Exam 8: Investing Activities

Which one of the following is an example of the expected benefit approach for valuing long-lived assets? 

A key characteristic of asset measurement is best described as:

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

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

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

How should Focus Company record expenditures for research and development costs according to U.S.GAAP?

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

When an intangible asset has a finite life,it is reported on the balance sheet at original cost with no ____________ taken.

Although the organizational structure and operating policies of a particular foreign unit determine its functional currency,discuss two actions that a management team might take to ensure that the foreign currency is the functional currency.

Ashley Company 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,passive and classifies the investment as an available-for-sale investment,then Ashley will recognize what amount of 2010 income from the investment?

U.S.GAAP requires firms to expense immediately all internal expenditures for R&D costs.Alternatively,U.S.GAAP could require firms to capitalize and subsequently amortize all internal expenditures on R&D that have future potential. Required: Why have standard setters chosen not to allow the capitalization alternative? How would analysts be better served if U.S.GAAP required capitalization of R&D costs?

Interpretation No.46R relates to the issue of whether an investing firm is the primary beneficiary in a variable-interest entity.When is an entity classified as a variable interest entity?

Which of the following is a difficulty in determining current market values when determining the value of fixed assets?

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

Firms recognize a(n)______________________________ when the carrying amount of a fixed asset exceeds its fair value and is deemed not recoverable.

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 a(n)______________________________ in income from continuing operations.

Examine the five following cases and determine if the functional currency of a U.S.parent's foreign unit is the foreign currency or the U.S.Dollar. Scenario Receivables and payables denominated in foreign currency are not usually remitted to parent company. Sales prices are influenced by worldwide competitive conditions and responsive on a short-term basis to exchange rate changes. Foreign unit obtains materials primarly from its own country. The unit's financing is taken care of through ongoing fund transfers by the parent. There is a low volume of intercompany transactions and little operational interrelations between the U.S. parent and foreign unit. Fumctional Courency is?

Harbour Company purchased a new piece of equipment with a list price of $200,000 and subject to a 6 percent discount if paid within 45 days.Harbour paid within the discount period.The company also paid $1,650 to obtain title to the equipment and $650 as the license fee for the first year of operation.It paid $2,475 to level the area in which the equipment would be located and $11,750 to relocate other equipment that would have interfered with the proper operation of the new equipment.Harbour paid $500 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.

Olivia Co.owns 5,600 of the 14,000 outstanding shares of Hobbitt Corp.common stock and exercises significant influence over the company.During 2011,Hobbitt earns $90,000 and pays cash dividends of $25,000.If the beginning balance in the investment account was $190,000,the balance at December 31,2011 should be:

Unrealized holding gains or losses that are recognized in the income statement are from securities classified as: