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ACCT4110 Exam3

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Question;Question 1 3;/ 3 points;Mint Corporation has several transactions with foreign;entities. Each transaction is denominated in the local currency unit of the;country in which the foreign entity is located. On October 1, 20X8, Mint;purchased confectionary items from a foreign company at a price of LCU 5,000;when the direct exchange rate was 1 LCU = $1.20. The account has not been;settled as of December 31, 20X8, when the exchange rate has decreased to 1 LCU;= $1.10. The foreign exchange gain or loss on Mint's records at year-end for;this transaction will be;a) $500 loss;b) $500 gain;c) $378 gain;d) $5,500;loss;Question 2 3;/ 3 points;On December 5, 20X8, Texas based Imperial Corporation;purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid;on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's;fiscal year ends on December 31, and its reporting currency is the U.S. dollar.;The exchange rates are;Based on the preceding information, what journal entry would;Imperial make on December 31, 20X8, to revalue foreign currency payable to;equivalent U.S. dollar value?;a) Option A;b) Option B;c) Option C;d) Option D;Question 3 3;/ 3 points;On December 5, 20X8, Texas based Imperial Corporation;purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid;on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's;fiscal year ends on December 31, and its reporting currency is the U.S. dollar.;The exchange rates are;Based on the preceding information, what journal entry would;Imperial make on January 10, 20X9, to revalue foreign currency payable to;equivalent U.S. dollar value?;a) Option A;b) Option B;c) Option C;d) Option D;Question 4 3;/ 3 points;On December 5, 20X8, Texas based Imperial Corporation;purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid;on January 10, 20X9. The transaction is denominated in Saudi riyals. Imperial's;fiscal year ends on December 31, and its reporting currency is the U.S. dollar.;The exchange rates are;Based on the preceding information, what was the overall;foreign currency gain or loss on the accounts payable transaction?;a) $300 loss;b) $200 loss;c) $100 gain;d) $200 gain;Question 5 3;/ 3 points;Note: This is a Kaplan CPA Review Question;On September 22, 20X1, Yumi Corp. purchased merchandise from;an unaffiliated foreign company for 10,000 units of the foreign company's local;currency. On that date, the spot rate was $.55. Yumi paid the bill in full, six;months later, on March 20, 20X2, when the spot rate was $.65. The spot rate was;$.70 on December 31, 20X1. What amount should Yumi report as a foreign currency;transaction loss in its income statement for the year ended December 31, 20X1?;a) $500;b) $0;c) $1,500;d) $1,000;Question 6 3;/ 3 points;Note: This is a Kaplan CPA Review Question;Mazeppa, Inc. is a multinational entity with its head office;located in Toronto, Canada. Its main foreign subsidiary is in Paris, France;but the primary economic environment in which the foreign subsidiary generates;and expends cash is in the United States. Based on this information, which of;the following statements is most likely true for Mazeppa, Inc.?;a) The;functional currency is the Euro.;b) The local;currency is the U.S. dollar.;c) The;reporting currency is the Canadian dollar.;d) The;reporting currency is the U.S. dollar.;Question 7 3;/ 3 points;If the restatement method for a foreign subsidiary involves;remeasuring from the local currency into the functional currency, then;translating from functional currency to U.S. dollars, the functional currency;of the subsidiary is;I. U.S. dollar.;II. Local currency unit.;III. A third country's currency.;a) I;b) III;c) II;d) Either I;or II;Question 8 3;/ 3 points;In cases of operations located in highly inflationary;economies;a) The;reporting currency of the U.S. parent?the U.S. dollar?should be used as the;foreign entity's functional currency.;b) The;foreign currency should be used as the functional currency with a footnote to;the financials displaying what the earnings would have been using the U.S.;dollar as the functional currency.;c) The;foreign currency should be used as the functional currency with a single line;item?foreign translation?reporting the adjustment using the U.S. dollar as the;functional currency.;d) None of;these.;Question 9 3;/ 3 points;When the local currency of the foreign subsidiary is the;functional currency, a foreign subsidiary's inventory carried at cost would be;converted to U.S. dollars by;a) translation;using historical exchange rates.;b) remeasurement;using historical exchange rates.;c) remeasurement;using the current exchange rate.;d) translation;using the current exchange rate.;Question 10 3;/ 3 points;When the local currency of the foreign subsidiary is the;functional currency, a foreign subsidiary's income statement accounts would be;converted to U.S. dollars by;a) translation;using historical exchange rates.;b) remeasurement;using current exchange rates at the time of statement preparation.;c) translation;using average exchange rate for the period.;d) remeasurement;using the current exchange rate at the time of statement preparation.;Question 11 3;/ 3 points;If the U.S. dollar is the currency in which the foreign;affiliate's books and records are maintained, and the U.S. dollar is also the;functional currency;a) the;translation