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modern advanced accounting

Questions and Answers of Modern Advanced Accounting

P 15-3 Apply threshold test Ferd CA is a company that has 5 operating segments. Information regarding the operating segments is as follows:A B C D E Sales to unaffiliated customer $500,000 $100,000
2. Do additional reportable segments have to be identified?
P 15-2 Apply threshold tests The following information is available for 2016 for Ichi Company, a worldwide conglomerate (in millions):Unaffiliated Sales Intersegment Sales Operating
3. Prepare a schedule to disclose segmented revenue and its reconciliation for 2016.
2. Are additional reportable segments required?
P 15-1 Apply threshold tests Rise Corporation is based in the United States and its business is divided into segments based on geographical location. The following information has been accumulated
5. In January 2016, Pin Company paid property taxes of $80,000 covering the calendar year 2016. Also in January 2016, Pin estimated that its year-end bonuses to executives would amount to $320,000
4. On July 1, 2016, Dol Corporation incurred an discontinued operations loss of $300,000, net of income tax saving. Dol’s operating income for the full year ending December 31, 2016, is expected to
3. An inventory loss from a permanent market decline of $360,000 occurred in May 2016. Cox Company appropriately recorded this loss in May 2016, after its March 31, 2016, quarterly report was issued.
2. Far Corporation had the following transactions during the quarter ended March 31, 2016:Loss on early extinguishment of debt $70,000 Payment of fire insurance premium for calendar year 2016 100,000
E 15-9 Interim accounting for various situations—tax 1. An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal
E 15-8 Effective tax rate Assume that the applicable tax rate and the estimated pretax income for four quarters of Nour SA are as follows:Quarter Estimated Pretax Income First $40,000 Second 30,000
4. Assume corporate tax rates of 15 percent on the first $50,000 of taxable income, 25 percent on taxable income between $50,000 and $75,000, 34 percent on taxable income between $75,000 and
3. Bar Company’s effective annual income tax rates for the first two quarters of 2016 are 34 percent and 30 percent for the first and second quarter, respectively. Assume that Bar’s pretax income
2. A liquidation of LIFO inventories for interim reporting purposes may create a problem in measuring cost of sales.Accordingly, cost of sales in interim periods should:a Be determined using the
E 15-7 Interim accounting for various situations—tax 1. Interim reporting under FASB ASC Topic 270 guidelines refers to financial reporting:a On a monthly basis b On a quarterly basis c On a
3. For which of the following geographic areas will separate disclosures be required if all relevant tests are considered?a United States, Canada, Germany, and Japan b United States, Germany, and
2. For which of the following geographic areas will separate disclosures be required if only the 10 percent asset test is considered?a United States b United States and Canada c United States, Japan,
1. For which of the following geographic areas will separate disclosures be required if only the 10 percent revenue test is considered?a United States, Canada, and Japan b United States and Canada c
E 15-6 Apply threshold tests A summary of the segment operations of the Nog Corporation for the year ended December 31, 2016, follows:United States Canada Germany Japan Mexico Other Foreign
8. In financial reporting of segment data, which of the following items is used in determining a segment’s operating income?a Income tax expense b Sales to other segments c General corporate
7. Selected data for a segment of a business enterprise are to be separately reported in accordance with GAAP when the revenues of the segment exceed 10 percent of the:a Combined net income of all
6. In its 2016 financial statements, if Gum is organized on an industry basis, it should disclose foreign operations data on a specific country if revenues from that country’s operations are at
5. In its 2016 financial statements, Gum should disclose major customer data if sales to any single customer amount to at least:a $300,000 b $1,500,000 c $4,000,000 d $5,000,000
4. The following information pertains to revenue earned by Wig Company’s operating segments for the year ended December 31, 2016:Segment Sales to Unaffiliated Customers Intersegment Sales Total
3. The following information pertains to Ari Corporation and its divisions for the year ended December 31, 2016 (in thousands):Sales to unaffiliated customers $4,000 Intersegment sales of products
2. Hen Corporation’s revenues for the year ended December 31, 2016, are as follows (in thousands):Consolidated revenue per income statement $1,200 Intersegment sales 180 Intersegment transfers 60
E 15-5 Apply threshold tests 1. Coy Corporation and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years’ data) pertain to the industries in
E 15-4 Apply threshold tests Shin Company is based in Japan, but operates internationally. Sales data based on geographical area for 2016 are as follows (in millions):Unaffiliated Sales Intersegment
4. Determine the reportable segments of Anka AD based on all tests.
3. Determine the reportable segments of Anka AD based on the operating-profit test.
2. Determine the reportable segments of Anka AD based on the asset test.
E 15-3 Apply threshold test Financial information for Anka AD segment operations are as follows:Segments Sales to External Party Intersegment Sales Operating Segment’s Identifiable Assets Operating
3. Prepare a reconciliation of segment revenue with corporate revenue.
2. Prepare a schedule suitable for disclosing the reportable segments for external reporting.
E 15-2 Apply threshold test—disclosure Oppa Corporation operates in various industries within Korea. It segments the business based on industry. Total sales of the segments are as follows:Food and
5. Which of the following is not a criterion for aggregating two or more operating segments?a The segments should have similar products or services.b The segments should have similar production
4. An enterprise is required to disclose information about its major customers if 10 percent or more of its revenue is derived from any single customer. This disclosure must include:a The products or
3. Each reportable segment is required to disclose the following information except for:a Unusual items b Depreciation, depletion, and amortization c Capital expenditures d Gross profit or loss
2. A reconciliation between the numbers disclosed in operating segments and consolidated numbers need not be provided for:a Cost of goods sold b Profit or loss c Net assets d Revenues
E 15-1 Segment disclosures 1. The disclosure requirements for an operating segment do not include:a Unusual items b Income tax expense or benefit c Interest revenue d Cost of goods or services sold
15. What is the major difference between US GAAP and IFRS interim reporting?E x E R c I S E S
14. The operating segments reporting between IFRS and US GAAP have several similarities; however, some disclosure requirements remain different. What are they? (Hint: Read IFRS 8 to answer this
13. Explain how a company estimates its annual effective tax rate for interim reporting purposes.
12. Do the requirements of FASB ASC Topic 280 apply to financial statements for interim periods? If so, how?
11. Must a major customer be identified by name?
10. When is an enterprise required to include information in its financial statements about its foreign and domestic operations?
9. What disclosures are required for the reportable segments and all remaining segments in the aggregate?
8. Assume that an enterprise has 10 operating segments. Of these, five segments qualify as reportable segments by passing one of the 10 percent tests. However, their combined revenues from sales to
7. Describe the 10 percent revenue test for determining reportable segments.
6. Describe the 10 percent asset test for determining reportable segments.
5. Describe the 10 percent operating-profit test for determining reportable segments.Segment and Interim Financial Reporting 517
4. Revenue information for Mahoney Corporation is as follows:Consolidated revenue (from the income statement) $400,000 Intersegment sales and transfers 80,000 Combined revenues of all industry
3. What items under the segment data and consolidated information require reconciliation?
2. What is a reportable segment according to FASB ASC Topic 280? What criteria are used in determining what operating segments are also reportable segments?
1. What are the characteristics of an operating segment under US GAAP or IFRS 8?
PR 13-2 What criteria are required for a hedged item to qualify for special accounting as a cash-flow hedge?
PR 13-1 What criteria are required for a hedged item to qualify for special accounting as a fair-value hedge?
3. Prepare journal entries for Mar’s settlement of its accounts payable and the forward contract on January 15, 2017.
2. Prepare year-end journal entries for Mar as needed on December 31, 2016.
P 13-8 Foreign currency hedge, existing payable Mar, a U.S. firm, purchased equipment for 400,000 British pounds from Thc on December 16, 2016. The terms were n/30, payable in British pounds.On
3. The delivery of the equipment and settlement of all accounts with Ram and the exchange broker on March 1, 2017.
2. Year-end adjustments relating to the forward contract on December 31, 2016.
P 13-7 Foreign currency hedge, anticipated sale Bat, a U.S. corporation, anticipates a contract based on December 2, 2016, discussions to sell heavy equipment to Ram of Scotland for 500,000 British
P 13-6 Foreign currency hedge, firm purchase commitment On October 2, 2016, Flx, a U.S. company, entered into a forward contract to purchase 50,000 euros for delivery in 180 days at a forward rate of
2. Prepare journal entries to record collection of the receivable and settlement of the forward contract on February 28.
P 13-5 Foreign currency hedge, existing receivable On January 1, 2017, Song delivers merchandise to Prabu for 250,000,000 Indonesian rupiah when the spot rate for the rupiah is 0.39 rupiah. The
4. Assuming that the LIBOR rate is 6.5 percent on December 31, 2017, prepare all the necessary entries to account for the interest rate swap at December 31, 2017, including the 2017 interest payment.
