Mergers Gleim

Rowe, Inc., owns 80% of Cowan Co.'s outstanding capital stock. On November 1, Rowe advanced $100,000 in cash to Cowan. What amount should be reported related to the advance in Rowe's consolidated balance sheet as of December 31? $0 $20,000 $80,000 $100,000

$0

Beni Corp. acquired 100% of Carr Corp.'s outstanding voting interests for $430,000 cash. Immediately before the acquisition, the balance sheets of the corporations reported the following: Beni Carr Assets $2,000,000 $750,000 Liabilities $ 750,000 $400,000 Common stock 1,000,000 310,000 Retained earnings 250,000 40,000 Liabilities and equity accounts $2,000,000 $750,000 At the acquisition date, the fair value of Carr's assets was $50,000 more than their aggregate carrying amount. In the consolidated balance sheet prepared immediately after the acquisition, the consolidated balance of the equity accounts is $1,680,000 $1,650,000 $1,600,000 $1,250,000

$1,250,000

The following information pertains to Gali Co.'s defined benefit pension plan for Year 1: Fair value of plan assets, beginning of year $350,000 Fair value of plan assets, end of year 525,000 Employer contributions 110,000 Benefits paid 85,000 In computing pension expense, what amount should Gali use as actual return on plan assets? $65,000 $150,000 $175,000 $260,000

$150,000

Three years ago, Jameson Company purchased stock in Zebra, Inc., at a cost of $100,000. This stock was sold for $150,000 during the current fiscal year. The result of this transaction should be shown in the investing activities section of Jameson's statement of cash flows as Zero $50,000 $100,000 $150,000

$150,000

Fara Co. reported bonds payable of $47,000 on December 31, Year 1, and $50,000 on December 31, Year 2. During Year 2, Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premium or discount during the year. What amount should Fara report in its Year 2 statement of cash flows for redemption of bonds payable? $3,000 $17,000 $20,000 $23,000

$17,000

The following information pertains to Lee Corp.'s defined benefit pension plan for Year 1: Service cost $160,000 Actual and expected gain on plan assets 35,000 Unexpected loss on plan assets related to a Year 1 disposal of a subsidiary 40,000 Amortization of prior service cost 5,000 Annual interest on pension obligation 50,000 What amount must Lee report as pension expense in its Year 1 income statement? $250,000 $220,000 $210,000 $180,000

$180,000

Pent Corp. acquired 100% of Subtle Corp.'s outstanding capital stock for $890,000 cash. Immediately before the acquisition, the balance sheets of both corporations reported the following: Pent Subtle Assets $4,000,000 $1,500,000 Liabilities $1,400,000 $ 720,000 Common stock 2,000,000 620,000 Retained earnings 500,000 80,000 Accumulated other comprehensive income 100,000 80,000 Liabilities and equity $4,000,000 $1,500,000 At the date of purchase, the fair value of Subtle's assets was $100,000 more than the aggregate carrying amounts. In the consolidated balance sheet prepared immediately after the purchase, the consolidated equity should equal $3,490,000 $3,480,000 $3,380,000 $2,600,000

$2,600,000

On December 31, Poe Corporation exchanged 200,000 shares of its $10 par common stock, with a market price of $18 per share, for all of Saxe Corporation's common stock. The equity section of each entity's balance sheet immediately before the combination is presented below: Poe Saxe Common stock $3,000,000 $1,500,000 Additional paid-in capital 1,300,000 150,000 Retained earnings 2,500,000 850,000 Total $6,800,000 $2,500,000 In the December 31 consolidated balance sheet, additional paid-in capital should be reported at $950,000 $1,300,000 $1,450,000 $2,900,000

$2,900,000

King Corp. owns 80% of Lee Corp.'s common stock. During October, Lee sold merchandise to King for $100,000. At December 31, one-half of the merchandise remained in King's inventory. For the year, gross profit percentages were 30% for King and 40% for Lee. The amount of unrealized intraentity profit in ending inventory at December 31 that should be eliminated in consolidation is $40,000 $20,000 $16,000 $15,000

