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advanced financial accounting
Questions and Answers of
Advanced Financial Accounting
The highest priority for payment of unsecured claims in a bankruptcy proceeding isa. Administrative expenses of the bankruptcy.b. Unpaid federal income taxes.c. Wages of each employee up to $10,000
The order of payments for unsecured priority claims in a Chapter 7 bankruptcy case is such thata. Tax claims of governmental units are paid before claims for administrative expenses incurred by the
Narco is in serious financial difficulty and is unable to meet current unsecured obligations of $30,000 to some 14 creditors who are demanding immediate payment. Narco owes Johnson $5,000, and
Your client is insolvent under the federal bankruptcy law. Under the circumstancesa. So long as the client can meet current debts or claims by its most aggressive creditors, a bankruptcy proceeding
If 1 Canadian dollar can be exchanged for 90 cents of U.S. currency, what fraction should be used to compute the indirect quotation of the exchange rate expressed in Canadian dollars?a. 1.10/1b.
An entity denominated a sale of goods in a currency other than its functional currency. The sale resulted in a receivable fixed in terms of the amount of foreign currency to be received. The exchange
An entity denominated a December 15, 20X6, 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
On November 15, 20X3, Chow Inc., a U.S. company, ordered merchandise FOB shipping point from a German company for €200,000. The merchandise was shipped and invoiced on December 10, 20X3. Chow paid
On September 1, 20X1, Cott Corporation received an order for equipment from a foreign customer for 300,000 LCUs when the U.S. dollar equivalent was $96,000.Cott shipped the equipment on October 15,
On April 8, 20X3, Trul Corporation purchased merchandise from an unaffiliated foreign company for 10,000 units of the foreign company’s local currency. Trul paid the bill in full on March 1, 20X4,
On October 1, 20X5, Stevens Company, a U.S. company, contracted to purchase foreign goods requiring payment in pesos one month after their receipt in Stevens’s factory. Title to the goods passed on
Cobb Co. purchased merchandise for 300,000 pounds from a vendor in London on November 30, 20X5. Payment in British pounds (£) was due on January 30, 20X6. The exchange rates to purchase 1 pound were
On September 1, 20X5, Johnson Inc. entered into a foreign exchange contract for speculative purposes by purchasing €50,000 for delivery in 60 days. The rates to exchange U.S. dollars for euros
Dahl entered into the first forward contract to manage the foreign currency risk from a purchase of inventory in November 20X5, payable in March 20X6. The forward contract is not designated as a
Dahl entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Dahl’s specifications. At December 31, 20X5, what amount of foreign currency
Dahl entered into the third forward contract for speculation. At December 31, 20X5, what amount of foreign currency transaction gain should Dahl include in income from this forward contract?a. $0b.
The entry on November 1, 20X8, to record the forward contract includes aa. Debit to Foreign Currency Receivable from Exchange Broker, 100,000 renminbi.b. Debit to Foreign Currency Receivable from
The entries on December 31, 20X8, include aa. Debit to Financial Expense, $300.b. Credit to Foreign Currency Payable to Exchange Broker, $300.c. Debit to Foreign Currency Receivable from Exchange
The entries on January 30, 20X9, include aa. Debit to Dollars Payable to Exchange Broker, $12,000.b. Credit to Cash, $12,600.c. Credit to Premium on Forward Contract, $600.d. Credit to Foreign
The entries on January 30, 20X9, include aa. Debit to Financial Expense, $400.b. Debit to Dollars Payable to Exchange Broker, $12,600.c. Credit to Foreign Currency Units (renminbi), $12,600.d. Debit
The entries on January 30, 20X9, include aa. Debit to Foreign Currency Units (renminbi), $12,700.b. Debit to Dollars Payable to Exchange Broker, $12,700.c. Credit to Foreign Currency Transaction
Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items Descriptions/Explanations 1. Direct exchange rate 2. Indirect exchange rate A. Exchange rate
According to ASC 815, which of the following is not an underlying?a. A security price.b. A monthly average temperature.c. The price of a barrel of oil.d. The number of foreign currency units.
