Exam 19: Derivatives, contingencies, business Segments, and Interim Reports

Goldisk Company began operations five years ago.The company produces and sells software.The company's primary market is in the United States,where 60% of sales occur.Ten percent of the company's sales occur in China and 30% of sales occur in Europe.Foreign sales are denominated in local currencies.Major software purchases may be paid over a one-year period. Goldisk Company has obtained its long-term financing from U.S.,Chinese,and European banks.Approximately one-half of the loans from U.S.banks are variable-rate loans,with the remainder of the company's loans being fixed-rate obligations. Goldisk Company has seen dramatic fluctuations in earnings during its five years of existence. Identify the types of risk faced by Goldisk Company.

Which of the following need not be disclosed on a segmental basis for a subunit identified as a reportable segment?

On January 1,2014,Suppose Company paid property taxes on its plant for the calendar year 2014 amounting to $70,000.In March 2014,Suppose made its annual major repairs to its machinery amounting to $210,000.These repairs will benefit the entire calendar year's operations. How should these expenses be reflected in Suppose's quarterly income statements for 2014?

Which of the following is not required under current GAAP for disaggregated information relating to geographic area information?

Which of the following is most likely to require only a note disclosure as a contingency?

Reporting in the body of the financial statements is required for

Uncertainty about the future market value of an asset is referred to as

A company enters into a futures contract with the intent of hedging an expected purchase of some equipment from a German company for DM350,000 on December 31.The contract requires that if the U.S.dollar value of DM700,000 is greater than $350,000 on December 31,the company will receive the difference.Alternatively,if the U.S.dollar value is less than $350,000,the company will pay the difference.Which of the following statements is correct regarding this contract?

On July 1, 2014, Stagger Company sold some limited edition art prints to Wakaramas Company for ¥38,500,000 to be paid on September 30 of that year. The current exchange rate on July 1, 2014, was ¥110=$1, so the total payment at the current exchange rate would be equal to $350,000. Stagger entered into a forward contract with a large bank to guarantee the number of dollars to be received. According to the terms of the contract, if ¥38,500,000 is worth less than $350,000, the bank will pay Stagger the difference in cash. Likewise, if ¥38,500,000 is worth more than $350,000, Stagger must pay the bank the difference in cash. -Using the information above and assuming the exchange rate on September 30 is ¥115=$1,what amount will Stagger pay to,or receive from,the bank (rounded to the nearest dollar)?

Which choice best describes the information that should be disclosed related to derivative contracts?

Which of the following tests may be used to determine if an industry segment of an enterprise is a reportable segment under FASB ASC Topic 280?

Which type of contract is unique in that it protects the owner against unfavorable movements in the prices or rates while allowing the owner to benefit from favorable movements?

A contract giving the owner the right,but not the obligation,to buy or sell an asset at a specified price any time during a specified period in the future is referred to as a(n)

Allman, Inc., enters into a call option contract with Betts Investment Co. on January 2, 2014. This contract gives Allman the option to purchase 1,000 shares of Upmann stock at $100 per share. The option expires on April 30, 2014. Upmann shares are trading at $100 per share on January 2, 2014, at which time Allman pays $200 for the call option. -Using the information above,assume that the price of the Upmann shares has risen to $130 per share on March 31,2014,and the Hall is preparing financial statements for the quarter ending March 31.As regards this option,Hall,Inc.,would report which of the following?

The following segments have been identified for an enterprise,along with each segments sales.No segment qualifies on any other criterion for determining reportable segments except possibly for sales.Sales for each segment,and the total for the enterprise follow: What is the minimum number of reportable segments for this firm?

The calculation of a reportable segment's operating income or loss excludes which of the following?

For which type of derivative are changes in the fair value deferred and recognized as an equity adjustment?

Contingent liabilities will or will not become actual liabilities depending on

Gain contingencies that are remote and can be reasonably estimated

Danbury Corporation was involved in a lawsuit with the EPA alleging inadequate air pollution control facilities at its Lafayette plant site during 2011.At December 31,2014,it appeared probable that the EPA would settle for approximately $150,000.This event should be recognized in 2014 as a(n)