain effective control over the assets transferred through (a) an agreement that both entitles and obligates it to repurchase the assets or (b) the ability to unilaterally cause the transferee to return specific assets. 
D)  A creditor of the selling firm can access the receivables in the event of the seller's bankruptcy. 
A)  The assets transferred have been isolated from the selling firm. 
B)  The buying firm obtains the right to pledge or exchange the transferred assets, and no condition both constrains the transferee from taking advantage of its right and provides more than a trivial benefit to the transferor. 
C)  The selling firm does not maintain effective control over the assets transferred through (a) an agreement that both entitles and obligates it to repurchase the assets or (b) the ability to unilaterally cause the transferee to return specific assets. 
D)  A creditor of the selling firm can access the receivables in the event of the seller's bankruptcy.

Question 19

Why can exercising stock options create cash flow problems for managers at the exercise date? What is an alternative to this problem?

Accepted Answer

Because the manager must pay the exercis

Question 20

Which is the date when a firm gives a stock option to employees?

Accepted Answer

A)  vesting date 
B)  grant date 
C)  exercise date 
D)  market date 
A)  vesting date 
B)  grant date 
C)  exercise date 
D)  market date

Under IFRS, cash payments for purchase of treasury stock:

Under U.S. GAAP, which of the following items would require a lessee to classify a lease of equipment as a capital lease?

Discuss the method of accounting for employee stock options. In your answer discuss the how the accounting has changed during recent years.

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

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

Which is the first date when employees can exercise their stock options?

For the year ended December 31, 2012, Porter should record depreciation expense for the leased equipment equal to:

The first date at which employees can exercise their stock options is termed the _________________________.

Which of the following is not true concerning the recognition of unrealized gains and losses on foreign currency translation during the consolidation process?

Using the information provided by Santa Corporation, calculate the present value of the operating leases.

Derivative instruments acquired to hedge exposure to variability in expected future cash are _________________________ hedges.

Which kind of dividend has an interest-bearing promise to pay dividends?

All of the following are benefits of leasing except :

One criterion that must be satisfied for a firm to recognize an obligation is that the transaction or event giving rise to the obligation has already ____________________.

Which kind of dividend is a return of the original investment by shareholders?

Which kind of dividend typically pays dividends with additional shares of the corporation's stock?

FASB has set forth all of the following conditions for recognizing transfers of receivables as sales only if the following conditions of surrendering control of the receivables are met except :

Why can exercising stock options create cash flow problems for managers at the exercise date? What is an alternative to this problem?

Which is the date when a firm gives a stock option to employees?

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

Operating 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

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Exam 7: Investing Activities

Under IFRS, cash payments for purchase of treasury stock:

Under U.S. GAAP, which of the following items would require a lessee to classify a lease of equipment as a capital lease?

Discuss the method of accounting for employee stock options. In your answer discuss the how the accounting has changed during recent years.

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

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

Which is the first date when employees can exercise their stock options?

For the year ended December 31, 2012, Porter should record depreciation expense for the leased equipment equal to:

The first date at which employees can exercise their stock options is termed the _________________________.

Which of the following is not true concerning the recognition of unrealized gains and losses on foreign currency translation during the consolidation process?

Using the information provided by Santa Corporation, calculate the present value of the operating leases.

Derivative instruments acquired to hedge exposure to variability in expected future cash are _________________________ hedges.

Which kind of dividend has an interest-bearing promise to pay dividends?

All of the following are benefits of leasing except :

One criterion that must be satisfied for a firm to recognize an obligation is that the transaction or event giving rise to the obligation has already ____________________.

Which kind of dividend is a return of the original investment by shareholders?

Which kind of dividend typically pays dividends with additional shares of the corporation's stock?

FASB has set forth all of the following conditions for recognizing transfers of receivables as sales only if the following conditions of surrendering control of the receivables are met except :

Why can exercising stock options create cash flow problems for managers at the exercise date? What is an alternative to this problem?

Which is the date when a firm gives a stock option to employees?

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

Operating 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