Advanced Accounting Final
What are the option entries?
1) Interest payment on debt Interest expense cash Loss on options investment in interest rate cap 2) interest payment interest expense cash Loss on option investment in interest rate cap 3) market rate>cap rate investment in interest rate cap interest expense 4) receive cash for excess interest cash investment in interest rate cap
What are the interim reporting for inventories items?
1) companies may use estimated gross profit rates to determine COGS during interim periods 2) LIFO liquidations should no be recognized if the company expects the inventory layer giving rise to the liquidation profit to be replaced by year end 3) If a lower of cost or market decline is expected to be restored by year end, the decline is not recognized at the interim date 4) If standard cost variances are planned and expected to be absorbed by year end, the company should not recognize the cost of the variance in the interim reporting period
What are the other interest rate swap entries? (LIBOR)(Receive fixed/variable pay rate)
1) interest payment interest expense cash 2) net settlement with intermediary cash interest expense (could also be flipped) 3) Mark swap to market (if LIBOR avg < fixed)(flip if LIBOR> fixed) investment in swap gain on hedging 4) mark debt to market loss on hedging note payable
What are the interest rate swap entries? (Receive variable/fixed pay rate)
1) interest payment on debt interest expense cash 2) net settlement with intermediary cash interest expense 3) record change in FV of swap (offset OCI) AOCI investment in swap
What is the definition of an operating segment?
1) it engages in business activities from which it earns revenues and incurs expenses 2) its operating results are regularly reviewed by the entity's chief operating decision maker 3) discrete financial information is available
What are the quantitative thresholds for detailed footnote disclosures?
1) its reported revenue (including both sales to external customers and intersegment sales/transfers) is 10% or MORE of the combined revenue of all operating segments 2) the absolute amount of its reported profit or loss is 10% or MORe of the greater (in absolute amount) of: -the combined reported profit of all segments that report a profit -the combined reported loss of all segments that report a loss 3) its assets are 10% or MORE of the combined assets of all operating segments
What are the futures entries?
1) pay deposit investment in futures cash 2) FV Hedge entries Loss on hedging investment in futures inventory gain on hedging 3) close out contract/settle account cash investment in futures 4) purchase RM commodity inventory cash 5) FG sold Cash sales revenue COGS OCI commodity inventory
What are the other option entries?
1) pay premium investment in options cash 2) adjustment entry/mark options to market investment in options gain on hedging loss on hedging loan payable 3) mark options to market; sell options investment in options gain on hedging loss on hedging loan payable 4) receive excess interest cash investment in options
When a cost benefits two or more interim periods, each interim period should be charged for an appropriate portion of the annual cost. What are examples of these?
1) quantity discounts 2) property taxes 3) advertising 4) anticipated year-end adjustments, such as bad debt expenses, bonuses, etc
Total external revenue reported by operating segments must constitute at least___
75% of total consolidated revenue
Which of the following is not true regarding the recognition of costs that benefit more than one interim reporting period? a) costs are generally recognized as expenses in the periods in which they are incurred b) the cost of quantity discounts should be recognized in the interim period, even if the annual purchase level has not yet been made if the company expects that the annual sales volume will be sufficient for the customer to receive the discount c) the estimated annual cost of property taxes that can be reliably estimated should be apportioned equally to interim reporting periods d) even though the entire cost of advertising may be recognized as an expense in the annual reporting period, that expense is allocated over the interim reporting periods that benefit from the expenditure
a) costs are generally recognized as expenses in the periods in which they are incurred
Two or more operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, and if the segments are similar. Which of the following is not one of the factors used to determine similarity? a) employment of many of the same people across the segments b) the nature of the products and services c) the nature of the production processes d) the type of class of customer for their products and services
a) employment of many of the same people across the segments
An audit committee of the board of directors consisting of outside directors should be objective in arbitrating disputes between a company's top management and the external auditor because audit committee members a) have no direct responsibility for the results of a company's operations b) have only limited contacts with the external auditor c) rely on senior management's opinions to resolve disputes with the external auditor d) are required by the securities exchange act of 1934 to oversee the progress of the annual external audit
a) have no direct responsibility for the results of a company's operations
Which of the SEC's organizational units--divisions and principal offices--reviews the registration statements, annual reports, and proxy statements filed with the commission? a) Office of the Chief Accountant b) Division of Corporation Finance c) Division of Enforcement d) Division of the Comptroller
b) Division of Corporation Finance
Assuming that all other criteria regarding the issuing organization and its "security" are met, which one of the following is not a "security" under jurisdiction of the SEC? a) a trust certificate b) a municipal bond c) an oil drilling venture participation unit d) a limited partnership share
b) a municipal bond
Which of the following statements related to registration of new securities is false? a) Registration of new securities is governed by the Securities Act of 1933 b) form S-1, the basic form for new security registration, is an elaborate checklist of rules to be followed and questions to be answered c) a private placement may be exempt from detailed registration requirements d) the independent public accountant reviews and audits information included in the registration statement
b) form S-1, the basic form for new security registration, is an elaborate checklist of rules to be followed and questions to be answered
Which of the following is not one of the factors to consider in determining whether a business entity meets the definition of a reportable segment? a) it engages in business activities from which it may earn revenues and incur expenses b) it engages in sales activities with unaffiliated entities c) its operating results are regularly reviewed by the entity's chief operating decision maker d) its discrete financial information is available
b) it engages in sales activities with unaffiliated entities
Which of the following operating segments should be identified as a reportable segment given the information below? A $45,000 B $(50,000) C $450,000 D $(200,000) a) C b) C and D c) B, C, and D d) A, B, C, and D
c) B, C, and D
Which of the following acts gives the SEC the ultimate power to suspend trading in a security, delist a security, and prevent brokers and dealers from working in the securities market? a) Securities Investors Protection Act of 1934 b) Securities Act of 1934 c) Securities Exchange Act of 1934 d) Investment Company Act of 1940
c) Securities Exchange Act of 1934
Which of the following is not true regarding the treatment of inventories in interim financial statements: a) companies may not take a physical inventory other than at year end b) LIFO liquidation should not be recognized if the company expects the inventory layer giving rise to the liquidation profit to be replaced c) companies should always recognize the cost of the variances in the interim reporting period d) in the lower of cost or market test, if the decline in the market value of the inventory is expected to be restored by year end, the decline is not recognized at the interim date.