3. Assuming that this hedge relationship qualifies for hedge accounting:a. Determine the estimated fair value of the hedge at December 31, 2016. Recall that the hedge contract is in effect for the
P 13-4 Fair-value hedge, interest rate swap Refer to Problem P 13-3 and assume that instead of initially signing a variable-rate loan, Cam receives a fixed rate of 8 percent on the loan on January 1,
4. Assuming that the LIBOR rate is 5.5 percent on December 31, 2017, prepare all the necessary entries to account for the interest rate swap at December 31, 2017, including the 2017 interest
3. Assuming that this hedge relationship qualifies for hedge accounting:a. Determine the estimated fair value of the hedge at December 31, 2016. Recall that the hedge contract is in effect for the
2. Do you think that this hedge would be considered effective and therefore would qualify for hedge accounting?
P 13-3 Cash-flow hedges, interest rate swap On January 1, 2016, Cam borrows $400,000 from Ven. The five-year term note is a variable-rate one in which the 2016 interest rate is determined to be 8
P 13-2 Sale commitments, entries, no net settlement US Mill, Inc. sold merchandise to Jang Ltd. for W25bn on October 1, 2014. The billing date is on October 1, 2014, and payable in 120 days, on
Journal entries and adjusting entries of foreign currency commitment Sean, Inc., a retailer based in the United States, entered into a forward contract with €250,000, payable in 90 days to Queen NV
2. Prepare the adjusting entry on December 31, 2016.468 CHAPTER 13 p R O B L E M S P 13-1
E 13-7 Firm purchase commitment, foreign currency hedge On November 2, 2016, Baz, a U.S. retailer, ordered merchandise from Mat of Japan. The merchandise is to be delivered to Baz on January 31,
E 13-6 Purchase commitment, foreign currency hedge, net settlement Dimple AG ordered merchandise of €20,000 from US Clark Ltd. on September 1, 2014, when the spot rate for the euro was $0.77. The
3. Car entered into a third forward contract for speculation. At December 31, 2016, what amount of foreign currency transaction gain should Car include in income from this forward contract? Explain.
2. Car entered into the second forward contract to hedge a commitment to purchase equipment being manufactured to Car’s specifications. At December 31, 2016, what amount of net gain or loss on
E 13-5[Based on AICPA] Various foreign currency hedge situations On December 12, 2016, Car entered into three forward exchange contracts, each to purchase 100,000 Canadian dollars in 90 days. Assume
E 13-4 Hedging of an existing asset Pattay Corporation purchases 200,000 pounds of copper on September 1, 2016, at $2 per pound. In order to hedge the value of the copper, on October 1, 2016, Pattay
E 13-3 Firm sales commitment Tuan Corporation enters into a firm sales commitment with Nyonya Corporation to sell 200,000 tons of coal deliverable in three months, on January 31, 2017, at the market
E 13-2 Hedge of a firm purchase commitment Refer to Exercise E13-1 and assume that Puan Corporation enters the contract to hedge a firm purchase commitment.Repeat parts 1 and 2 under this assumption.
2. Assume that the wheat is subsequently sold on July 1, 2017, at $5 per bushel. What journal entries will Puan make on that date?
E 13-1 Hedge of an anticipated purchase On November 1, 2016, Puan Corporation enters into a 90-day forward contract with a wheat speculator to purchase 300,000 bushels of wheat at $4.30. The contract
10. Describe how to account for a forward contract that is intended as a hedge of an identifiable foreign currency commitment.E x E R c I S E S
9. Briefly describe how derivatives are accounted for according to the International Accounting Standards Board. Is the accounting similar to U.S. GAAP? How is it different?
8. ASC 815 allows companies to account for certain hedges of existing foreign currency–denominated receivables and payables as cash-flow hedges. Also in ASC 815, hedges of existing assets and
7. Explain the circumstances under which fair-value hedge accounting should be used and when cash-flow hedge accounting should be used.
6. Interest rate swaps were used in the chapter to highlight the differences between fair-value and cash-flow hedge accounting. Explain what type of risk is being hedged when a receive-fixed,
5. Interest rate swaps were used in the chapter to highlight the differences between fair-value and cash-flow hedge accounting. Explain what type of risk is being hedged when a pay-fixed,
4. A hedged firm purchase or sale commitment typically qualifies for fair-value hedge accounting if the hedge is documented to be effective. Compare the accounting for both the derivative and the
3. What are foreign currency commitments? Why are they considered special?
2. What are the differences in the treatment of gain and loss in fair value and cash flow hedge accounting?
1. How do hedge items qualify for hedge accounting? Explain how these items are assessed.
PR 14-2 Should a firm readjust after the fiscal period end if before the release of their statements the exchange rate is materially different?
PR 14-1 What is required to disclose concerning the changes in a firm’s cumulative translation adjustment?
3. Prepare consolidation working papers for Par Corporation and Subsidiary for the year ended December 31, 2016.

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