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ACCT4110 Exam3

Question # 00003632
Subject: Business / Finance
Due on: 11/28/2013
Posted On: 11/16/2013 10:31 PM
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Question 1 3 / 3 points

Mint Corporation has several transactions with foreign entities. Each transaction is denominated in the local currency unit of the country in which the foreign entity is located. On October 1, 20X8, Mint purchased confectionary items from a foreign company at a price of LCU 5,000 when the direct exchange rate was 1 LCU = $1.20. The account has not been settled as of December 31, 20X8, when the exchange rate has decreased to 1 LCU = $1.10. The foreign exchange gain or loss on Mint's records at year-end for this transaction will be:

a) $500 loss

b) $500 gain

c) $378 gain

d) $5,500 loss

Question 2 3 / 3 points

On December 5, 20X8, Texas based Imperial Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are:

Based on the preceding information, what journal entry would Imperial make on December 31, 20X8, to revalue foreign currency payable to equivalent U.S. dollar value?

a) Option A

b) Option B

c) Option C

d) Option D

Question 3 3 / 3 points

On December 5, 20X8, Texas based Imperial Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are:

Based on the preceding information, what journal entry would Imperial make on January 10, 20X9, to revalue foreign currency payable to equivalent U.S. dollar value?

a) Option A

b) Option B

c) Option C

d) Option D

Question 4 3 / 3 points

On December 5, 20X8, Texas based Imperial Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are:

Based on the preceding information, what was the overall foreign currency gain or loss on the accounts payable transaction?

a) $300 loss

b) $200 loss

c) $100 gain

d) $200 gain

Question 5 3 / 3 points

Note: This is a Kaplan CPA Review Question

On September 22, 20X1, Yumi Corp. purchased merchandise from an unaffiliated foreign company for 10,000 units of the foreign company's local currency. On that date, the spot rate was $.55. Yumi paid the bill in full, six months later, on March 20, 20X2, when the spot rate was $.65. The spot rate was $.70 on December 31, 20X1. What amount should Yumi report as a foreign currency transaction loss in its income statement for the year ended December 31, 20X1?

a) $500

b) $0

c) $1,500

d) $1,000

Question 6 3 / 3 points

Note: This is a Kaplan CPA Review Question

Mazeppa, Inc. is a multinational entity with its head office located in Toronto, Canada. Its main foreign subsidiary is in Paris, France, but the primary economic environment in which the foreign subsidiary generates and expends cash is in the United States. Based on this information, which of the following statements is most likely true for Mazeppa, Inc.?

a) The functional currency is the Euro.

b) The local currency is the U.S. dollar.

c) The reporting currency is the Canadian dollar.

d) The reporting currency is the U.S. dollar.

Question 7 3 / 3 points

If the restatement method for a foreign subsidiary involves remeasuring from the local currency into the functional currency, then translating from functional currency to U.S. dollars, the functional currency of the subsidiary is:

I. U.S. dollar.

II. Local currency unit.

III. A third country's currency.

a) I

b) III

c) II

d) Either I or II

Question 8 3 / 3 points

In cases of operations located in highly inflationary economies:

a) The reporting currency of the U.S. parent—the U.S. dollar—should be used as the foreign entity's functional currency.

b) The foreign currency should be used as the functional currency with a footnote to the financials displaying what the earnings would have been using the U.S. dollar as the functional currency.

c) The foreign currency should be used as the functional currency with a single line item—foreign translation—reporting the adjustment using the U.S. dollar as the functional currency.

d) None of these.

Question 9 3 / 3 points

When the local currency of the foreign subsidiary is the functional currency, a foreign subsidiary's inventory carried at cost would be converted to U.S. dollars by:

a) translation using historical exchange rates.

b) remeasurement using historical exchange rates.

c) remeasurement using the current exchange rate.

d) translation using the current exchange rate.

Question 10 3 / 3 points

When the local currency of the foreign subsidiary is the functional currency, a foreign subsidiary's income statement accounts would be converted to U.S. dollars by:

a) translation using historical exchange rates.

b) remeasurement using current exchange rates at the time of statement preparation.

c) translation using average exchange rate for the period.

d) remeasurement using the current exchange rate at the time of statement preparation.

Question 11 3 / 3 points

If the U.S. dollar is the currency in which the foreign affiliate's books and records are maintained, and the U.S. dollar is also the functional currency,

a) the translation method should be used for restatement.

b) the remeasurement method should be used for restatement.

c) either translation or remeasurement could be used for restatement.

d) no restatement is required.

Question 12 3 / 3 points

Under the temporal method, which of the following is usually used to translate monetary amounts to the functional currency?

