Question 1

Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?

Accepted Answer

A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment 
A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment

Question 2

The acceptable method of accounting for stock options is the _________________________ method.

Accepted Answer

The answer of The acceptable method of accounting for stock...

Question 3

Under the fair value method of accounting for stock options, firms must value stock options on the date of ____________________.

Accepted Answer

The answer of Under the fair value method of accounting...

Question 4

There are three dates that are important to a corporation when they issue new shares of stock. Identify the three dates and explain the significance of each?

Accepted Answer

Date of declaration- The board of direct

Question 5

When firms use derivatives effectively to manage risks, the net gain or loss each period should be relatively ____________________.

Accepted Answer

The answer of When firms use derivatives effectively to manage...

Question 6

Many firms use derivative instruments to hedge exposure to changes in the fair value of an asset or liability, or to hedge exposure to variability in expected future cash flows. As an analyst examining the financial reports of a company that uses derivative instruments to hedge, what questions should you ask when thinking about derivatives and accounting quality?

Accepted Answer

Items that should be considered are:
1.

Question 7

All of the following are correct regarding operating leases except :

Accepted Answer

A)  Cash outflow is in the form of rent payments 
B)  The rights to use the property for a specified period of time are conferred to the lessee by the lessor. 
C)  At the end of the lease the lessee returns the property to the lessor 
D)  Depreciation expense can be recorded on the books by the lessee 
A)  Cash outflow is in the form of rent payments 
B)  The rights to use the property for a specified period of time are conferred to the lessee by the lessor. 
C)  At the end of the lease the lessee returns the property to the lessor 
D)  Depreciation expense can be recorded on the books by the lessee

Question 8

Under an operating lease agreement the lessee recognizes ______________________________ each period that the leased asset is used.

Accepted Answer

The answer of Under an operating lease agreement the lessee...

Question 9

Under current U.S. GAAP, unrealized gains and losses from four balance sheet items are reported in accumulated other comprehensive income or loss. Which of the following is not one of the balance sheet items?

Accepted Answer

A)  Derivatives held as cash flow hedges 
B)  Deferred tax assets related to net operating loss carryforwards 
C)  Minimum pension obligations 
D)  Investment securities classified as available for sale 
A)  Derivatives held as cash flow hedges 
B)  Deferred tax assets related to net operating loss carryforwards 
C)  Minimum pension obligations 
D)  Investment securities classified as available for sale

Question 10

A(n) ____________________ lease arrangement is one in which the lessee enjoys the use of the property for a set period of time.

Accepted Answer

The answer of A(n) ____________________ lease arrangement is one in...

Question 11

Where in the financial statements are changes in the fair value of cash flow hedges reported:

Accepted Answer

A)  On the Balance Sheet as part of retained earnings 
B)  On the Income Statement as other gains/losses 
C)  As other comprehensive income and accumulated in other comprehensive income on the Balance Sheet. 
D)  On the Statement of Stockholder's Equity 
A)  On the Balance Sheet as part of retained earnings 
B)  On the Income Statement as other gains/losses 
C)  As other comprehensive income and accumulated in other comprehensive income on the Balance Sheet. 
D)  On the Statement of Stockholder's Equity

Question 12

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

Accepted Answer

A)  Record as an asset or liability and recognize changes in fair value in other comprehensive income. 
B)  Do not record as an asset or liability; record income from the transaction at maturity and recognize in earnings. 
C)  Record as an asset or liability; recognize changes in fair value currently in earnings. 
D)  Record as an asset or liability if off-balance sheet risk is material. 
A)  Record as an asset or liability and recognize changes in fair value in other comprehensive income. 
B)  Do not record as an asset or liability; record income from the transaction at maturity and recognize in earnings. 
C)  Record as an asset or liability; recognize changes in fair value currently in earnings. 
D)  Record as an asset or liability if off-balance sheet risk is material.

Question 13

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 ____________________,...

Question 14

Regarding accounting for troubled debt, which of the following statements is true?

Accepted Answer

A)  The treatment for troubled debt is the same under both U.S. GAAP and IFRS. 
B)  The settlement of troubled debt results in an economic loss to the debtor because the creditor accepts more than the book value of the debt to settle the debt. 
C)  U.S. GAAP uses a "10 percent rule" to determine whether a gain is recognized by the debtor in a troubled debt situation. 
D)  Because IFRS uses the present value approach to determine the magnitude of the settlement for troubled debt, the magnitude of the new book value of the restructured debt will be lower and the gain recognition will be larger under IFRS. 
A)  The treatment for troubled debt is the same under both U.S. GAAP and IFRS. 
B)  The settlement of troubled debt results in an economic loss to the debtor because the creditor accepts more than the book value of the debt to settle the debt. 
C)  U.S. GAAP uses a "10 percent rule" to determine whether a gain is recognized by the debtor in a troubled debt situation. 
D)  Because IFRS uses the present value approach to determine the magnitude of the settlement for troubled debt, the magnitude of the new book value of the restructured debt will be lower and the gain recognition will be larger under IFRS.

Question 15

Which of the following is not one of the three criteria for recognition of a liability?