method should be used for restatement.;b) the;remeasurement method should be used for restatement.;c) either;translation or remeasurement could be used for restatement.;d) no;restatement is required.;Question 12 3;/ 3 points;Under the temporal method, which of the following is usually;used to translate monetary amounts to the functional currency?;I. The current exchange rate;II The historical exchange rate;III. Average exchange rate;a) I;b) III;c) II;d) Either I;or II;Question 13 3;/ 3 points;All of the following stockholders' equity accounts of a;foreign subsidiary are translated at historical exchange rates except;a) retained;earnings.;b) common;stock.;c) additional;paid-in capital.;d) preferred;stock.;Question 14 0;/ 3 points;Dividends of a foreign subsidiary are translated at;a) the;average exchange rate for the year.;b) the;exchange rate on the date of declaration.;c) the;current exchange rate on the date of preparation of the financial statement.;d) the;exchange rate on the record date.;Question 15 3;/ 3 points;If the functional currency is the local currency of a;foreign subsidiary, what exchange rates should be used to translate the items;below, assuming the foreign subsidiary is in a country which has not;experienced hyperinflation over three years?;a) Option A;b) Option B;c) Option C;d) Option D;Question 16 3;/ 3 points;Company X denominated a December 1, 20X9, 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, and was paid on the;settlement date, January 10, 2010. Exchange rates moved unfavorably at December;31, 20X9, resulting in a loss that should;a) be;included as a separate component of stockholders' equity at Dec. 31, 20X9.;b) be;included as a component of income from continuing operations for 20X9.;c) be;included as a deferred charge at December 31, 20X9.;d) not be;reported until January 10, 2010, the settlement date.;Question 17 3;/ 3 points;ASC 280 uses a(n) ______ approach to the definition of;segments.;a) line of;business;b) entity;approach;c) portfolio;d) management;Question 18 3;/ 3 points;Zeus Corporation has determined that it has 15 reportable;operating segments. In order to comply with the standard for segment;disclosures, Zeus Corporation should do which of the following?;a) Report 10;reportable segments and disclose the remaining 5 segments as other operating;segments.;b) Report 10;reportable segments by combining the most closely related segments.;c) Report 15;reportable segments as long as the 75 percent revenue test has been satisfied.;d) Report 12;reportable segments and show all other operating segments in a column labeled;Other Operating Segments.;Question 19 3;/ 3 points;Trimester Corporation's revenue for the year ended December;31, 20X8, was as follows;Trimester has a reportable operating segment if that;segment's revenue exceeds;a) $65,500;b) $60,000;c) $64,500;d) $61,000;Question 20 3;/ 3 points;Five of eight internally reported operating segments of;Rollins Company qualify under the standards set by ASC 280 for segment;reporting. However, the five identified segments do not meet the 75 percent;revenue test. ASC 280 prescribes that management;a) subdivide;segments until there are at least 10 reportable segments.;b) consolidate;the remaining operating segments and include them under an "all;other" category.;c) select;additional operating segments until the 75% threshold is met.;d) include;the heading "corporate headquarters" as an operating segment.;Question 21 3;/ 3 points;Note: This is a Kaplan CPA Review Question;Correy Corp. and its divisions are engaged solely in;manufacturing operations. The following data (consistent with prior years;data) pertain to the industries in which operations were conducted for the year;ended December 31st;In its segment information for the year, how many reportable;segments does Correy have?;a) Five;b) Three;c) Four;d) Six;Question 22 3;/ 3 points;Note: This is a Kaplan CPA Review Question;Cott Co.'s four business segments have revenues and;identifiable assets expressed as percentages of Cott's total revenues and total;assets as follows;Which of these business segments are deemed to be reportable;segments?;a) Ebon;Fair, Gel, and Hak;b) Ebon only;c) Ebon and;Fair only;d) Ebon;Fair, and Gel only;Question 23 3;/ 3 points;Note: This is a Kaplan CPA Review Question;The key to reporting accounting information by segments is;determining what constitutes a segment. Of the following, which is not a method;of determining a reportable segment?;a) Operating;profit;b) Revenues;c) Number of;employees;d) Combined;identifiable assets;Question 24 3;/ 3 points;Note: This is a Kaplan CPA Review Question;Which of the following characteristics would render the;operating unit "reportable"? The operating unit comprises at least;a) 5 percent;of the assets of a company as a whole.;b) 10;percent of the revenues of the company as a whole.;c) 50 percent;of the long term debt of the company as a whole.;d) 20;percent of the operating profit of the company as a whole.;Question 25 3;/ 3 points;Note: This is a Kaplan CPA Review Question;Reportable segments are not required to disclose which of the;following;a) Amortization;expense;b) Intersegment;sales;c) Capital;expenditures;d) Long-term;debt;Question 26 3;/ 3 points;Stone Company reported $100,000,000 of revenues on its 20X8;income statement. During the year ended December 31, 20X8, Stone made sales of;$8,000,000 to external customers in Western Europe. In