Exam 8: Investing Activities

Financial reporting requires firms to ____________________ immediately all R&D costs incurred internally.

Unrealized gains and losses that appear in accumulated other comprehensive income are from securities classified as ___________________________________ securities.

When a foreign entity operates as a direct and integral extension of the U.S.parent,normally,its functional currency is the _________________________.

The following problem requires some of the following present value information: PV af an arthary annuity for 20 periods at 12\% 7.46944 PV af an ardinary annuty for 19 periods at 12\% 8.36497.36578 PV af an arthary annuty for 18 periods at 10\%12\% 8.20147.24967 PV af 1 for 20 periods at 10\%12\% 0.10367 Bioco sold a patent on a new laser process to Agent Co.The sales agreement,which was signed on January 1,2011,requires Agent Co.to pay Bioco $2 million immediately.In addition,Agent is required to pay 500,000 each December 31 for 20 years starting with December 31,2011.Agent and Bioco estimate that 12 percent is an appropriate interest rate for this arrangement. Required: a.Compute the present value of the receivable on Bioco's books on January 1,2011 immediately after receiving the $1 million down payment. b.Compute the present value of the receivable on Biotech's books on December 31,2011. c.Compute the present value of the receivable on Biotech's books on December 31,2012.

Record Corporation CD Inc.acquires 100% of the outstanding shares of Record Corp.for $1,200,000 and accounts for the transaction using the purchase method.Record Corp's balance sheet at the date of acquisition appears below: Record, Corp. Balance Sheet Acquisition Date Current Historical Market Cost Value Assets Cash \ 479,000 \ 479,000 Accounts Receivable 225,400 210,000 Inventory 98,900 105,000 Depreciable Assets less 554,700 600,000 Accumulated Depreciation Note Receivable 100,000 100,000 soodwill Total Assets \ 1,458,000 Liabilities and Equities Accounts Payable \ 458,000 \ 458,000 Note Payable 325,000 325,000 Deferred Income Tax Liability 125,000 125,000 Shareholders' Equity 550,000 Total Liabilities and Equities \ 1,458,000 -Based on the information concerning Record Corp.,what is the market value of the company's shareholders' equity at the acquisition date?

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

Under U.S.GAAP,when an asset's carrying amount is deemed _______________,the asset is considered impaired.

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

Stock Trader,Inc.began operations in 2012.Stock Trader has acquired a number of equity investments during 2012.None have been sold.Stock Trader exerts no influence over any of its investments each of which represents a small percentage of the investee.An analysis of Stock Trader's investment portfolios shows the following totals at December 31,2012: Aggregate Cost Aggregate Fair Value Dividends received from nvestments Available-for-Sale Trading Securities Securities \ 49,000 \ 65,000 \ 39,000 \ 90,000 \ 5,000 \ 9,000 Based on the information provided,describe how Stock Trader would present this information in its financial statements.You should discuss what amounts would appear in each financial statement.

Which of the following is the least effective way for an analyst to understand whether existing long-lived assets must be replaced?

Snowflake Corp. Penguin, Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows: Snowflake, Corp. Balance Sheet Acquisition Date Historical Cost Current Market Value Assets \ 900,000 \ 900,000 Current Assets \ 875,000 \ 1,250,000 Depreciable Assets less Accumulated Depreciation Goodwill \ 1,775,000 Total Assets Liabilities and Equities Liabilities \ 1,100,000 \ 1,100,000 Deferred Income Tax Liability \ 125,000 \ 125,000 Shareholders' Equity \ 550,000 Total Liabilities and Equities \ 1,775,000 -Based on the information concerning Snowflake Corp.what is the market value of the company's shareholders' equity at the acquisition date?

All of the following are difficulties encountered in determining fair values except:

When a company records the cost of cutting down timber,this cost is deemed to be:

When a foreign entity has the foreign currency as its functional currency,it uses which exchange rate to translate revenues and expenses in the income statement?

Which of the following would not be used to determine the cost of an asset?

Record Corporation CD Inc.acquires 100% of the outstanding shares of Record Corp.for $1,200,000 and accounts for the transaction using the purchase method.Record Corp's balance sheet at the date of acquisition appears below: Record, Corp. Balance Sheet Acquisition Date Current Historical Market Cost Value Assets Cash \ 479,000 \ 479,000 Accounts Receivable 225,400 210,000 Inventory 98,900 105,000 Depreciable Assets less 554,700 600,000 Accumulated Depreciation Note Receivable 100,000 100,000 soodwill Total Assets \ 1,458,000 Liabilities and Equities Accounts Payable \ 458,000 \ 458,000 Note Payable 325,000 325,000 Deferred Income Tax Liability 125,000 125,000 Shareholders' Equity 550,000 Total Liabilities and Equities \ 1,458,000 -Based on the information concerning Record Corp.,what amount of goodwill should CD record at the acquisition date?

Snowflake Corp. Penguin, Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows: Snowflake, Corp. Balance Sheet Acquisition Date Historical Cost Current Market Value Assets \ 900,000 \ 900,000 Current Assets \ 875,000 \ 1,250,000 Depreciable Assets less Accumulated Depreciation Goodwill \ 1,775,000 Total Assets Liabilities and Equities Liabilities \ 1,100,000 \ 1,100,000 Deferred Income Tax Liability \ 125,000 \ 125,000 Shareholders' Equity \ 550,000 Total Liabilities and Equities \ 1,775,000 -Based on the information concerning Snowflake Corp.by what amount would Penguin increase depreciable assets when it consolidates Snowflake on the acquisition date?

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 decommissioning 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?

Using the information below,calculate the average total depreciable life of the assets: $\text { Information iram the Balance Sheet: }$ 2012 2011 Depreciable Assets \ 2,458,600 (1,350,700) Accumulated Depreciation \ 1,985,400 (1,046,000 Denreciable Assets (Net) \ 1107900 \ 939400 From the Incame Statement 2012 Depreciation Expense \ 384,500

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