Accepted Answer

A)  The obligation involves a probable future sacrifice of resources at a specified or determinable date. 
B)  The firm is required to make a cash payment for the goods or services. 
C)  The firm has little or no discretion to avoid the transfer. 
D)  The transaction or event giving rise to the liability has already occurred. 
A)  The obligation involves a probable future sacrifice of resources at a specified or determinable date. 
B)  The firm is required to make a cash payment for the goods or services. 
C)  The firm has little or no discretion to avoid the transfer. 
D)  The transaction or event giving rise to the liability has already occurred.

Question 16

Which of the following is the date on which the dividend distribution occurs?

Accepted Answer

A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment 
A)  date of record 
B)  commitment date 
C)  date of declaration 
D)  date of payment

Question 17

Derivatives are financial instruments that derive their value from changes in any of the following underlying securities except:

Accepted Answer

A)  Stock prices 
B)  Percentage discount on accounts receivable 
C)  Interest rates 
D)  Commodity prices 
A)  Stock prices 
B)  Percentage discount on accounts receivable 
C)  Interest rates 
D)  Commodity prices

Question 18

According to U.S. GAAP, which of the following provides the most reliable measure for fair value measurement?

Accepted Answer

A)  Observable market data serving as inputs into estimates into present value-based measurements such as foreign exchange rates. 
B)  Quoted market prices of identical assets or liabilities in inactive markets 
C)  Observable quoted market prices in active markets for identical assets or liabilities 
D)  Unobservable inputs used by the reporting entity when modeling how the market would determine the fair value of the asset or liability in question 
A)  Observable market data serving as inputs into estimates into present value-based measurements such as foreign exchange rates. 
B)  Quoted market prices of identical assets or liabilities in inactive markets 
C)  Observable quoted market prices in active markets for identical assets or liabilities 
D)  Unobservable inputs used by the reporting entity when modeling how the market would determine the fair value of the asset or liability in question

Question 19

Santa Corporation
NOTE : These multiple choice questions require present value information.
Santa Corporation manufactures Christmas decorations and supplies throughout the world. The company owns property, plants, and equipment and also enters into operating leases for certain facilities. Assume that Santa's incremental borrowing rate is 8%. The company's tax rate is 40%. Listed below are selected financial data for Santa and a portion of the company's operating lease footnote.

Accepted Answer

A)  8.66 years 
B)  13.66 years 
C)  10 years 
D)  Not able to determine 
A)  8.66 years 
B)  13.66 years 
C)  10 years 
D)  Not able to determine

Question 20

Assume that you are currently negotiating a lease transaction in the role of the lessee. Discuss whether you would rather structure the lease as an operating lease or a capital lease and why. In addition, provide the conditions that would require that the lease be accounted for as a capital lease.

Accepted Answer

Normally, most managers would probably w

Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?

The acceptable method of accounting for stock options is the _________________________ method.

Under the fair value method of accounting for stock options, firms must value stock options on the date of ____________________.

There are three dates that are important to a corporation when they issue new shares of stock. Identify the three dates and explain the significance of each?

When firms use derivatives effectively to manage risks, the net gain or loss each period should be relatively ____________________.

All of the following are correct regarding operating leases except :

Under an operating lease agreement the lessee recognizes ______________________________ each period that the leased asset is used.

Under current U.S. GAAP, unrealized gains and losses from four balance sheet items are reported in accumulated other comprehensive income or loss. Which of the following is not one of the balance sheet items?

A(n) ____________________ lease arrangement is one in which the lessee enjoys the use of the property for a set period of time.

Where in the financial statements are changes in the fair value of cash flow hedges reported:

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

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

Regarding accounting for troubled debt, which of the following statements is true?

Which of the following is not one of the three criteria for recognition of a liability?

Which of the following is the date on which the dividend distribution occurs?

Derivatives are financial instruments that derive their value from changes in any of the following underlying securities except:

According to U.S. GAAP, which of the following provides the most reliable measure for fair value measurement?

Assume that you are currently negotiating a lease transaction in the role of the lessee. Discuss whether you would rather structure the lease as an operating lease or a capital lease and why. In addition, provide the conditions that would require that the lease be accounted for as a capital lease.

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

Which of the following is the date on which a company incurs a legal liability to distribute the dividend to owners of the stock?

The acceptable method of accounting for stock options is the _________________________ method.

Under the fair value method of accounting for stock options, firms must value stock options on the date of ____________________.

There are three dates that are important to a corporation when they issue new shares of stock. Identify the three dates and explain the significance of each?

When firms use derivatives effectively to manage risks, the net gain or loss each period should be relatively ____________________.

All of the following are correct regarding operating leases except :

Under an operating lease agreement the lessee recognizes ______________________________ each period that the leased asset is used.

Under current U.S. GAAP, unrealized gains and losses from four balance sheet items are reported in accumulated other comprehensive income or loss. Which of the following is not one of the balance sheet items?

A(n) ____________________ lease arrangement is one in which the lessee enjoys the use of the property for a set period of time.

Where in the financial statements are changes in the fair value of cash flow hedges reported:

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

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

Regarding accounting for troubled debt, which of the following statements is true?

Which of the following is not one of the three criteria for recognition of a liability?

Which of the following is the date on which the dividend distribution occurs?

Derivatives are financial instruments that derive their value from changes in any of the following underlying securities except:

According to U.S. GAAP, which of the following provides the most reliable measure for fair value measurement?

Assume that you are currently negotiating a lease transaction in the role of the lessee. Discuss whether you would rather structure the lease as an operating lease or a capital lease and why. In addition, provide the conditions that would require that the lease be accounted for as a capital lease.

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