I. The current exchange rate

II The historical exchange rate

III. Average exchange rate

a) I

b) III

c) II

d) Either I or II

Question 13 3 / 3 points

All of the following stockholders' equity accounts of a foreign subsidiary are translated at historical exchange rates except:

a) retained earnings.

b) common stock.

c) additional paid-in capital.

d) preferred stock.

Question 14 0 / 3 points

Dividends of a foreign subsidiary are translated at:

a) the average exchange rate for the year.

b) the exchange rate on the date of declaration.

c) the current exchange rate on the date of preparation of the financial statement.

d) the exchange rate on the record date.

Question 15 3 / 3 points

If the functional currency is the local currency of a foreign subsidiary, what exchange rates should be used to translate the items below, assuming the foreign subsidiary is in a country which has not experienced hyperinflation over three years?

a) Option A

b) Option B

c) Option C

d) Option D

Question 16 3 / 3 points

Company X denominated a December 1, 20X9, purchase of goods in a currency other than its functional currency. The transaction resulted in a payable fixed in terms of the amount of foreign currency, and was paid on the settlement date, January 10, 2010. Exchange rates moved unfavorably at December 31, 20X9, resulting in a loss that should:

a) be included as a separate component of stockholders' equity at Dec. 31, 20X9.

b) be included as a component of income from continuing operations for 20X9.

c) be included as a deferred charge at December 31, 20X9.

d) not be reported until January 10, 2010, the settlement date.

Question 17 3 / 3 points

ASC 280 uses a(n) ______ approach to the definition of segments.

a) line of business

b) entity approach

c) portfolio

d) management

Question 18 3 / 3 points

Zeus Corporation has determined that it has 15 reportable operating segments. In order to comply with the standard for segment disclosures, Zeus Corporation should do which of the following?

a) Report 10 reportable segments and disclose the remaining 5 segments as other operating segments.

b) Report 10 reportable segments by combining the most closely related segments.

c) Report 15 reportable segments as long as the 75 percent revenue test has been satisfied.

d) Report 12 reportable segments and show all other operating segments in a column labeled "Other Operating Segments."

Question 19 3 / 3 points

Trimester Corporation's revenue for the year ended December 31, 20X8, was as follows:

Trimester has a reportable operating segment if that segment's revenue exceeds:

a) $65,500

b) $60,000

c) $64,500

d) $61,000

Question 20 3 / 3 points

Five of eight internally reported operating segments of Rollins Company qualify under the standards set by ASC 280 for segment reporting. However, the five identified segments do not meet the 75 percent revenue test. ASC 280 prescribes that management:

a) subdivide segments until there are at least 10 reportable segments.

b) consolidate the remaining operating segments and include them under an "all other" category.

c) select additional operating segments until the 75% threshold is met.

d) include the heading "corporate headquarters" as an operating segment.

Question 21 3 / 3 points

Note: This is a Kaplan CPA Review Question

Correy Corp. and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the industries in which operations were conducted for the year ended December 31st:

In its segment information for the year, how many reportable segments does Correy have?

a) Five

b) Three

c) Four

d) Six

Question 22 3 / 3 points

Note: This is a Kaplan CPA Review Question

Cott Co.'s four business segments have revenues and identifiable assets expressed as percentages of Cott's total revenues and total assets as follows:

Which of these business segments are deemed to be reportable segments?

a) Ebon, Fair, Gel, and Hak

b) Ebon only

c) Ebon and Fair only

d) Ebon, Fair, and Gel only

Question 23 3 / 3 points

Note: This is a Kaplan CPA Review Question

The key to reporting accounting information by segments is determining what constitutes a segment. Of the following, which is not a method of determining a reportable segment?

a) Operating profit

b) Revenues

c) Number of employees

d) Combined identifiable assets

Question 24 3 / 3 points

Note: This is a Kaplan CPA Review Question

Which of the following characteristics would render the operating unit "reportable"? The operating unit comprises at least:

a) 5 percent of the assets of a company as a whole.

b) 10 percent of the revenues of the company as a whole.

c) 50 percent of the long term debt of the company as a whole.

d) 20 percent of the operating profit of the company as a whole.

Question 25 3 / 3 points

Note: This is a Kaplan CPA Review Question

Reportable segments are not required to disclose which of the following:

a) Amortization expense

b) Intersegment sales

c) Capital expenditures

d) Long-term debt

Question 26 3 / 3 points

Stone Company reported $100,000,000 of revenues on its 20X8 income statement. During the year ended December 31, 20X8, Stone made sales of $8,000,000 to external customers in Western Europe. In addition, Stone made sales of $10,000,000 to the U.S. government and $4,000,000 of sales to various state governments. In the footnotes to its financial statements for 20X8, in reporting enterprisewide disclosures, Stone is required to disclose:

a) Option A

b) Option B

c) Option C

d) Option D

Question 27 3 / 3 points

Which of the following are established by ASC 280

as "enterprisewide disclosure" standards to provide more information about the risks to a company?

I. Information about dominant industry segments.

II. Information about major customers.

III. Information about geographic areas

a) Both II and III

b) Both I and III

c) Both I and II

d) I, II, and II

Question 28 3 / 3 points

William Corporation, which has a fiscal year ending January 31, had the following pretax accounting income and estimated effective annual income tax rates for the first three quarters of the year ended January 31, 20X8:

William's income tax expenses in its interim income statement for the third quarter are:

a) $36,000.

b) $73,500.

c) $46,500.

d) $120,000.

Question 29 3 / 3 points

On June 30, 20X8, String Corporation incurred a $220,000 net loss from disposal of a business component. Also, on June 30, 20X8, String paid $60,000 for property taxes assessed for the calendar year 20X8. What amount of the preceding items should be included in the determination of String's net income or loss for the six-month interim period ended June 30, 20X8?

a) $250,000

b) $220,000

c) $140,000

d) $280,000

Question 30 3 / 3 points

During the third quarter of 20X8, Pride Company sold a piece of equipment at an $8,000 gain. What portion of the gain should Pride report in its income statement for the third quarter of 20X8?

a) $0

b) $2,000

c) $4,000

d) $8,000

Question 31 3 / 3 points

ASC 270 uses which view of interim reporting?

a) Integral

b) Discrete

c) Segmental

d) Comprehensive

Question 32 3 / 3 points

How would a company report a change in an accounting principle made on the last day of the third quarter?

a) Retrospective application to all pre-change interim periods reported.

b) No change is required.

c) Apply to current and prospective interim periods only.

d) Apply to prospective interim periods only.

Question 33 3 / 3 points

Missoula Corporation disposed of one of its segments in the second quarter and incurred a gain from disposal of discontinued segment of $600,000, net of taxes. What is the effect of this gain from disposal of discontinued segment?

a) Increase net income from operations for the year by $600,000.

b) Increase second quarter net income by $600,000.

c) Increase each quarter's net income by $150,000.

d) Increase each of the last three quarters' net income by $200,000.

Question 34 3 / 3 points

The income tax expense applicable to the second quarter's income statement is determined by:

a) dividing the estimated annual income tax expense by four and allocating the amount to the second quarter.

b) multiplying the effective income tax rate times the income before tax for the second quarter.

c) subtracting the income tax expense applicable to the first quarter from the income tax expense applicable to the first two quarters.

d) subtracting the income tax liability applicable to the first quarter from the income tax liability applicable to the first two quarters.

Question 35 3 / 3 points

If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available, how is this change in method is accounted for?

a) The change is only reported in the current period in which the change is made.

b) The change is reported in all future periods affected by the change.

c) Previously issued financial statements are not adjusted by the change.

d) All of these are correct ways to account for the change.

Question 36 0 / 16 points

Foreign Currency Transactions

Old Colonial Corp. (a U.S. company) made a sale to a foreign customer on September 15, 2009, for 100,000 stickles. Payment was received on October 15, 2009. The following exchange rates applied:

Required:

Prepare all journal entries for Old Colonial Corp. in connection with this sale assuming that the company closes its books on September 30 to prepare interim financial statements.

The correct answer is not displayed for Long Answer type questions.

Question 37 0 / 9 points

Multinational Accounting

A foreign subsidiary of an American company may operate in a highly inflationary economy.

A. Discuss the criteria that must be satisfied in order to qualify as a highly inflationary economy.

B. For inflationary economies, discuss how the trial balance or financial statements of a foreign branch or subsidiary are combined with the financial statements of the parent company. In other words:

1. Is the trial balance remeasured or translated?

2. Is the difference a transaction gain or loss, or is the difference a translation adjustment? Why?

A)

This question has not been graded.

The correct answer is not displayed for Long Answer type questions.

Question 38 0 / 20 points

Interim Reports:

APB Opinion No. 28 “Interim Financial Reporting” discusses the proper method of reporting results of operations on interim dates.

A. Discuss how revenue is generally recognized on interim date. Note any possible disclosures that may be needed.

B. Discuss how product costs and period costs are recognized on interim dates. Include comments on exceptions provided for inventory valuations.