c) companies should always recognize the cost of the variances in the interim reporting period
A significant event affecting a company registered under the securities and exchange act of 1934 should be reported on which of the following? a) form 10-K b) form S-1 c) form 8-K d) form 11-K
c) form 8-K
Which of the following is a required disclosure regarding external customers? a) the name of the customer b) the dollar amount of sales to the customer c) the fact that transactions with the customer constitute more than 10% of total revenues d) information on major customers is not required in segment reporting
c) the fact that transactions with the customer constitute more than 10% of total revenues
Selected data for an operating segment of a business are to be separately reported when the revenue of the segment exceeds 10% of the a) combined net income of all segments reporting profits b) total revenue from unaffiliated transactions c) total revenue of all the entity's operating segments d) separate tests for combined revenue from all segments reporting profits and losses
c) total revenue of all the entity's operating segments
Financial Reporting Releases (FRRs) and Staff Accounting Bulletins (SABs) are two pronouncements issues by the SEC. How do FRRs and SABs differ? a) FRRs are part of the 1934 Securities Exchange Act while SABs are not b) SABs represent the official rules of the SEC while FRRs do not c) SABs represent amendments to Regulation S-x, FRRs do not d) FRRs represent requirements applicable to the form and content of financial statements filed with the SEC, SABs represent accounting interpretations followed by the SEC
d) FRRs represent requirements applicable to the form and content of financial statements filed with the SEC, SABs represent accounting interpretations followed by the SEC
The SEC was established in 1934 to help regulate the United States securities market. Which of the following statements is true concerning the SEC? a) the SEC prohibits the sale of speculative securities b) Registration with the SEC guarantees the accuracy of the registrant's prospectus c) The SEC's initial influence and authority has diminished in recent years as stock exchanges have become more organized and better able to police themselves d) The SEC regulates only securities offered for public sale
d) The SEC regulates only securities offered for public sale
When does information regarding major customers need to be disclosed?
Information about the extent of reliance on a single major customer with revenues of 10% or MORE of the company's consolidated revenues
Are R&D disclosures required? why?
No R&D disclosures are not required because of proprietary information (competitors)
Which of the following statements related to the SEC's period reporting requirements is false? a) Form 10-K, the annual report, is governed only by regulation S-X, not S-K b) financial statements in form 10-Q, the quarterly report, follow typical interim reporting principles contained in ASC Topic 270 c) Required form 10Q financial statements include balance sheets, statements of income and comprehensive income and cash flow statements d) form 10-Q financial statements may include fewer line items than those in form 10-K
a) Form 10-K, the annual report, is governed only by regulation S-X, not S-K
Which of the following statements is true regarding the estimation of materiality? a) in determining the materiality for an extraordinary item in an interim financial statement, the magnitude of the item should be judged relative to the estimate income for profitable segments for the full fiscal year b) companies are not required to test for materiality in any periood other than the annual reporting period c) in determining the materiality for an extraordinary item in an interim financial statement, the magnitude of the item should be judged relative to the estimated income for the interim reporting period d) in determining the matieriality for an extraordinary item in an interim financial statement, the magnitude of the item should be judged relative to the estimated income for the full fiscal year
d) in determining the matieriality for an extraordinary item in an interim financial statement, the magnitude of the item should be judged relative to the estimated income for the full fiscal year
Assume that your company determines that the value of its inventories have declined in the second quarter, but you assume that the market price will return to previous levels by the end of the year so that no loss will be recognized. At the end of the year, however, the market price reversal did not occur. When should the loss be reported in your company's interim income statements? a) ratably over the second, third, and fourth quarters b) ratably over the third and fourth quarters c) in the second quarter only d) in the fourth quarter only
d) in the fourth quarter only
The role of the SEC regarding financial accounting for public companies is that the SEC does which of the following? a) promulgates generally accepted accounting principles b) regularly adopts requirements that conflict with FASB pronouncements c) makes regulations and rules pertaining to filings with the SEC but not to annual or quarterly reports to shareholders d) makes regulations and rules pertaining more to disclosure outside the financial statements than to the setting of accounting principles
d) makes regulations and rules pertaining more to disclosure outside the financial statements than to the setting of accounting principles