A decrease in the intrinsic value of a fair value hedge is accounted for asa. A decrease of current earnings.b. Not recorded because the exchange transaction has not yet occurred.c. A decrease of
Changes in the fair value of the effective portion of a hedging financial instrument are recognized as a part of current earnings of the period for which of the following? Cash Flow Hedge Fair Value
According to ASC 815, for which of the following is hedge accounting not allowed?a. A forecasted purchase or sale.b. Available-for-sale securities.c. Trading securities.d. An unrecognized firm
Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items 1. Put option 2. Notional amount 8. Intrinsic value 4. Underlying Descriptions/Explanations
Certain balance sheet accounts in a foreign subsidiary of Shaw Company on December 31, 20X1, have been restated in U.S. dollars as follows:What total should be included in Shaw’s balance sheet for
A wholly owned foreign subsidiary of Nick Inc. has certain expense accounts for the year ended December 31, 20X4, stated in local currency units (LCU) as follows:The exchange rates at various dates
A credit-balancing item resulting from the process of restating a foreign entity’s financial statement from the local currency unit to U.S. dollars should be included as a(an)a. Separate component
A foreign subsidiary of the Bart Corporation has certain balance sheet accounts on December 31, 20X2. Information relating to these accounts in U.S. dollars is as follows:What total should be
Gate Inc. had a $30,000 credit adjustment for the year ended December 31, 20X2, from restating its foreign subsidiary’s accounts from their local currency units into U.S. dollars. Additionally,
Bar Corporation had a realized foreign exchange loss of $13,000 for the year ended December 31, 20X2, and must also determine whether the following items will require year-end adjustment:(1) Bar had
The balance in Simpson Corp.’s foreign exchange loss account was $15,000 on December 31, 20X2, before any necessary year-end adjustment relating to the following:(1) Simpson had a $20,000 debit
When remeasuring foreign currency financial statements into the functional currency, which of the following items would be remeasured using a historical exchange rate?a. Inventories carried at
Match the items in the left-hand column with the descriptions/explanations in the right-hand column. 1. Remeasurement gain or loss 2. Translation adjustment 3. Current rate method 1. Remeasurement
Refer to the preceding information. On January 1, 20X5, how much goodwill was acquired by Bartell?a. $17,200b. $31,480c. $11,400d. $25,360 Bartell Inc., a U.S. company, acquired 90 percent of the
Refer to the preceding exchange rate information. Assume that Bartell acquired $10,500 of goodwill on January 1, 20X5, and the goodwill suffered a 10 percent impairment loss in 20X5. If the
Refer to the preceding information but now assume that the U.S. dollar is the functional currency. How much goodwill impairment loss should be reported on Bartell’s consolidated income statement in
Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items Descriptions/Explanations 1. Current exchange rate 2. Foreign entity goodwill under
How are discontinued operations reported on an interim basis?
Dutko Company has three lines of business, each of which is a significant industry segment. Company sales aggregated $1,800,000 in 20X6, of which Segment 3 contributed 60 percent. Traceable costs
Stein Company is a diversified company that discloses supplemental financial information on its industry segments. The following information is available for 20X2:Allocable costs are assigned based
Selected data for a segment of a business enterprise are to be reported separately in accordance with ASC 280 when the revenue of the segment exceeds 10 percent of thea. Combined net income of all
Kimber Company operates in four different industries, each of which is appropriately regarded as a reportable segment. Total sales for 20X2 for all segments combined were $1,000,000. Sales for
The following information pertains to Reding Corporation for the year ended December 31, 20X6.All of Reding’s segments are engaged solely in manufacturing operations. Reding has a reportable
Snow Corporation’s revenue for the year ended December 31, 20X2, was as follows:Snow has a reportable operating segment if that segment’s revenue exceedsa. $6,000.b. $24,000.c. $120,000.d.
