Question 1

Contingent liabilities will or will not become actual liabilities depending on

Accepted Answer

A)  whether they are probable and estimable. 
B)  the degree of uncertainty. 
C)  the present condition suggesting a liability. 
D)  the outcome of a future event. 
A)  whether they are probable and estimable. 
B)  the degree of uncertainty. 
C)  the present condition suggesting a liability. 
D)  the outcome of a future event.

Question 2

Which of the following liabilities is NOT contingent?

Accepted Answer

A)  A liability to replace a specific defective television set already returned to the manufacturer 
B)  A liability to pay pension benefits if a specific employee lives to retirement 
C)  A liability to pay any adverse judgment for a product liability case currently on appeal 
D)  A liability to pay for books received by a college bookstore under terms that allow for the return for full refund of any books not sold 
A)  A liability to replace a specific defective television set already returned to the manufacturer 
B)  A liability to pay pension benefits if a specific employee lives to retirement 
C)  A liability to pay any adverse judgment for a product liability case currently on appeal 
D)  A liability to pay for books received by a college bookstore under terms that allow for the return for full refund of any books not sold

Question 3

On February 1,Rapido Corporation entered into a firm commitment to purchase specialized equipment from the Yamasake Trading Company for ¥65,000,000 on April 1.Rapido would like to reduce the exchange rate risk that could increase the cost of the equipment in U.S.dollars by April 1,but Rapido is not sure which direction the exchange rate may move.What type of contract would protect Rapido from an unfavorable movement in the exchange rate while allowing them to benefit from a favorable movement in the exchange rate?

Accepted Answer

A)  Interest rate swap 
B)  Forward contract 
C)  Call option 
D)  Put option 
A)  Interest rate swap 
B)  Forward contract 
C)  Call option 
D)  Put option

Question 4

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)

Accepted Answer

A)  extraordinary loss. 
B)  disclosure of a contingency loss only in a note. 
C)  should not be disclosed or recognized.. 
D)  loss on the lawsuit (operating expense). 
A)  extraordinary loss. 
B)  disclosure of a contingency loss only in a note. 
C)  should not be disclosed or recognized.. 
D)  loss on the lawsuit (operating expense).

Question 5

Sanford,Inc. ,enters into a call option contract with Sons Investment Co.on January 2,2014.This contract gives Sanford the option to purchase 1,000 shares of MAX stock at $100 per share.The option expires on April 30,2014.MAX shares are trading at $100 per share on January 2,2014,at which time Sanford pays $400 for the call option.The $400 paid by Sanford,Inc. ,to Sons Investment is referred to as the

Accepted Answer

A)  option premium. 
B)  notional amount. 
C)  strike price. 
D)  intrinsic value. 
A)  option premium. 
B)  notional amount. 
C)  strike price. 
D)  intrinsic value.

Question 6

Stern Fitness Enterprises uses soybeans to make one of their nutritional supplement products.Stern anticipates a need of 700,000 pounds of soybeans in January of 2015.On November 1,2014,Stern purchased a call option for 700,000 pounds of soybeans on January 1,2015,at a price of $0.40 per pound,which is the market price on November 1.Stern paid $1,300 for the call option and designated this option as a hedge against price fluctuations for their January purchase of soybeans.On December 31,2014,and January 1,2015,the prevailing market price for soybeans is $0.45 per pound.On January 1,2015,Stern purchased 700,000 pounds of soybeans.
Make the necessary entries on Stern's books at

Accepted Answer

@#IMG-DLM& No entry is made on November 1 to recor

Question 7

A company enters into an interest rate swap in order to hedge a $5,000,000 variable-rate loan.The loan is expected to be fully repaid this year on June 10.The contract requires that if the interest rate on April 30 of next year is greater than 11%,the company receives the difference on a principal amount of $5,000,000.Alternatively,if the interest rate is less than 11%,the company must pay the difference.Which of the following statements is correct regarding this contract?

