Exam 7: Investing Activities

U.S.GAAP stipulates that firms should ____________________ expenditures that increase the service potential of an asset beyond that originally anticipated

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

When there are two or more investing firms in an entity,how is it determined which entity consolidates the variable interest entity?

Buchaneer Co.,a waste collection company,estimates that its landfill will be in operation for five years and will cost $300 million to build,with generation of $900 million in revenues during its useful life.According to Federal Law,Buchaneer must decommission and decontaminate the site at the end of its useful life.Based on estimates by its engineers,Buchaneer will have to spend $20 million on this process when the landfill is finally shut down in five years.Buchaneer's credit adjusted rate of interest is 10%.(Hint: Use PV factors to estimate fair value of this ARO.) Required: 1.In accounting for asset retirement obligations,how should Buchaneer account for the costs associated with this decommisioning process according to U.S.GAAP? Show journal entries and prepare an amortization table. 2.How should these costs be reported on the income statement and how does this treatment improve the matching process?

Currently,the FASB's Statements of Accounting Concepts (Nos.5 and 6)define an asset as having all of the following characteristics except:

Harbour Company purchased a new piece of equipment with a list price of $175,000 and subject to a 5 percent discount if paid within 45 days.Harbour paid within the discount period.The company also paid $1,500 to obtain title to the equipment and $600 as the license fee for the first year of operation.It paid $2,500 to level the area in which the equipment would be located and $12,500 to relocate other equipment that would have interfered with the proper operation of the new equipment.Harbour paid $400 for property and liability insurance for the first year of operation.What is the acquisition cost of this equipment that Harbour should record in its accounting records? Indicate the treatment of any amount not included in acquisition cost.

When dividends from an investment are recognized as a reduction of the investment account,the investment must have been of which type?

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 __________________________________________________.

Goodwill represents

Focus Company's accounting manager decided to start capitalizing the company's routine repairs and maintenance expense,starting in 2011.What effect will this change have on the company's 2012 income and assets respectively?

Under which of the following scenarios would an entity not be classified as a variable interest entity?

Unrealized holding gains and losses from investments classified as available for sale are reported in _____________________________________________. other comprehensive income

When a foreign entity has the U.S.dollar as its functional currency,it uses which exchange rate to translate monetary assets and liabilities?

When a company has a minority passive investment it will recognize changes in the market value of the investment as ____________________ gains and losses.

A company would need to record an impairment loss for its equipment when

All of the following are types of intercorporate investments in capital stock except:

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.If the beginning balance in the investment account was $160,000,the balance at December 31,2011 should be: