1. Which risk exposure a forward contract hedges against?

A. Economic exposure

B. Transaction exposure

C. Translation exposure

D. All above

2. MET corporation acquired 80% of the voting shares of NLT company for $4,500,000. NLT's carrying value of net assets was $2,000,000 on the acquisition day. If NLT's earnings per share failed to reach the agreed level by the two parties in three years, NLT would return an amount of money back to MET. This amount of money had a present value of $500,000 on the acquisition day. The carrying values of NLT's assets and liabilities on the acquisition day were equal to their fair values except for the followings:

Fair value Inventory $30,000

Land 1,000,000

Book value $40,000

600,000

Goodwill reported for this acquisition under the entity theory is:

A. $3,235,000 B. $3,390,000 C. $2,610,000 D. $2,590,000

3. Companies A and B entered into a joint operation on Jan 1, 20X1. On that day, A earned an interest of 30% from its contribution to the operation. On that day, which of the following statements is true?

A. A can recognize a gain or loss from its contribution to the extent of B's interest.

B. A can recognize a gain or loss from its contribution to the extent of its own interest.

C. A can recognize a gain or loss from its contribution depending on if the joint contract represents a commercial substance case.

D. A can recognize a gain or loss from its contribution which is equal to the difference between the FV and BV of the asset it contributed.

4. Which of the following statements is NOT true?

A. Under hedge, gains or losses could be reported in net income on the financial reporting day.

B. Under hedge, gains or losses could be reported in OCI on the financial reporting day.

C. Where to report gains or losses from hedge does not depend on the type of hedge involved.

D. Where to report gains or losses from hedge depends on the type of hedge involved.

5. Which of the following statements is NOT true?

A. Parent's portion in consolidated net income could be decreased by downstream inventory sales.

B. Parent's portion in consolidated net income could be increased by downstream inventory sales.

C. NCI in profit will not be affected by downstream inventory sales.

D. NCI in profit will be affected by downstream inventory sales.

6. A company holds 70% of B company's voting shares and uses cost method for this equity investment. A also holds 30% of C company's voting shares and uses equity method for this equity investment. B company holds 25% of C company's voting shares and uses equity method for this equity investment. The followings are the net income reported on the separate-entity income statement by each company, respectively: ABC Net income $150,000 $11,350 $7,800 Which of the followings is Parent's portion in the consolidated net income?

A. $159.310 B. $161,350 C. $157,945 D. $169,150

7. On Jan.1, Y1, MIT Ltd. acquired 1,000 voting shares of Berg Ltd at a price of $ 20 per share. On the event day, Berg had 10,000 shares outstanding. On Jan 1, Y2, MIT acquired additional 2,000 voting shares of Berg at a price of $ 23 per share. Berg reported net income of $50,000 for Y1 and $60,000 for Y2. What is the carrying value of MIT's investments in Berg at the end of Y2 under equity method?

A. $87,000 B. $84,000 C. $92,000 D. $89,000