Accepted Answer

A)  The swap agreement effectively hedges the variable interest payments. 
B)  The timing of the swap payment matches the timing of the interest payments and,therefore,the variable interest payments are hedged. 
C)  The timing of the swap payment does not match the timing of the interest payments and,therefore,the variable interest payments are not hedged. 
D)  This swap represents a fair value hedge. 
A)  The swap agreement effectively hedges the variable interest payments. 
B)  The timing of the swap payment matches the timing of the interest payments and,therefore,the variable interest payments are hedged. 
C)  The timing of the swap payment does not match the timing of the interest payments and,therefore,the variable interest payments are not hedged. 
D)  This swap represents a fair value hedge.

Question 8

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

Accepted Answer

A)  Net assets 
B)  Sales 
C)  Identifiable assets 
D)  Total depreciation,depletion,and amortization 
A)  Net assets 
B)  Sales 
C)  Identifiable assets 
D)  Total depreciation,depletion,and amortization

Question 9

A loss contingency that is remote and cannot be reasonably estimated

Accepted Answer

A)  may be disclosed in a note to the financial statements. 
B)  must be disclosed in a note to the financial statements. 
C)  must be reported in the body of the financial statements. 
D)  is permitted to be reported in the body of the financial statements. 
A)  may be disclosed in a note to the financial statements. 
B)  must be disclosed in a note to the financial statements. 
C)  must be reported in the body of the financial statements. 
D)  is permitted to be reported in the body of the financial statements.

Question 10

Asolo Construction Co.carries $10,000,000 comprehensive public liability insurance with a $200,000 deductible clause.A suit for personal injury damages was brought against Asolo in 2014.Asolo's counsel believes it probable that the insurance company will settle out of court for an estimated amount of $550,000.At December 31,2014,Asolo should report an accrued liability of

Accepted Answer

A)  $550,000. 
B)  $350,000. 
C)  $200,000. 
D)  $0. 
A)  $550,000. 
B)  $350,000. 
C)  $200,000. 
D)  $0.

Question 11

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

Accepted Answer

A)  3 only 
B)  3 and 4 only 
C)  4 only 
D)  None are reportable segments 
A)  3 only 
B)  3 and 4 only 
C)  4 only 
D)  None are reportable segments

Question 12

Which of the following statements is correct regarding FASB ASC Topic 270,"Interim Financial Reporting," and IAS No.34,"Interim Financial Reporting"?

Accepted Answer

A)  Both pronouncements view each reporting interval as a separate accounting period. 
B)  Only IAS No.34 views each reporting interval as a separate accounting period. 
C)  Only FASB ASC Topic 270 views each reporting interval as a separate accounting period. 
D)  Only IAS No.34 views each interim period as an integral part of each annual period. 
A)  Both pronouncements view each reporting interval as a separate accounting period. 
B)  Only IAS No.34 views each reporting interval as a separate accounting period. 
C)  Only FASB ASC Topic 270 views each reporting interval as a separate accounting period. 
D)  Only IAS No.34 views each interim period as an integral part of each annual period.

Question 13

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 ¥105=$1,what amount will Stagger pay to,or receive from,the bank (rounded to the nearest dollar)?

Accepted Answer

A)  $15,217 payment 
B)  $15,217 receipt 
C)  $16,667 payment 
D)  $16,667 receipt 
A)  $15,217 payment 
B)  $15,217 receipt 
C)  $16,667 payment 
D)  $16,667 receipt

Question 14

On June 18,Burger Corporation entered into a firm commitment to purchase specialized equipment from the Hyabuza Trading Company for ¥80,000,000 on August 20.The exchange rate on June 18 is ¥100 = $1.To reduce the exchange rate risk that could increase the cost of the equipment in U.S.dollars,Burger pays $12,000 for a call option contract.This contract gives Burger the option to purchase ¥80,000,000 at an exchange rate of ¥100 = $1 on August 20.On August 20,the exchange rate is ¥93 = $1.How much did Burger save by purchasing the call option (answers rounded to the nearest dollar)?