$20,000

At December 31, Grey, Inc., owned 90% of Winn Corp., a consolidated subsidiary, and 20% of Carr Corp., an investee over which Grey cannot exercise significant influence. On the same date, Grey had receivables of $300,000 from Winn and $200,000 from Carr. In its December 31 consolidated balance sheet, Grey should report accounts receivable from affiliates of $500,000 $340,000 $230,000 $200,000

$200,000

On August 31 of the current year, Pine Corp. issued 100,000 shares of its $20 par value common stock for all of the net assets of Sap, Inc., in a business combination. The fair value of Pine's common stock on the acquisition date was $36 per share. Pine paid a fee of $160,000 to the consultant who arranged this acquisition. Costs of registering and issuing the equity securities amounted to $80,000. No goodwill or gain on a bargain purchase was involved. What amount should Pine record for the net assets acquired? $3,600,000 $3,680,000 $3,760,000 $3,840,000

$3,600,000

During the current year, a tornado completely destroyed a building belonging to Holland Corp. The building cost $100,000 and had accumulated depreciation of $48,000 at the time of the loss. Holland received a cash settlement from the insurance company and reported a loss of $21,000. In Holland's current-year cash flow statement, the net change reported in the cash flows from investing activities section should be a $10,000 increase $21,000 decrease $31,000 increase $52,000 decrease

$31,000 increase

On December 31, Year 1, Andover Co. acquired Barrelman, Inc. Before the acquisition, a product lawsuit seeking $10 million in damages was filed against Barrelman. As of the acquisition date, Andover believed that it was probable that a liability existed and that the fair value of the liability was $5 million. What amount should Andover record as a liability as of December 31, Year 1? $0 $5,000,000 $7,500,000 $10,000,000

$5,000,000

King, Inc., owns 70% of Simmon Co.'s outstanding common stock. King's liabilities total $450,000, and Simmon's liabilities total $200,000. Included in Simmon's financial statements is a $100,000 note payable to King. What amount of total liabilities should be reported in the consolidated financial statements? $520,000 $550,000 $590,000 $650,000

$550,000

MAJ Corporation acquired 90% of the common stock of Min Co. for $420,000. MAJ previously held no equity interest in Min. On the date of acquisition, the carrying amount of Min's identifiable net assets equaled $300,000. The acquisition-date fair values of Min's inventory and equipment exceeded their carrying amounts by $60,000 and $40,000, respectively. The carrying amounts of the other assets and liabilities were equal to their acquisition-date fair values, and the fair value of the noncontrolling interest was $45,000. What amount should MAJ recognize as goodwill immediately after the acquisition? $150,000 $90,000 $65,000 $114,000

$65,000

On August 31, Planar Corp. exchanged 100,000 shares of its $40 par value common stock for all of the net assets of Sistrock Co. The fair value of Planar's common stock on August 31 was $72 per share. Planar paid a fee of $320,000 to the consultant who arranged this acquisition. Direct costs of registering and issuing the equity securities amounted to $160,000. No goodwill or bargain purchase was involved in the acquisition. At what amount should Planar record the acquisition of Sistrock's net assets? $7,200,000 $7,360,000 $7,520,000 $7,680,000

$7,200,000

Par Corp. owns 60% of Sub Corp.'s outstanding capital stock. On May 1, Par advanced Sub $70,000 in cash, which was still outstanding at December 31. What portion of this advance should be eliminated in the preparation of the December 31 consolidated balance sheet? $70,000 $42,000 $28,000 $0

$70,000

On November 30, Pindar Co. purchased for cash at $30 per share all 250,000 shares of the outstanding common stock of Shimoda Co., a business entity. Shimoda reported net assets on that date with a carrying amount of $6 million. This amount reflected acquisition-date fair value except for property, plant, and equipment, which had a fair value that exceeded its carrying amount by $800,000. In its November 30 consolidated balance sheet, what amount should Pindar report as goodwill? $1,500,000 $800,000 $700,000 $0

$700,000

Zest Co. owns 100% of Cinn, Inc. On January 2, Zest sold equipment with an original cost of $80,000 and a carrying amount of $48,000 to Cinn for $72,000. Zest had been depreciating the equipment over a 5-year period using straight-line depreciation with no residual value. Cinn is using straight-line depreciation over 3 years with no residual value. In Zest's December 31 consolidating worksheet, by what amount should depreciation expense be decreased? $0 $8,000 $16,000 $24,000

$8,000

West, Inc., acquired 60% of East Co.'s outstanding common stock. West paid $800,000 to acquire the stock. West plans to relocate East's company headquarters, which is expected to cost between $100,000 and $300,000. The present value of the probability-adjusted relocation cost is $240,000. What is West's acquisition cost? $800,000 $900,000 $1,040,000 $1,100,000

$800,000

Tulip Co. owns 100% of Daisy Co.'s outstanding common stock. Tulip's cost of goods sold for the year totals $600,000, and Daisy's cost of goods sold totals $400,000. During the year, Tulip sold inventory costing $60,000 to Daisy for $100,000. By the end of the year, all transferred inventory was sold to third parties. What amount should be reported as cost of goods sold in the consolidated statement of income? $900,000 $940,000 $960,000 $1,000,000

$900,000

Port, Inc., owns 100% of Salem, Inc. On January 1, Port sold Salem delivery equipment at a gain. Port had owned the equipment for 2 years and used a 5-year straight-line depreciation rate with no residual value. Salem is using a 3-year straight-line depreciation rate with no residual value for the equipment. In the consolidated income statement, Salem's recorded depreciation expense on the equipment for the year will be decreased by 20% of the gain on sale 33 1/3% of the gain on sale 50% of the gain on sale 100% of the gain on sale

33 1/3% gain on sale

Which one of the following should be classified as a cash flow from an operating activity on the statement of cash flows? A decrease in accounts payable during the year. An increase in cash resulting from the issuance of previously authorized common stock. The payment of cash for the purchase of additional equipment needed for current production. The payment of a cash dividend from money arising from current operations.

A decrease in accounts payable during the year.

An entity sponsors a defined benefit pension plan that is underfunded by $800,000. A $500,000 increase in the fair value of plan assets would have which of the following effects on the financial statements of the entity? An increase in the assets of the entity. An increase in accumulated other comprehensive income of the entity for the full amount of the increase in the value of the assets. A decrease in accumulated other comprehensive income of the entity for the full amount of the increase in the value of the assets. A decrease in the liabilities of the entity.

A decrease in the liabilities of the entity.

Acquirer Corporation acquired for cash at $10 per share 100,000 shares of the outstanding common stock of Acquiree Company. The total fair value of the identifiable assets acquired minus liabilities assumed of Acquiree was $1.4 million on the acquisition date, including the fair value of its property, plant, and equipment (its only noncurrent asset) of $250,000. The consolidated financial statements of Acquirer Corporation and its wholly owned subsidiary must reflect A deferred credit of $150,000 Goodwill of $150,000 A gain of $150,000 A gain of $400,000

A gain of $400,000

Which collection is reported as an investing activity in statement of cash flows? Proceeds from a note payable A note receivable from a related party An overdue account receivable from a customer A tax refund

A note receivable from a related party

Which of the following is not disclosed on the statement of cash flows when prepared under the direct method, either on the face of the statement or in a separate schedule? The major classes of gross cash receipts and gross cash payments. The amount of income taxes paid. A reconciliation of net income to net cash flow from operations. A reconciliation of ending retained earnings to net cash flow from operations.

A reconciliation of ending retained earnings to net cash flow from operations.

