ACCT4110 Exam3
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.
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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)
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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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Rating:
5/
Solution: ACCT4110 Exam3