Accepted Answer

A)  $12,000 
B)  $48,215 
C)  $60,215 
D)  Burger would have been better off not to have purchased the call option. 
A)  $12,000 
B)  $48,215 
C)  $60,215 
D)  Burger would have been better off not to have purchased the call option.

Question 15

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

Accepted Answer

A)  All are reportable segments 
B)  All but 1 and 2 
C)  3 and 5 only 
D)  All but 2 
A)  All are reportable segments 
B)  All but 1 and 2 
C)  3 and 5 only 
D)  All but 2

Question 16

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

Accepted Answer

A)  Revenues from external customers from the home country of the firm and from all foreign countries in total. 
B)  The total of long-lived assets located in the firm's home country and located in foreign countries. 
C)  Operating profits from external customers from the home country of the firm and from all foreign countries in total. 
D)  Revenues for any foreign country for which the revenues from that country are material to the firm. 
A)  Revenues from external customers from the home country of the firm and from all foreign countries in total. 
B)  The total of long-lived assets located in the firm's home country and located in foreign countries. 
C)  Operating profits from external customers from the home country of the firm and from all foreign countries in total. 
D)  Revenues for any foreign country for which the revenues from that country are material to the firm.

Question 17

How is income tax expense for the third quarter interim period computed?

Accepted Answer

A)  The annual rate multiplied by the third quarter pretax earnings. 
B)  The estimated tax for the first three quarters based on an annual rate,less a similar estimate for the first two quarters. 
C)  The rate applicable during the third quarter multiplied by four times the third quarter pretax earnings. 
D)  One-half of the difference between total estimated annual income tax expense and the income tax for the first two quarters. 
A)  The annual rate multiplied by the third quarter pretax earnings. 
B)  The estimated tax for the first three quarters based on an annual rate,less a similar estimate for the first two quarters. 
C)  The rate applicable during the third quarter multiplied by four times the third quarter pretax earnings. 
D)  One-half of the difference between total estimated annual income tax expense and the income tax for the first two quarters.

Question 18

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

Accepted Answer

A)  Fair value 
B)  Notional amount 
C)  Both of these 
D)  Neither of these 
A)  Fair value 
B)  Notional amount 
C)  Both of these 
D)  Neither of these

Question 19

In exchange for the rights inherent in an option contract,the owner of the option will typically pay a price

Accepted Answer

A)  only when a call option is exercised. 
B)  only when a put option is exercised. 
C)  when either a call option or a put option is exercised. 
D)  at the time the option is received regardless of whether the option is exercised or not. 
A)  only when a call option is exercised. 
B)  only when a put option is exercised. 
C)  when either a call option or a put option is exercised. 
D)  at the time the option is received regardless of whether the option is exercised or not.

Contingent liabilities will or will not become actual liabilities depending on

Which of the following liabilities is NOT contingent?

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)

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

A loss contingency that is remote and cannot be reasonably estimated

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

Which of the following statements is correct regarding FASB ASC Topic 270,"Interim Financial Reporting," and IAS No.34,"Interim Financial Reporting"?

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

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

How is income tax expense for the third quarter interim period computed?

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

In exchange for the rights inherent in an option contract,the owner of the option will typically pay a price

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

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

Contingent liabilities will or will not become actual liabilities depending on

Which of the following liabilities is NOT contingent?

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)

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

A loss contingency that is remote and cannot be reasonably estimated

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

Which of the following statements is correct regarding FASB ASC Topic 270,"Interim Financial Reporting," and IAS No.34,"Interim Financial Reporting"?

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

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

How is income tax expense for the third quarter interim period computed?

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

In exchange for the rights inherent in an option contract,the owner of the option will typically pay a price

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, pensions, Other Compissues

Earnings Per Share

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters