Question 1

A key characteristic of asset measurement is best described as:

Accepted Answer

A)  average value based on all assets held by the company 
B)  disposal cost less depreciation 
C)  fair value at the acquisition date 
D)  fair value less depreciation

Question 2

U.S.GAAP stipulates that firms should ____________________ expenditures that increase the service potential of an asset beyond that originally anticipated

Accepted Answer

The answer of U.S.GAAP stipulates that firms should ____________________ expenditures...

Question 3

When one company acquires another company it may not be able to estimate the potential losses inherent in the acquired assets or the potential liability of the acquired company,for these reasons the acquirer may establish ________________________________________.

Accepted Answer

The answer of When one company acquires another company it...

Question 4

All of the following statements are true regarding accounting for software development costs except:

Accepted Answer

A)  Firms must expense as incurred all costs incurred internally in developing computer software until such development achieves the technological feasibility of a product. 
B)  Firms must capitalize as incurred all costs incurred internally in developing computer software. 
C)  Researchers have found a significant association between costs and future earnings,which support capitalizing and amortizing product development costs permitted by U.S.GAAP and IFRS. 
D)  The interpretation of the meaning of technological feasibility has created diversity in the practice of accounting for software development costs.

Question 5

Firms recognize a(n)______________________________ when the carrying amount of a fixed asset exceeds its fair value and is deemed not recoverable.

Accepted Answer

The answer of Firms recognize a(n)______________________________ when the carrying amount...

Question 6

Ashley Company
Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd,Inc.'s common stock for $60,000 on January 1,2010.During 2010,Judd declared a dividend of $5 per share and reported net income of $75,000.At the end of 2010 the market value of a share of Judd,Inc.stock has increased to $32 per share.
-If Ashley Company accounts for the investment as a minority,active investment and uses the equity method to account for the investment,then Ashley will recognize what amount of 2010 income from the investment?

Accepted Answer

A)  $4,000 
B)  $10,000 
C)  $25,000 
D)  $15,000

Question 7

Which of the following is not a classification for a minority,passive investment?

Accepted Answer

A)  trading securities 
B)  equity securities 
C)  available-for-sale securities 
D)  held-to-maturity securities

Question 8

Snowflake Corp.
Penguin,Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows:
 
-Based on the information concerning Snowflake Corp.by what amount would Penguin increase depreciable assets when it consolidates Snowflake on the acquisition date?

Accepted Answer

A)  $1,775,000 
B)  $475,000 
C)  $2,250,000 
D)  $375,000

Question 9

All of the following are consistent with the purpose of determining the useful life of a long-lived asset except:

Accepted Answer

A)  using the information to convey expectations about the future usefulness of the assets to stakeholders. 
B)  using the information to help project a rational basis for depreciation 
C)  using the information to help project a systematic basis for depreciation 
D)  using the information to manage earnings upward.

Question 10

When a foreign entity has the foreign currency as its functional currency,it uses which exchange rate to translate revenues and expenses in the income statement?

Accepted Answer

A)  the average exchange rate during the period 
B)  the end of the period exchange rate 
C)  the historical exchange rate 
D)  the exchange rate on the date the asset or liability was obtained

Question 11

Which one of the following is an example of the expected benefit approach for valuing long-lived assets?

Accepted Answer

A)  Current cost. 
B)  Historical cost. 
C)  Discounted present value. 
D)  Current replacement value.

Question 12

Ashley Company
Ashley Company purchased 2,000 of the 10,000 outstanding shares of Judd,Inc.'s common stock for $60,000 on January 1,2010.During 2010,Judd declared a dividend of $5 per share and reported net income of $75,000.At the end of 2010 the market value of a share of Judd,Inc.stock has increased to $32 per share.
-If Ashley Company accounts for the investment as a minority,active investment and uses the equity method to account for the investment,then the investment will appear in the December 31,2010 balance sheet at what amount?

Accepted Answer

A)  $60,000 
B)  $65,000 
C)  $64,000 
D)  $75,000

Question 13

When the purchase price of another entity exceeds the book value of the entity's net assets the purchaser allocates the excess to identifiable assets and liabilities in order to revalue them to market value and any additional excess is allocated to ____________________.

Accepted Answer

The answer of When the purchase price of another entity...

Question 14

Which of the following would not be used to determine the cost of an asset?

Accepted Answer

A)  cash paid 
B)  sales and excise taxes 
C)  cost incurred to get the asset ready for its intended use 
D)  depreciation method

Question 15

Interpretation No.46R relates to the issue of whether an investing firm is the primary beneficiary in a variable-interest entity.When is an entity classified as a variable interest entity?

Accepted Answer

The answer of Interpretation No.46R relates to the issue of...

Question 16

Although the organizational structure and operating policies of a particular foreign unit determine its functional currency,discuss two actions that a management team might take to ensure that the foreign currency is the functional currency.

Accepted Answer

The answer of Although the organizational structure and operating policies...

Question 17

The functional currency of a foreign unit whose receivables and payables are denominated in foreign currency and not usually remitted to parent company is the ______________________________.

Accepted Answer

The answer of The functional currency of a foreign unit...

Question 18

Pop,Inc.acquires 100% of the outstanding shares of Snap Corp.for $3,923,450 and accounts for the transaction using the purchase method.The purchase price Pop paid for Snap exceeded Snap's book value for four reasons:
  Information about Pop and Snap's balance sheet at the acquisition date and the current market value of Snap's assets appears below:
  Required: Complete the table for Snap's current market values and the consolidated amounts at the date of acquisition.

Accepted Answer

The answer of Pop,Inc.acquires 100% of the outstanding shares of...

Question 19

Snowflake Corp.
Penguin,Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows:
 
-Based on the information concerning Snowflake Corp.what is the market value of the company's shareholders' equity at the acquisition date?

Accepted Answer

A)  $1,775,000 
B)  $475,000 
C)  $2,250,000 
D)  $0

Question 20

Goodwill represents:

Accepted Answer

A)  the synergies that will be achieved through the acquisition. 
B)  the difference between the acquisition cost and the market value of the identifiable assets and liabilities. 
C)  the difference between the acquisition cost and the book value of the identifiable assets and liabilities. 
D)  the merger premium.

Exam 8: Investing Activities