Question 1

The amount that a company would have to pay today to acquire an asset it now holds is called ________________________________________.

Accepted Answer

current replacement cost

Question 2

Balance Sheet Equation
 $\begin{array}{llllll}
\text { Cash }+ \text { Non-Cash } =\text { Liabilities }+ \text { Contributed }+\text { AccunulatedOther }+\text {Retained}\
\quad \quad\quad\quad\text { Assets }\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Capital } \quad\quad\quad\text { Comprehensive }\quad\quad\quad\text {Earning:}\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Income}
\end{array}$
 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 ____________________________________________________________.

Accepted Answer

accumulated other comprehensive income

Question 3

At origination which of the following temporary differences would create a deferred tax asset?

Accepted Answer

A)   Tax basis of an asset exceeds its financial reporting basis.
B)   Tax basis of a liability exceeds its financial reporting basis.
C)   Financial reporting basis of an asset is equal to its tax basis.
D)   Financial reporting basis of an asset exceeds its tax basis. A

Question 4

If a portfolio manager had to estimate the fair value of illiquid mortgage-backed securities, which of the following would he/she most likely identify as the level of inputs to determine this?

Accepted Answer

A)   Level 1.
B)   Level 2.
C)   Level 3.
D)   None of these.

Question 5

Why might income tax expense on the income statement differ from actual income taxes paid to the government?

Accepted Answer

A)   There are timing differences to when income is recognized and there are items that may or may not be subject to taxation.
B)   The IRS uses the accrual method of calculating income.
C)   Financial statement preparers can use an estimated tax rate.
D)   The IRS requires deferral of most expenses.

Question 6

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

Accepted Answer

The answer of ________________________________________ is the net amount that a...

Question 7

Historical costs include all of the following except:

Accepted Answer

A)   acquisition costs for assets
B)   net realizable values for assets.
C)   adjusted acquisition costs for assets.
D)   initial present value for assets and liabilities

Question 8

Balance Sheet Equation
 $\begin{array}{llllll}
\text { Cash }+ \text { Non-Cash } =\text { Liabilities }+ \text { Contributed }+\text { AccunulatedOther }+\text {Retained}\
\quad \quad\quad\quad\text { Assets }\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Capital } \quad\quad\quad\text { Comprehensive }\quad\quad\quad\text {Earning:}\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Income}
\end{array}$

Refer to Balance Sheet Equation. To recognize the cost of goods sold ORP Corporation will reduce retained earnings and reduce ______________________________.

Accepted Answer

The answer of Balance Sheet Equation
 \(\begin{array}{llllll}
\text { Cash }+...

Question 9

Which of the following assets appears on the balance sheet at fair value?

Accepted Answer

A)   Equipment
B)   Land
C)   Investments in Marketable Securities
D)   Intangible Assets

Question 10

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?

Accepted Answer

A)   Selling land at a cost greater than its original purchase price.
B)   Recording an increase in the fair value of investments at year end.
C)   Translating foreign operations accounted for in Yen back to U.S. dollars in order to prepare consolidated financial statements.
D)   Writing down the value of an asset due to obsolescent.

Question 11

What level are inputs for estimating fair values based on a firm's own assumptions about the fair value of an asset or a liability, such as using various data to estimate present values?

Accepted Answer

A)   Level 1.
B)   Level 2.
C)   Level 3.
D)   None of these.

Question 12

Match between columns
                        Premises:  Accrued bad debt expense
 The dividends received deduction
 Installment sales revenue
 Insurance payments for executives for which the company is the beneficiary
 Fines paid for law violations
 Municipal bond interest
 Accrued warranty expense
 Revenues received in advance
 Expenses paid for in advance (prepaid insurance)
 Tax depreciation expense exceeds GAAP (book) depreciation expense

Accepted Answer

The Answer of Temporary difference and Permanent difference and deferred is...

Question 13

Relevant asset valuations refer to all of the following except:

Accepted Answer

A)   they are timely.
B)   they have the capacity to affect a user's decisions, based on the information.
C)   they incorporate all available information.
D)   they are always subjective.

Question 14

What valuation methods reflect current values? Discuss the advantage(s) and disadvantage(s) of valuing assets and liabilities using current values.

Accepted Answer

The answer of What valuation methods reflect current values? Discuss...

Question 15

Valuation methods that reflect current valuesor a combination of historical and current values include all of the following except:

Accepted Answer

A)   fair value for assets and liabilities.
B)   current replacement cost for assets.
C)   net realizable value for assets.
D)   adjusted acquisition costs for assets.

Question 16

There are three valuation methods that reflect historical values: acquisition cost, adjusted acquisition cost, and present value of cash flows using historical interest rates. For each of three methods discuss what the valuation represents and provide an example of a balance sheet item that is valued using the method. In addition, for each of the three methods valuation methods explain its advantages and disadvantages.

Accepted Answer

The answer of There are three valuation methods that reflect...

Question 17

The analytical framework used to evaluate transactions is reproduced below:
 $\begin{array}{llllll}
\text { Cash }+ \text { Non-Cash } =\text { Liabilities }+ \text { Contributed }+\text { AccunulatedOther }+\text {Retained}\
\quad \quad\quad\quad\text { Assets }\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Capital } \quad\quad\quad\text { Comprehensive }\quad\quad\quad\text {Earning:}\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Income}
\end{array}$
 Using this analytical framework indicate the effect of each of the following transactions for CX Corporation:
 1.	CX Corporation purchases land for $450,000 cash.
2.	At the end of the period CX Corporation receives an appraisal that values the land at $540,000.
3.	During the next period CX Corporation sells the land for $665,000.
4.	CX pays taxes at a rate of 40%.

Accepted Answer

The answer of The analytical framework used to evaluate transactions...

Question 18

The traditional accounting model delays the recognition of value changes of assets and liabilities until what event occurs?

Accepted Answer

A)   A change in value.
B)   A market transaction.
C)   A balance sheet date.
D)   Cash is received or cash is paid.

Question 19

Firms may not include all income taxes for a period on the line for income tax expense in the income statement. Other places that income tax expenses may occur include all of the following except:

Accepted Answer

A)   Discontinued Operations
B)   Extraordinary Items
C)   Other Comprehensive Income
D)   Common Stock

Question 20

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.

Accepted Answer

The answer of For some transactions GAAP requires that value...

Exam 2: Asset and Liability Valuation and Income Measurement