Boecker is a multidivisional corporation that has both intersegment sales and sales to unaffiliated customers. Boecker should report segment financial information for each segment meeting which of
In its 20X5 financial statements, Ward should disclose major customer data if sales to any single customer amount to at leasta. $300,000.b. $1,500,000.c. $4,000,000.d. $5,000,000.Ward Corporation, a
In its 20X5 financial statements, Ward should disclose foreign revenues in a specific country if revenues from foreign operations in that country are at leasta. $5,000,000.b. $4,700,000.c.
Which of the following is an inherent difficulty in determining the results of operations on an interim basis?a. Cost of sales reflects only the amount of product expense allocable to revenue
Which of the following reporting practices is permissible for interim financial reporting?a. Use of the gross profit method for interim inventory pricing.b. Use of the direct costing method for
On January 1, 20X2, Harris Inc. paid $40,000 in property taxes on its plant for the calendar year 20X2. In March 20X2, Harris made $120,000 in annual major repairs to its machinery. These repairs
Wenger Company experienced a $420,000 inventory loss from market decline in April 20X2. The company recorded this loss in April 20X2 after its March 31, 20X2, quarterly report was issued. None of
A company that uses the last-in, first-out (LIFO) method of inventory costing finds at an interim reporting date that there has been a partial liquidation of the base-period inventory level. The
During the second quarter of 20X5, Camerton Company sold a piece of equipment at a $12,000 gain. What portion of the gain should Camerton report in its income statement for the second quarter of
On March 15, 20X1, Burge Company paid property taxes of $180,000 on its factory building for calendar year 20X1. On April 1, 20X1, Burge made $300,000 in unanticipated repairs to its plant equipment.
SRB Company had an inventory loss from a market price decline that occurred in the first quarter. The loss was not expected to be restored in the fiscal year.However, in the third quarter, the
For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for b. Interia Financial Reporting Year-End Financial Reporting Yes Yes No
On June 30, 20X5, Park Corporation incurred a $100,000 net loss from disposal of a business component. Also, on June 30, 20X5, Park paid $40,000 for property taxes assessed for calendar year 20X5.
Neil Company, 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
Beckett Corporation expects to sustain an operating loss of $100,000 for the full year ending December 31, 20X3. Beckett operates entirely in one jurisdiction where the tax rate is 40 percent.
The computation of a company’s third-quarter provision for income taxes should be based on earningsa. For the quarter at an expected effective annual income tax rate.b. For the quarter at the
During the first quarter of 20X5, Stahl Company had income before taxes of $200,000, and its effective income tax rate was 15 percent. Stahl’s 20X4 effective annual income tax rate was 30 percent,
Which of the following items will result in the recognition of a deferred tax asset or liability in the second quarter of 20X7 for Nelson Company?a. The portion of dividends received this quarter on
Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items 3. 1. Reportable operating segment 2. 10 percent significance rules. Revenue test for
Two interesting and important topics concerning the SEC are the role it plays in the development of accounting principles and the impact it has had and will continue to have on the accounting
The Securities and Exchange Commission was established in 1934 to help regulate the U.S. securities market. Which of the following statements is true about the SEC?a. The SEC prohibits the sale of
The SEC is organized into several divisions and principal offices. The organization unit that reviews registration statements, annual reports, and proxy statements filed with the Commission isa. The
Regulation S-Xa. Specifies the information that can be incorporated by reference from the annual report into the registration statement filed with the SEC.b. Specifies the regulation and reporting
Which of the following is not a purpose of the Securities Exchange Act of 1934?a. To establish federal regulation over securities exchanges and markets.b. To prevent unfair practices on securities
Regulation S-K disclosure requirements of the SEC deal with the company’s business, properties, and legal proceedings; selected five-year summary financial data; management’s discussion and
In the registration and sales of new securities issues, the SECa. Endorses a security’s investment merit by allowing its registration to “go effective.”b. Provides a rating of the investment
The 1933 Securities Act provides for a 20-day review period between the filing and the effective date of the registration. During this review period, the registrant is prohibited froma. Preparing any
Form 10-K is filed with the SEC to update the information a company supplied when filing a registration statement under the Securities and Exchange Act of 1934. Form 10-K is a report that is filed by
The SEC’s Regulation S-X disclosure requirements addressa. Changes in and disagreements with accountants on accounting and financial disclosure.b. Management’s discussion and analysis of the
Form 10-Q is filed with the SEC to keep both investors and experts apprised of a company’s operations and financial position. For an accelerated filer, Form 10-Q is a report that is filed withina.
Within four days after the occurrence of any event that is of material importance to the stockholders, a company must file a Form 8-K information report with the SEC to disclose the event. An example
Form 8-K must generally be submitted to the SEC within four days after the occurrence of a significant event. Which one of the following is not an event that would be reported by Form 8-K?a. The
Which one of the following items is not required to be included in a company’s periodic 8-K report filed with the SEC when significant events occur?a. Acquisition or disposition of a significant
A major impact of the Foreign Corrupt Practices Act of 1977 is that registrants subject to the Securities Exchange Act of 1934 are required toa. Keep records that reflect the transactions and
Shareholders may ask or allow others to enter their vote at a shareholders’ meeting that they are unable to attend. The document furnished to shareholders to provide background information for
Formation and meaningful utilization of an audit committee of the board of directors is required of publicly traded companies that are subject to the rules of thea. Securities and Exchange
An external auditor’s involvement with a Form 10-Q that is being prepared for filing with the SEC would most likely consist ofa. An audit of the financial statements included in Form 10-Q.b. A
Which of the following statements concerning the prospectus required by the Securities Act of 1933 is correct?a. The prospectus is a part of the registration statement.b. The prospectus should enable
Which of the following securities is exempt from registration under the Securities Act of 1933?a. Shares of nonvoting common stock provided their par value is less than $1.b. Bonds issued by a
Pix Corp. is making a $6,000,000 stock offering. Pix wants the offering exempt from registration under the Securities Act of 1933. Which of the following provisions of Regulation D would Pix have to
A “Tier 1” offering made under the provisions of Regulation A of the Securities Act of 1933 requires that the issuera. File an offering circular with the SEC.b. Sell only to accredited
Which of the following factors by itself requires a corporation to comply with the reporting requirements of the Securities Exchange Act of 1934?a. 600 employees.b. Shares listed on a national
Which of the following persons is not an insider of a corporation subject to the Securities Exchange Act of 1934 registration and reporting requirements?a. An attorney for the corporation.b. An owner
On May 1, 20X1, Cathy and Mort formed a partnership and agreed to share profits and losses in the ratio of 3:7, respectively. Cathy contributed a parcel of land that cost her $10,000. Mort
On July 1, 20X1, James and Short formed a partnership. James contributed cash. Short, previously a sole proprietor, contributed property other than cash, including realty subject to a mortgage, which
Two individuals who were previously sole proprietors form a partnership. Property other than cash that is part of the initial investment in the partnership is recorded for financial accounting
Mutt and Jeff formed a partnership on April 1 and contributed the following assets:The land was subject to a $30,000 mortgage, which the partnership assumed. Under the partnership agreement, Mutt and
On July 1, Mabel and Pierre formed a partnership, agreeing to share profits and losses in the ratio of 4:6, respectively. Mabel contributed a parcel of land that cost her $25,000. Pierre contributed
Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items 1. General partner 2. Note payable to a partner 3. Recognition of neither bonus nor goodwill
If the assets are fairly valued on this balance sheet and the partnership wishes to admit Denise as a new one-sixth-interest partner without recording goodwill or bonus, Denise should contribute cash
If assets on the initial balance sheet are fairly valued, Alex and Betty give their consent, and Denise pays Claire $51,000 for her interest, the revised capital balances of the partners would bea.
On December 31, 20X4, Alan and Dave are partners with capital balances of $80,000 and $40,000, and they share profit and losses in the ratio of 2:1, respectively. On this date, Scott invests $36,000
Boris and Richard are partners who share profits and losses in the ratio of 6:4. On May 1, 20X9, their respective capital accounts were as follows:On that date, Lisa was admitted as a partner with a
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