addition, Stone made;sales of $10,000,000 to the U.S. government and $4,000,000 of sales to various;state governments. In the footnotes to its financial statements for 20X8, in;reporting enterprisewide disclosures, Stone is required to disclose;a) Option A;b) Option B;c) Option C;d) Option D;Question 27 3;/ 3 points;Which of the following are established by ASC 280;as "enterprisewide disclosure" standards to;provide more information about the risks to a company?;I. Information about dominant industry segments.;II. Information about major customers.;III. Information about geographic areas;a) Both II;and III;b) Both I;and III;c) Both I;and II;d) I, II;and II;Question 28 3;/ 3 points;William Corporation, 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 January 31;20X8;William's income tax expenses in its interim income;statement for the third quarter are;a) $36,000.;b) $73,500.;c) $46,500.;d) $120,000.;Question 29 3;/ 3 points;On June 30, 20X8, String Corporation incurred a $220,000 net;loss from disposal of a business component. Also, on June 30, 20X8, String paid;$60,000 for property taxes assessed for the calendar year 20X8. What amount of;the preceding items should be included in the determination of String's net;income or loss for the six-month interim period ended June 30, 20X8?;a) $250,000;b) $220,000;c) $140,000;d) $280,000;Question 30 3;/ 3 points;During the third quarter of 20X8, Pride Company sold a piece;of equipment at an $8,000 gain. What portion of the gain should Pride report in;its income statement for the third quarter of 20X8?;a) $0;b) $2,000;c) $4,000;d) $8,000;Question 31 3;/ 3 points;ASC 270 uses which view of interim reporting?;a) Integral;b) Discrete;c) Segmental;d) Comprehensive;Question 32 3;/ 3 points;How would a company report a change in an accounting;principle made on the last day of the third quarter?;a) Retrospective;application to all pre-change interim periods reported.;b) No change;is required.;c) Apply to;current and prospective interim periods only.;d) Apply to;prospective interim periods only.;Question 33 3;/ 3 points;Missoula Corporation disposed of one of its segments in the;second quarter and incurred a gain from disposal of discontinued segment of;$600,000, net of taxes. What is the effect of this gain from disposal of;discontinued segment?;a) Increase;net income from operations for the year by $600,000.;b) Increase;second quarter net income by $600,000.;c) Increase;each quarter's net income by $150,000.;d) Increase;each of the last three quarters' net income by $200,000.;Question 34 3;/ 3 points;The income tax expense applicable to the second quarter's;income statement is determined by;a) dividing;the estimated annual income tax expense by four and allocating the amount to;the second quarter.;b) multiplying;the effective income tax rate times the income before tax for the second;quarter.;c) subtracting;the income tax expense applicable to the first quarter from the income tax;expense applicable to the first two quarters.;d) subtracting;the income tax liability applicable to the first quarter from the income tax;liability applicable to the first two quarters.;Question 35 3;/ 3 points;If a company changes the method it uses to compute the;allowance for uncollectible accounts receivable because more recent information;has become available, how is this change in method is accounted for?;a) The;change is only reported in the current period in which the change is made.;b) The;change is reported in all future periods affected by the change.;c) Previously;issued financial statements are not adjusted by the change.;d) All of;these are correct ways to account for the change.;Question 36 0;/ 16 points;Foreign Currency Transactions;Old Colonial Corp. (a U.S. company) made a sale to a foreign;customer on September 15, 2009, for 100,000 stickles. Payment was received on;October 15, 2009. The following exchange rates applied;Required;Prepare all journal entries for Old Colonial Corp. in;connection with this sale assuming that the company closes its books on;September 30 to prepare interim financial statements.;The correct answer is not displayed for Long Answer type;questions.;Question 37 0;/ 9 points;Multinational Accounting;A foreign subsidiary of an American company may operate in a;highly inflationary economy.;A. Discuss the criteria that must be satisfied in order to;qualify as a highly inflationary economy.;B. For inflationary economies, discuss how the trial balance;or financial statements of a foreign branch or subsidiary are combined with the;financial statements of the parent company.;In other words;1. Is the trial balance remeasured or translated?;2. Is the difference a transaction gain or loss, or is the;difference a translation adjustment?;Why?;A);This question has not been graded.;The correct answer is not displayed for Long Answer type;questions.;Question 38 0;/ 20 points;Interim Reports;APB Opinion No. 28 ?Interim Financial Reporting? discusses;the proper method of reporting results of operations on interim dates.;A. Discuss how revenue is generally recognized on interim;date. Note any possible disclosures that;may be needed.;B. Discuss how product costs and period costs are recognized;on interim dates. Include comments on;exceptions provided for inventory valuations.;C. Explain how income taxes are computed and reported in;interim reports.

 

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