Acct 2333 Ch 7-9 Test

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Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: For purposes of the profit or loss test, segment C's operating profit or (loss) is

$(200,000). External Rev $750,000 + I/E Sales $1,300,000 = Total Segment Sales $2,050,000 - Segment Expenses $2,250,000 = $200,000 Segment Loss

Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: What amount of dividends should Gardner Corp. recognize in its consolidated net income with respect to dividends received from Canning Co.?

$-0-

On June 1, Cagle Co. received a signed agreement to sell inventory for ¥650,000. The sale would take place in 90 days. Cagle immediately signed a 90-day forward contract to sell the yen as soon as they are received. The spot rate on June 1 was ¥1 = $0.003986, and the 90-day forward rate was ¥1 = $0.004021. At what amount would Cagle record the Forward Contract on June 1?

$0. Cagle will make no formal entry for the forward contract because it is an executory contract (no cash changes hands) and has a fair value of zero.

Curtis purchased inventory on December 1, 2020. Payment of 250,000 stickles was to be made in sixty days. Also on December 1, Curtis signed a contract to purchase §250,000 in sixty days. The spot rate was §1 = 0.33682, and the 60-day forward rate was §1 = $0.36842. On December 31, the spot rate was §1 = 0.32438 and the 30-day forward rate was §1 = 0.36386. At what amount should the Forward Contract account be recorded on December 1?

$0. Curtis will make no formal entry for the forward contract because it is an executory contract (no cash changes hands) and has a fair value of zero.

Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of 250,000 pounds, with delivery and payment to be made on October 24, 2021. On July 24, 2021, Woolsey purchased a three-month put option for 250,000 British pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction expected to be completed in late October, 2021. The following exchange rates apply: What amount will Woolsey record for the forecasted sale on July 24?

$0. There is no entry to record the forecasted sale.

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was entered into on December 16, at what amount should the forward contract be recorded at December 31, 2021? Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is 0.9901.

$1,188. $0.00089 − $0.00083 = $0.00006 × 0.9901 × FC 20,000,000 = $1,188.12

Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: The accrual-based net income of Gardner Corp. is calculated to be

$1,272,800.

Wayne, Inc. has four operating segments with the following information: What is the minimum amount of revenue an operating segment must have to be considered a reportable segment?

$1,355,200. External revenue ($2,600,000 + $3,200,000 + $5,350,000 + $1,780,000) + Intersegment transfer ($380,000 + $125,000 + $117,000) = $13,552,000 × 10% = $1,355,200

$1,425,000.

Clark Stone purchases raw material from its foreign supplier, Rinne Clay, on May 8. Payment of 1,500,000 foreign currency units (FC) is due in 30 days. May 31 is Clark's fiscal year-end. The pertinent exchange rates were as follows: May 8Spot rate:$1.16 May 31Spot rate:$1.18 June 7Spot rate:$1.12 How much US $ will it cost Clark to finally pay the payable on June 7?

$1,680,000. $1.12 × FC 1,500,000 = $1,680,000 A/P

Clark Co., a U.S. corporation, sold inventory on December 1, 2021, with payment of 12,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Dec. 1 Spot rate:$1.831 Dec. 31Spot rate:$1.976 Jan. 30Spot rate:$1.768 What amount of foreign exchange gain or loss should be recorded on December 31?

$1,740 gain. $1.976 − $1.831 = $0.145 × £12,000 = $1,740 gain

Clark Stone purchases raw material from its foreign supplier, Rinne Clay, on May 8. Payment of 1,500,000 foreign currency units (FC) is due in 30 days. May 31 is Clark's fiscal year-end. The pertinent exchange rates were as follows: May 8Spot rate:$1.16 May 31Spot rate:$1.18 June 7Spot rate:$1.12 For what amount should Clark's Accounts Payable be credited on May 8?

$1,740,000. $1.16 × FC 1,500,000 = $1,740,000 A/P

On May 1, 2021, Mosby Company received an order to sell a machine to a customer in Canada at a price of 2,000,000 Mexican pesos. The machine was shipped and payment was received on March 1, 2022. On May 1, 2021, Mosby purchased a put option giving it the right to sell 2,000,000 pesos on March 1, 2022 at a price of $190,000. Mosby properly designates the option as a fair value hedge of the peso firm commitment. The option cost $3,000 and had a fair value of $3,200 on December 31, 2021. The following spot exchange rates apply: What was the impact on Mosby's 2021 net income as a result of this fair value hedge of a firm commitment?

