1. Colper Grant is the president of Acme Brush of Brazil, the whole owned

Braziliain Subsidiary of US based Acme Brush Inc. Cooper Grant's compensation

package consists of a combination of salary and bonus. His annual bonus

is calculated as a predetermined percentage of the pre-tax annual income

earned by Acme Brush of Brazil. A condensed income statement for Acme

Brush of Brazil for the most recent year is as follows (amounts in

thousands of Brazilian reals (BRL)):

BRL

Sales 10,000

Expenses 9,500

Pre-tax income 500

After translating the Brazilian real income statement to the US dollars, the

condensed income statement for Acme Brush of Brazil appears as follows

(amounts in thousand of US Dollars (USD):

Sales 3,000

Expenses 3,300

Pre-tax loss -300

A. Explain how Acme Brush of Brazil's pre-tax income in BRL becamea US

dollar pretax loss. In order to receive the full credit, you are required

to show all steps in calculation.

B. Discuss whether Cooper Grant should be paid a bonus or not.

2. As noted in the chapter, diversity in accounting practice accrss countries

generates problesm for a number of different groups.

a. Which is the greatest problem arising from worldwide accounting

diversity ?

b. which group is most affected by worldwide accounting diverstiy ?

c. which group can most easily deal with the problems associated with

accounting diversity ?

3. Geneva Technology Company (GTC), a Swiss-based compay

founded in 1999, is considering the us of IFRS in preparing

its annual report for the year ended Dec 31, 2013. You

are manager of GTC's fixed assets accounting

department.

The steps that you will need to take in your department to comply with

the requirements of IFRS 1.

4. To determine the amount at which the inventory should be reported

on the December 31, Year1, balance sheet, Monroe Company compiles

the following information for its inventory of Product Z on hand at

that date:

Historical Cost $20,000

Replacement Cost 14000

Estimated Selling Price 17000

Estimated Costs to complete and sell 2000

Normal profit margin as a percentage of selling price 20%

The entire inventory of Product Z that was on hand at De31, Year 1 was

completed in Year 2 at a cost of $1,800 and sold at a price of $17,150.

a. Determine the impact that Product Z has on income in Year 1 and Year 2

under (1) IFRS and (2) USGAAP

b. Summarize the difference in income, total assets, and total stockholders' equity

using the two different sets of accounting rules over the two year period.

Instruction : Below are ten multiple choice questions. Plesae select only one best answer. (20%)

1 Why would a company want its stock cross-listed on the stock exchanges of several countries?

A. To make financial reporting less burdensome for its accounting firm

B. In order to use International Financial Reporting Standards

C. To gain access to more financial resources than are available in its home country

D. All of the above

2 What group is primarily responsible for the creation of International Financial Reporting Standards (IFRS)?

A. Financial Accounting Standards Board (FASB)

B. International Forum on Accountancy Development (IFAD)

C. International Federation of Accountants (IFA)

D. International Accounting Standards Board (IASB)

3 Which of the following is an advantage of having a single set of accounting standards used worldwide?

A. Reduced accounting costs for multinational corporations

B. Increased power of the FASB

C. Reduced number of multinational corporations on the NYSE

D. Increased diversity of accounting methods used by multinational corporations

4 The accounting standards in code law countries tend to be:

A. very detailed.

B. formulated by organizations such as the FASB.

C. stated generally without much guidance on accounting procedures.

D. very conservative.

5 What is the likely result when accounting rules are left up to professional associations

rather than being legislated by governmental bodies?

A. Very general accounting rules are created, as in code law countries.

B. Very detailed rules for practice are created, as in common law countries.

C. Very general accounting rules are created, as in common law countries.

D. Very detailed rules for practice are created, as in code law countries.

6 Historical cost is the primary basis for asset valuation under U.S. GAAP.

Why is historical cost NOT as important in the accounting systems of Latin America as in the U.S.?

A. Historical costs are too difficult to calculate in the currencies used in Central and South America.

B. The countries of Latin America have experienced very high rates of inflation,

which would make historical costs meaningless to readers of financial statements.

C. There is very little foreign direct investment in the countries of Latin America,

so few assets need to be accounted for.

D. In Latin America, asset prices are very stable, making historical costs ,

so it doesn't matter which valuation basis is used.

7 Which of the following statements is true about accounting convergence?

A. Convergence is a synonym for harmonization.

B. Convergence is the opposite of standardization.

C. Convergence, unlike harmonization, takes place over a period of time.

D. Convergence means developing high-quality standards in partnership with national standards.

8 Which of the following statements is believed to be true about accounting convergence

by proponents of convergence?

A. Convergence would not affect the feelings of nationalism.

B. Convergence is desirable because there is very little difference among capital markets

in different countries.

C. Convergence would help to raise the quality of accounting practices internationally.

D. None of the above statements is true.

9 Why does the IASB believe that a principles-based approach to standard setting

is superior to a rules-based approach?

A. Detailed guidance or rules encourage accountants to look for ways around the rules

rather than trying to provide useful information.

B. Principles-based standard setting is less costly to undertake than rules

-based standard formulation.

C. It is desirable to have all corporations in all countries using the same accounting practice.

D. A conceptual framework for standard setting has demonstrated to encourage

the greatest economic development.

10 If a company chooses the revaluation model permitted in IAS 16 for fixed asset measurement:

A. annual revaluations must be performed on each class of assets.

B. it must update the valuation so that the balance sheet represents fair value

on the balance sheet date.

C. appraisals must be performed by an official of the IASB.

D. the depreciated replacement cost must be used as the fair value of the fixed asset.