A significant noncash transaction that need not be reported in disclosures related to the statement of cash flows is The acquisition of assets by assuming directly related liabilities Obtaining a building by donation A stock dividend declared during the year An issuance of equity securities to retire debt

A stock dividend declared during the year

How should the acquirer recognize a bargain purchase in a business acquisition? As negative goodwill in the statement of financial position As goodwill in the statement of financial position As a gain in earnings at the acquisition date As a deferred gain that is amortized into earnings over the estimated future periods benefited.

As a gain in earnings at the acquisition date

Payne Co. prepares its statement of cash flows using the indirect method. Payne's unamortized bond discount account decreased by $25,000 during the year. How should Payne report the change in unamortized bond discount in its statement of cash flows? As a financing cash inflow As a financing cash outflow As an addition to net income in the operating activities section As a subtraction from net income in the operating activities section

As an addition to net income in the operating activities section

How should plan investments be reported in a defined benefit plan's financial statements? At actuarial present value At cost At net realizable value At fair value

At fair value

Which of the following items is included in the financing activities section of the statement of cash flows? Cash effects of transactions involving making and collecting loans. Cash effects of acquiring and disposing of investments and property, plant, and equipment. Cash effects of transactions obtaining resources from owners and providing them with a return on their investment. Cash effects of transactions that enter into the determination of net income.

Cash effects of transactions obtaining resources from owners and providing them with a return on their investment.

Which of the following should not be disclosed in an enterprise's statement of cash flows prepared using the indirect method? Interest paid, net amounts capitalized Income taxed paid Cash flow per share Dividends paid on preferred stock

Cash flow per share

Dividends paid to shareholders are shown on the statement of cash flows as Operating cash inflows Operating cash outflows Cash flows from investing activities Cash flows from financing activities

Cash flows from financing activities

Which of the following cash flows per share should be reported in a statement of cash flows? Primary cash flows per share only Fully diluted cash flows per share only Both basic and diluted cash flows per share Cash flows per share should not be reported

Cash flows per share should not be reported

During the current year, Beck Co. purchased equipment for cash of $47,000, and sold equipment with a $10,000 carrying amount for a gain of $5,000. How should these transactions be reported in Beck's current-year statement of cash flows? Cash outflow of $32,000 Cash outflow of $42,000 Cash inflow of $5,000 and cash outflow of $47,000 Cash inflow of $15,000 and cash outflow of $47,000

Cash inflow of $15,000 and cash outflow of $47,000

A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the remaining balance. In a statement of cash flows, what amount is included in investing activities for this transaction? Cash payment Acquisition price of the building Zero Mortgage amount

Cash payment

In the consolidated financial statements of a parent and its 90%-owned subsidiary. Comprehensive income or loss attributable to the parent and the noncontrolling interest is reported at separate amounts. Consolidated net income or loss is the amount attributable to the parent. Consolidated equity is the amount attributable to the parent. Revenues and expenses are reported at the separate amounts attributable to the parent and the noncontrolling interest.

Comprehensive income or loss attributable to the parent and the noncontrolling interest is reported at separate amounts.

When the direct method of preparing a statement of cash flows is used, an enterprise should provide a reconciliation of net income to net cash flows from which activity? Investing Financing Operating No reconciliation should be provided

Operating

Which one of the following would result in a decrease in cash flow measured under the indirect method of preparing a statement of cash flows? Amortization expense Decrease in income taxes payable Proceeds from the issuance of common stock Decrease in inventories

Decrease in income taxes payable

On December 31, Year 1, Entity A contributed $30,000 to a defined contribution pension plan. The contribution required by the plan's formula for Year 1 is $45,000. What is the effect of these events on Entity A's working capital? Decrease of $45,000 Decrease of $30,000 Decrease of $15,000 Increase of $15,000

Decrease of $45,000

In a statement of cash flows prepared using the indirect method, a gain on the sale of a long-term investment should be Deducted from income from continuing operations Added to income from continuing operations Reported as an inflow and outflow of cash Reported as an outflow of cash

Deducted from income from continuing operations

In a statement of cash flows (indirect method) of a business, an increase in inventories should be presented as a(n) Outflow of cash Inflow and outflow of cash Addition to income from continuing operations Deduction from income from continuing operations

Deduction from income from continuing operations

When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of Reliability Materiality Legal entity Economic entity

Economic entity

An employer's accounting for single-employer defined pension plan is based on the fundamental assumption that such a plan is part of an employee's compensation incurred when the Defined pension benefit becomes vested Defined pension benefit is paid Defined pension benefit becomes a legal obligation Employee's services are rendered

Employee's services are rendered

Consolidated financial statements are prepared when a parent-subsidiary relationship exists in recognition of the accounting concept of Materiality Entity Verifiability Going concern

Entity

The computations required to prepare the statement of cash flows include all of the following except Borrowing via notes payable or bonds The sale of goods or services Equipment purchased with a note payable The sale of investments in debt or equity securities

Equipment purchased with a note payable

All of the following are classifications on the statement of cash flows except Operating activities Equity activities Investing activities Financing activities

Equity activities

An entity that maintains a defined benefit pension plan for its employees reports an unfunded projected benefit obligation (PBO). This amount is the Excess of the PBO over the fair value of plan assets Excess of the PBO over the vested benefit obligation (VBO) Pension asset recognized in the balance sheet Excess of the vested benefit obligation (VBO) over the fair value of plan assets

Excess of the PBO over the fair value of plan assets

Bale Co. incurred $100,000 of acquisition costs related to the purchase of the net assets of Dixon Co. The net assets acquired constitute a business. The $100,000 should be Allocated on a pro rata basis to the nonmonetary assets acquired Capitalized as part of goodwill and tested annually for impairment Capitalized as an other asset and amortized over 5 years Expensed as incurred in the current period

Expensed as incurred in the current period

In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from Lending activities Operating activities Investing activities Financing activities

Financing activities

When using the statement of cash flows to evaluate a company's continuing solvency, the most important factor to consider is the cash Balance at the end of the period Flows from (used for) operating activities Flows from (used for) investing activities Flows from (used for) financing activities

Flows from (used for) operating activities

Which of the following transactions is included in the operating activities section of a cash flow statement prepared using the indirect method? Gain on sale of plant asset Sale of property, plant, and equipment Payment of cash dividend to the shareholders Issuance of common stock to the shareholders

Gain on sale of plant asset

For purposes of consolidating financial interests, a majority voting interest is deemed to be 50% of the directly or indirectly owned outstanding voting shares of another entity. 50% of the directly or indirectly owned outstanding voting shares and at least 50% of the directly or indirectly owned outstanding nonvoting shares of another entity. Greater than 50% of the directly or indirectly owned outstanding voting shares of another entity. Greater than 50% of the directly or indirectly owned outstanding voting shares and at least 50% of the directly or indirectly owned outstanding nonvoting shares of another entity.

Greater than 50% of the directly or indirectly owned outstanding voting shares of another entity.

How should the amortization of bond discount on long-term debt be reported in a statement of cash flows prepared using the indirect method? As a financing activities inflow As a financing activities outflow In operating activities as a deduction from income In operating activities as an addition to income

In operating activities as an addition to income

P Co. purchased term bonds at a premium on the open market. These bonds represented 20% of the outstanding class of bonds issued at a discount by S Co., P's wholly owned subsidiary. P intends to hold the bonds until maturity. In a consolidated balance sheet, the difference between the bond carrying amounts of the two companies is Included as a decrease in retained earnings. Included as an increase in retained earnings. Reported as a deferred debit to be amortized over the remaining life of the bonds. Reported as a deferred credit to be amortized over the remaining life of the bonds.

Included as a decrease in retained earnings.