$1,800 decrease. $0.094 − $0.095 = ($0.001) × MP 2,000,000 = ($2,000) Loss on Firm Commitment $3,200 − $3,000 = $200 Option Value Increase ($2,000) Loss on Firm Commitment + $200 Option Value Increase = ($1,800) Reduction in 2021 Net Income

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: When totaling the revenues to use as the basis for the 75% rule, what is the 75% hurdle that must be exceeded by the revenues of the reportable segments?

$12,750,000. External Rev $17,000,000 × 0.75 = $12,750,000

The Charlton Co. had three operating segments with the following information: In addition, revenues generated at corporate headquarters are $1,500. Combined segment revenues are calculated to be

$30,680. (Total External Rev $11,450 + $5,800 + $8,900) + (Total I/E Sales $960 + $1,500 + $2,070) = $30,680 Combined Segment Revenues

Brandon Co., a U.S. corporation, sold inventory on credit to a British company on April 8, 2021. Brandon received payment of 40,000 British pounds on May 8, 2021. The exchange rate was £1 = $1.56 on April 8 and £1 = 1.45 on May 8. What amount of foreign exchange gain or loss should be recognized? (Round to the nearest dollar.)

$4,400 loss $1.45 − $1.56 = ($0.11) × £40,000 = ($4,400) Loss

Wayne, Inc. has four operating segments with the following information: What is the minimum amount of assets an operating segment must have to be considered a reportable segment?

$4,430,000. $10,800,000 + $12,000,000 + $18,000,000 + $3,500,000 = $44,300,000 × 10% = $4,430,000 Threshold for Segment Asset Reporting

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was not entered into, what would be the net impact on Jackson Corp.'s 2021 income statement related to this transaction?

$400 (loss). $0.00080 − $0.00082 = ($0.00002) × FC 20,000,000 = ($400) Loss

Florrick Co. owns 85% of Bishop Inc. The two companies file a consolidated income tax return and Florrick uses the initial value method to account for the investment. The following information is available from the two companies' financial statements: The income tax rate was 40%. What is the amount of income tax expense that should be assigned to Bishop using the percentage allocation method?

$41,420

Nelson Co. ordered parts costing §120,000 from a foreign supplier on May 12 when the spot rate was $0.31 per stickle. A one-month forward contract was signed on that date to purchase §120,000 at a forward rate of $0.32 per stickle. On June 12, when the parts were received and payment was made, the spot rate was $0.36 per stickle. At what amount should inventory be reported?

$43,200. $0.36 × §120,000 = $43,200

Authoritative literature provides guidance for hedges of the following sources of foreign exchange risk. I. Recognized foreign currency denominated assets and liabilities. II. Unrecognized foreign currency firm commitments. III. Forecasted foreign currency denominated transactions.

I, II, and III

Which of the following is false with regard to accounting standards for segment reporting according to International Financial Reporting Standards (IFRS) and U.S. GAAP? IFRS and U.S. GAAP do not each require disclosure of segment liabilities. IFRS and U.S. GAAP both require disclosure of intangible assets attributable to geographic segments. Correct According to IFRS, operating segments can be based on products and services. According to IFRS, operating segments can be based on geographic areas. IFRS and U.S. GAAP both require disclosure of total assets.

IFRS and U.S. GAAP both require disclosure of intangible assets attributable to geographic segments.

How should discontinued operations be reported in an interim report? Include in the gain or loss section of the interim report and include the tax with all other income tax. Include as discontinued operations, net of tax, if the component of the business is classified as held-for-sale or is discontinued in the interim period. Correct Include net of the tax estimated specifically for the discontinued operations. Include with other operations in the interim period but include the amount net of its specific tax. Include with other operations in interim periods until the annual financial statement is prepared.

Include as discontinued operations, net of tax, if the component of the business is classified as held-for-sale or is discontinued in the interim period.