C. Explain how income taxes are computed and reported in interim reports.

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Preview: 20X9 xxxxxx included xx a component xx income from xxxxxxxxxx operations xxx xxxx c) be xxxxxxxx as a xxxxxxxx charge at xxxxxxxx 31, xxxx xxxxxxx be xxxxxxxx until January xxx 2010, the xxxxxxxxxx date xxxxxxxx xxx / x pointsASC 280 uses xxxx ______ approach xx the xxxxxxxxxx xx segments xxxxxxxx of businessb) entity xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 183 / x pointsZeus xxxxxxxxxxx xxx determined xxxx it has xx reportable operating xxxxxxxx In xxxxx xx comply xxxx the standard xxx segment disclosures, xxxx Corporation xxxxxx xx which xx the following?a) Report xx reportable segments xxx disclose xxx xxxxxxxxx 5 xxxxxxxx as other xxxxxxxxx segments b) Report xx reportable xxxxxxxx xx combining xxx most closely xxxxxxx segments c) Report xx reportable xxxxxxxx xx long xx the 75 xxxxxxx revenue test xxx been xxxxxxxxx xxxxxxxxxx 12 xxxxxxxxxx segments and xxxx all other xxxxxxxxx segments xx x column xxxxxxx "Other Operating xxxxxxxx "Question 193 x 3 xxxxxxxxxxxxxxx xxxxxxxxxxxxx revenue xxx the year xxxxx December 31, xxxxx was xx xxxxxxxxxxxxxxxxxxx has x reportable operating xxxxxxx if that xxxxxxxxx revenue xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxx / x pointsFive of xxxxx internally reported xxxxxxxxx segments xx xxxxxxx Company xxxxxxx under the xxxxxxxxx set by ASC xxxxxxxx segment xxxxxxxxx xxxxxxxx the xxxx identified segments xx not meet xxx 75 xxxxxxx xxxxxxx test xxxxx 280 prescribes that xxxxxxxxxxxxxxxxxxxxxxxx segments until xxxxx are xx xxxxx 10 xxxxxxxxxx segments b) consolidate xxx remaining operating xxxxxxxx and xxxxxxx xxxx under xx "all other" xxxxxxxx c) select additional xxxxxxxxx segments xxxxx xxx 75% xxxxxxxxx is met xxxxxxxxxxx the heading xxxxxxxxxx headquarters" xx xx operating xxxxxxx Question 213 x 3 pointsNote: xxxx is x xxxxxx CPA xxxxxx QuestionCorrey Corp xxx its divisions xxx engaged xxxxxx xx manufacturing xxxxxxxxxx The following xxxx (consistent with xxxxx years' xxxxx xxxxxxx to xxx industries in xxxxx operations were xxxxxxxxx for xxx xxxx ended xxxxxxxx 31st: In its xxxxxxx information for xxx year, xxx xxxx reportable xxxxxxxx does Correy xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 223 / x pointsNote: xxxx xx a xxxxxx CPA Review xxxxxxxxxxxx Co 's xxxx business xxxxxxxx xxxx revenues xxx identifiable assets xxxxxxxxx as percentages xx Cott's xxxxx xxxxxxxx and xxxxx assets as xxxxxxxxxxxxxxx of these xxxxxxxx segments xxx xxxxxx to xx reportable segments?a) Ebon, xxxxx Gel, and xxxxxxxxxxx onlyc) Ebon xxx xxxx onlyd) Ebon, xxxxx and Gel xxxxxxxxxxxx 233 / x pointsNote: xxxx xx a xxxxxx CPA Review xxxxxxxxxxx key to xxxxxxxxx accounting xxxxxxxxxxx xx segments xx determining what xxxxxxxxxxx a segment xx the xxxxxxxxxx xxxxx is xxx a method xx determining a xxxxxxxxxx segment?a) Operating xxxxxxxxxxxxxxxxxxxxxxxxxxxx xx employeesd) Combined xxxxxxxxxxxx assetsQuestion 243 x 3 pointsNote: xxxx is x xxxxxx CPA xxxxxx QuestionWhich of xxx following characteristics xxxxx render xxx xxxxxxxxx unit xxxxxxxxxxxxx The operating xxxx comprises at xxxxxxxxxxx percent xx xxx assets xx a company xx a whole xxxxxx percent xx xxx revenues xx the company xx a whole xxxxxx percent xx xxx long xxxx debt of xxx company as x whole xxxxxx xxxxxxx of xxx operating profit xx the company xx a xxxxx xxxxxxxx 253 x 3 pointsNote: xxxx is a xxxxxx CPA xxxxxx xxxxxxxxxxxxxxxxxx segments xxx not required xx disclose which xx the xxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxx salesc) Capital xxxxxxxxxxxxxxxxxxxxxxxxx debtQuestion 263 x 3 pointsStone xxxxxxx reported xxxxxxxxxxxx xx revenues xx its 20X8 xxxxxx statement During xxx year xxxxx xxxxxxxx 31, xxxxx Stone made xxxxx of $8,000,000 xx external
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