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

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)

An agreement between two parties to exchange a specified amount of a commodity,security,or foreign currency at a specified date in the future with the price or exchange rate being set now is referred to as a(n)

Which of the following measures is NOT used to determine whether a subunit of a business is a reportable segment?

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 January 1,2014,Panther Company received a two-year $600,000 loan.The loan calls for payments to made at the end of each year based on the prevailing market rate at January 1 of each year.The interest rate at January 1,2014,was 10 percent.Aegean company also has a two-year $600,000 loan,but Aegean's loan carries a fixed interest rate of 10 percent. -Panther Company does not want to bear the risk that interest rates may increase in year two of the loan.Aegean Company believes that rates may decrease and they would prefer to have variable debt.So the two companies enter into an interest rate swap agreement whereby Aegean agrees to make Panther's interest payment in 2015 and Panther likewise agrees to make Aegean's interest payment in 2015.The two companies agree to make settlement payments,for the difference only,on December 31,2015.If the interest rate on January 1,2015,is 12 percent,what will be Panther's settlement payment to/from Aegean?

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,the 1,000 shares of Upmann stock in this contract is referred to as the

If a cannery wanted to lock in the price they would pay for peaches in August four months before harvest (in April of the same year),they would be most likely to enter into which kind of agreement?

Interim income tax expense is based on

Which of the following is NOT true regarding standards for interim reporting?

Blind Faith Company reported the following data with regard to its first quarter of operations: The expected annual income tax rate is 40 percent.Blind Faith should report net income on the first quarter interim financial statements of

In May 2014,the Sailfish Company became involved in litigation.As a result of this litigation,it is probable that Sailfish will have to pay $800,000.In July 2014,a competitor commenced a suit against Sailfish alleging violation of antitrust laws seeking damages of $1,100,000.Sailfish denies the allegations,and the likelihood of Sailfish paying any damages is remote.In September 2014,Urchins County brought action against Sailfish for $900,000 for polluting Lake Kissimmee.It is reasonably possible that Urchins County will be successful,but the amount of damages Sailfish will have to pay is not reasonably determinable.What amount,if any,should be accrued by a charge to income in 2014?

A company that receives 10 percent or more of its revenue from sales to a single customer must disclose the

Which of the following is an example of a contingent loss (expense)likely to be recognized in the accounts on a regular basis each year? lawsuit loss warranty expense bad debt expense

In considering interim financial reporting,how does FASB ASC Topic 270 conclude that such reporting should be viewed?

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? Three Months Ended (2014) March 31 June 30 September 30 December 31

The following segments were identified for an enterprise: Which of the four segments is a reportable segment?

A contingency must be accrued in the accounts and reported in the financial statements when

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,the call option would be recorded in the accounts of Allman as

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

On November 5,2014,a Longhaul Rental truck was in an accident with an auto driven by Alana Rodriguez.Longhaul Rental received notice on January 12,2015,of a lawsuit for $700,000 damages for personal injuries suffered by Rodriguez.Longhaul Rental's counsel believes it is probable that Rodriguez will be awarded an estimated amount in the range between $300,000 and $550,000,and that $400,000 is a better estimate of potential liability than any other amount.Longhaul's accounting year ends on December 31,and the 2014 financial statements were issued on March 2,2015.What amount of loss should Longhaul accrue at December 31,2014?