Question 7 [5 pts]

Complete the following statements given in (a) and (b). (selected topics from Sections#1 and #2)

Firms can buy back their own shares for various reasons, such as the preparation for the exercise of (i) , and may keep the repurchased shares as (ii) .

Answer:

The accounting rules for a firms financial investments depend on the level of influence and control the firm has over the investee firm, primarily determined by the (i) . A firms investment in a bond is classified as (ii) if the firm has no intention to hold the bond until the maturity.

Question 9 [5 pts]

Which of the following statements is correct? Choose only one. (Sections #2 and #3)

If a firm is the primary beneficiary of a variable-interest entity (VIE) and has less than 50% ownership in the VIE, the firm typically would not consolidate the VIEs financial statements.

If a firm sets aside funds internally to accumulate pension assets to fulfill its pension obligations, such a plan is referred to as an unfunded plan.

Firms must carry out asset impairment tests annually for both depreciable assets and indefinite-life assets.

In a defined contribution plan, firms incur the obligation to provide pension payments to employees throughout their retirement period.

None of the above.

Question 10 [5 pts]

Which of the following statements is correct? Choose only one. (Sections #2 and #3)

If the fair value of a business unit a firm acquired in the past has declined below the original acquisition price it paid, the new accounting standard that came into effect early 2020 would require the firm to estimatethe fair values of individual assets forthe goodwill impairment test.

Firms that have a high volatility in profit margin over business cycle can benefit from the LIFO method as it allows income-smoothing.

The SEC requires the firms that use the LIFO method to disclose the LIFO layer liquidation, which is the difference in the values of inventories between the FIFO and LIFO assumptions.

When a firms ownership in another firm exceeds 50%, the investor firm is deemed to have outright control and is required to use the equity method to report the effect of the ownership on its financial statements.

None of the above.

Answer: