Exam 2: Asset and Liability Valuation and Income Recognition

If a portfolio manager had to estimate the fair value of private equity funds invested in a young,privately-held start-up company,which of the following would he/she most likely identify as the level of inputs to determine this?

____________________ assets and liabilities represent amounts of cash a firm can expect to receive or pay in the future.

Relevant asset valuations refer to all of the following except:

H.Solo 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.H.Solo 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.H.Solo paid $400 for property and liability insurance for the first year of operation.What is the acquisition cost of this equipment that H.Solo should record in its accounting records? Indicate the treatment of any amount not included in acquisition cost.

For some transactions GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur,even if not realized.Discuss what types of transactions get this type of treatment and the logic behind this accounting.

Balance Sheet Equation -Refer to Balance Sheet Equation.The payment of a note payable by a firm reduces cash and ______________________________.

Discuss the three ways in which GAAP allows value changes to be treated in the financial statements.Provide an example of each value change treatment.

Which of the following valuation methods reflects current values?

The existence of subjectivity in an asset valuation does not necessarily mean the valuation will not be reliable.All of the following are examples of this except:

Which of the following is not one of methods used by GAAP for treating value changes?

Which of the following transactions is consistent with recognizing value changes on the balance sheet and income statement when they are realized in a market transaction?

On January 1,2010,Starlight Company's balance sheet reported a deferred tax liability of $185,000 and a deferred tax asset of $99,900.The future taxable amounts that existed as of January 1,2010 will reverse equally over the next four years beginning in 2010,while the future deductible amounts that existed as of January 1,2010 will reverse equally over the next three years beginning in 2010.The enacted income tax rate for all tax years as of January 1,2010 was 37%.On February 1,2010,the tax laws were amended resulting in income tax rates of 38% for 2010 and 2011;the income tax rate will be 40% for tax years 2012 and later. Required: Prepare the journal entry on February 1,2010 to record the impact of the amended income tax rates.

Fish Farm Corporation purchases a new tract of land on which it is going to build new growing and holding tanks in order to expand its business.Which of the following costs would not be part of the cost of the land?

The analytical framework used to evaluate transactions is reproduced below: Using this analytical framework indicate the effect of each of the following transactions for CX Corporation:

When recognizing deferred tax assets and liabilities,the income statement approach and the balance sheet approach yield identical results:

On December 31,2009,Loran Corporation reported a deferred tax liability totaling $12,000,resulting from depreciation timing differences pertaining to a depreciable asset purchased during 2009.Loran uses straight-line depreciation over four years for GAAP (book)purposes;for tax purposes,the depreciation deduction is 40% of cost during 2009,30% of cost during 2010,20% of cost during 2011,and 10% of cost during 2012.During 2010,Loran expensed $80,000of warranty costs that will be deducted for tax purposes in future years.Loran also accrued revenue totaling $135,000 which is taxable in 2011.Loran's GAAP (book)income before taxes during 2010 totaled $380,000The marginal income tax rate is 40% for all years. Required: (1)What is the taxable income? (2)Prepare the journal entry to record income tax expense for the year ended December 31,2010.

Future taxable income is characteristic of all of the following situations except:

Balance Sheet Equation -Refer to Balance Sheet Equation.JCP Company purchased marketable securities for $5,000 during the year,at the end of the year the company revalues the securities to $5,700.This revaluation would result in an increase to non-cash assets and ____________________________________________________________.

The net amount a firm would receive if it sold an asset or the net amount it would pay to settle a liability is referred to as:

What level are inputs for estimating fair values are based on inputs that are readily available via prices for identical assets or liabilities in actively traded markets such as securities exchanges?