Interest cost included in the pension expense recognized for a period by an employer sponsoring a defined benefit pension plan represents the Shortage between the expected and actual return on plan assets Increase in the projected benefit obligation resulting form the passage of time Increase in the fair value of plan assets resulting from the passage of time Amortization of prior service cost

Increase in the projected benefit obligation resulting from the passage of time

In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents and debt instruments acquired specifically for resale) should be classified as cash outflows for Operating activities Investing activities Financing activities Lending activities

Investing activities

In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from Operating activities Financing activities Investing activities Selling activities

Investing activities

The sale of available-for-sale debt securities should be accounted for on the statement of cash flows as a(n) Operating activity Investing activity Financing activity Noncash investing and financing activity

Investing activity

A 70%-owned subsidiary declares and pays a cash dividend. What effect does the dividend have on the retained earnings and noncontrolling interest balances in the consolidated balance sheet? No effect on either retained earnings or the noncontrolling interest. No effect on retained earnings and a decrease in the noncontrolling interest. Decreases in both retained earnings and the noncontrolling interest. A decrease in retained earnings and no effect on the noncontrolling interest.

No effect on retained earnings and a decrease in the noncontrolling interest.

Kelli Company acquired land by assuming a mortgage for the full acquisition cost. This transaction should be disclosed on Kelli's statement of cash flows as a(n) Financing activity Investing activity Operating activity Noncash financing and investing activity

Noncash financing and investing activity

An overfunded single-employer defined benefit postretirement plan should be recognized in a classified statement of financial position as a Noncurrent liability Current liability Noncurrent asset Current asset

Noncurrent asset

Mend Co. purchased a 3-month U.S. Treasury bill. Mend's policy is to treat as cash equivalents all highly liquid investments with an original maturity of 3 months or less when purchased. How should this purchase be reported in Mend's statement of cash flows? As an outflow from operating activities As an outflow from investing activities As an outflow from financing activities Not reported

Not reported

In a business combination, the valuation of goodwill is a calculation To offset the bargain purchase cost Of all of the unlimited life intangible assets Of the residual paid above fair value of the identifiable net assets Of all of the increases in market valuation of the intangible assets acquired

Of the residual paid above the fair value of the identifiable net assets

During the current year, Ace Co. amortized a bond discount. Ace prepares its statement of cash flows using the indirect method. In which section of the statement should Ace report the amortization of the bond discount? Financing activities Operating activities Investing activities Supplemental disclosures

Operating activities

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for Operating activities Borrowing activities Lending activitied Financing activities

Operating activities

A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders? Financing, investing, operating Investing, financing, operating Operating, financing, investing Operating, investing, financing

Operating, investing, financing

A company has an underfunded defined benefit pension plan. During the current year, the company uses the years-of-service method to amortize its prior service cost. What effect will the amortization of prior service cost have on the company's current-year financial statements? Total liabilities will be decreased Net income will be increased Current-period expenses will be decreased Other comprehensive income will be increased

Other comprehensive income will be increased

During the year, Deltech, Inc., acquired a long-term productive asset for $5,000 and also borrowed $10,000 from a local bank. These transactions should be reported on Deltech's statement of cash flows as Outflows for investing activities, $5,000; inflows from financing activities, $10,000. Inflows from investing activities, $10,000; outflows for financing activities, $5,000. Outflows for operating activities, $5,000; inflows from financing activities, $10,000. Outflows for financing activities, $5,000; inflows from investing activities, $10,000.

Outflows for investing activities, $5,000; inflows from financing activities, $10,000.

In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment Plus the gain Plus the gain and less the amount of tax attributable to the gain Plus both the gain and the amount of tax attributable to the gain With no addition or subtraction

Plus the gain

GAAP relevant to employers' accounting for pensions apply primarily to defined benefit pension plans. It defines the projected benefit obligation as the Present value of benefits accrued to date based on future compensation levels. Present value of benefits accrued to date based on current compensation levels. Increase in retroactive benefits at the date of the amendment of the plan. Amount of the adjustment necessary to reflect the difference between actual and estimated actuarial returns.

Present value of benefits accrued to date based on future compensation

Depreciation expense is added to net income under the indirect method of preparing a statement of cash flows in order to Report all assets at gross carrying amount Ensure depreciation has been properly reported Reverse noncash charges deducted from net income Calculate net carrying amount

Reverse noncash charges deducted from net income

Which of the following transactions should be classified as investing activities on an entity's statement of cash flows? Increase in accounts receivable Sale of property, plant, and equipment Payment of cash dividend to the shareholders Issuance of common stock to the shareholders

Sale of property, plant, and equipment

An employee's right to obtain pension benefits regardless of whether (s)he remains employed is the Prior service cost Defined benefit Vested interest Minimum liability

Vested interest

Perez, Inc., owns 80% of Senior, Inc. During the year just ended, Perez sold goods with a 40% gross profit to Senior. Senior sold all of these goods during the year. In its consolidated financial statements for the year, how should the summation of Perez and Senior income statement items be adjusted? Sales and cost of goods sold should be reduced by the intraentity sales. Sales and cost of goods sold should be reduced by 80% of the intraentity sales. Net income should be reduced by 80% of the gross profit on intraentity sales. No adjustment is necessary.

Sales and cost of goods sold should be reduced by the intraentity sales.

A public entity that sponsors a defined benefit pension plan must disclose in the notes to its financial statements a reconciliation of The vested and nonvested benefit obligation of its pension plan with the accumulated benefit obligation. The accrued or prepaid pension cost reported in its balance sheet with the pension expense reported in its income statement. The accumulated benefit obligation of its pension plan with its projected benefit obligation. The beginning and ending balances of the projected benefit obligation.

The beginning and ending balances of the projected benefit obligation.

Which statement is true regarding a defined benefit pension plan? A defined benefit plan defines the annual amount of cash that an employer must deposit to fulfill its pension obligation to employees. No investment risk is borne by an employer. At the end of the reporting period, an employer can measure exactly the total amount of pension benefits that it is responsible for providing to employees in the future. The benefits to be paid to employees depend on events that are beyond the employer's control.

The benefits to be paid to employees depend on events that are beyond the employer's control

The primary purpose of a statement of cash flows is to provide relevant information about Differences between net income and associated cash receipts and disbursements. An entity's ability to generate future positive net cash flows. The cash receipts and cash disbursements of an entity during a period. An entity's ability to meet cash operating needs.

The cash receipts and cash disbursements of an entity during a period.

With respect to the content and form of the statement of cash flows, The pronouncements covering the cash flow statement encourage the use of the indirect method. The indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations. The direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments. The reconciliation of the net income to net operating cash flow need not be presented when using the direct method.

The direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments.

On July 31, Year 1, Tern Co. amended its single employee defined benefit pension plan by granting increased benefits for services provided prior to Year 1. This prior service cost will be reflected in the financial statement(s) for Years before Year 1 only Year 1 only Year 1 and years before and following Year 1 Year 1 and following years only

Year 1 and following years only

Each of the following is a component of the changes in the net assets available for benefits of a defined benefit pension plan trust except The net change in fair value of each significant class of investments. The net change in the actuarial present value of accumulated plan benefits. Contributions from the employer and participants. Benefits paid to participants.

The net change in the actuarial present value of accumulated plan benefits.

Certain accounting treatments not ordinarily allowed under GAAP are allowed in an employer's accounting for pensions. Which of the following accounting treatments is generally allowed in accounting for defined benefit pension plans? The tax basis of accounting The cash or modified cash basis of accounting The offsetting of assets and liabilities The immediate recognition of all costs

The offsetting of assets and liabilities

The funded status of a defined benefit pension plan for a company should be reported in The income statement The statement of cash flows The statement of financial position The notes to the financial statements only

The statement of financial position

Water Co. owns 80% of the outstanding common stock of Fire Co. On December 31, Year 3, Fire sold equipment to Water at a price in excess of Fire's carrying amount but less than its original cost. On a consolidated balance sheet at December 31, Year 3, the carrying amount of the equipment should be reported at Water's original cost Fire's original cost Water's original cost minus Fire's recorded gain Water's original cost minus 80% of Fire's recorded gain

Water's original cost minus Fire's recorded gain