On October 1, 2021, Eagle Company forecasts the purchase of inventory from a British supplier on February 1, 2022, at a price of 100,000 British pounds. On October 1, 2021, Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of $2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2021, the option has a fair value of $1,600. The following spot exchange rates apply: What journal entry should Eagle prepare for the option on December 31, 2021?

Option D. Other Comprehensive Income 200 Foreign Currency Option 200

Option E. Foreign Currency Option 1,800 Cash 1,800

Williams, Inc., a U.S. company, has a Japanese yen account receivable resulting from an export sale on March 1 to a customer in Japan. The exporter signed a forward contract on March 1 to sell yen and designated it as a cash flow hedge of a recognized receivable. The spot rate was $0.0094, and the forward rate was $0.0095. Which of the following would the U.S. exporter allocate over the life of the forward contract?

Premium as an increase in net income.

For speculative derivatives, the change in the fair value of the derivative must be: Utilized to adjust the derivative asset. Recognized immediately as a gain or loss in net income. Recognized as a loss in other comprehensive income. Recognized as a gain in other comprehensive income. Recognized as a gain or loss in net income at a later date.

Recognized immediately as a gain or loss in net income.

Which tests must a company use to determine which operating segments require separate disclosure? Revenue test and asset test. Revenue test, profit or loss test, and asset test. Correct Revenue test and profit or loss test. Profit or loss test and asset test. Revenue test, asset test, and liability test.

Revenue test, profit or loss test, and asset test.

Which of the following statements is true regarding the reporting of revenues in an interim report? Revenues should be recognized on the income tax basis for interim reporting. Revenues should be recognized in interim periods in the same way as they are on an annual basis. Correct Projected losses on long-term contracts should be deferred to the annual report. The percentage-of-completion method of reporting long-term construction projects is not an acceptable method for interim reporting. Revenues should be recognized on the cash basis of accounting for interim reporting.

Revenues should be recognized in interim periods in the same way as they are on an annual basis.

Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned 35% of Tayle. When Buckette prepares consolidated financial statements, it should include

Shuvelle and Tayle.

Wayne, Inc. has four operating segments with the following information: What is the minimum amount of operating profit or loss an operating segment must have to be considered a reportable segment?

Tables $1,080,000 + Bookcases $1,000,000 + Cabinets $995,000 = Total Profitable Segments $3,075,000 × 10% = $307,500 Threshold for Segment Profit/Loss Reporting $307,500.

Wayne, Inc. has four operating segments with the following information: Which operating segments are separately reportable under the revenue test?

Tables, Bookcases, Cabinets, and Chairs. All Segments with Revenues > $1,355,200

Wayne, Inc. has four operating segments with the following information: Which operating segments are separately reportable under the asset test?

Tables, Bookcases, and Cabinets. All Segments with Assets > $4,430,000

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was entered into on December 16, how would the forward contract be reflected on Jackson's December 31, 2021 balance sheet?

Forward contract (asset).

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2021 at a:

Forward contract premium $1,400. $0.00089 − $0.00082 = $0.00007 × FC 20,000,000 = $1,400 Premium

Winston Corp., a U.S. company, had the following foreign currency transactions during 2021: (1.) Purchased merchandise from a foreign supplier on July 16, 2021 for the U.S. dollar equivalent of $47,000 and paid the invoice on August 3, 2021 at the U.S. dollar equivalent of $54,000. (2.) On October 15, 2021 borrowed the U.S. dollar equivalent of $315,000 evidenced by a non-interest-bearing note payable in euros on October 15, 2022. The U.S. dollar equivalent of the note amount was $295,000 on December 31, 2021, and $299,000 on October 15, 2022. What amount should be included as a foreign exchange gain or loss from the two transactions for 2021?

$13,000 gain. [$47,000 − $54,000 = ($7,000) Loss] + [$315,000 − $295,000 = $20,000 Gain] = $13,000 Gain

On January 1, 2021, Harley Company bought 15% of Buttercup Company. Harley paid $200,000 for these shares, an amount that exactly equaled the proportionate book value of Buttercup. On January 1, 2022, Buttercup acquired 80% ownership of Harley. The following data are available concerning Buttercup's acquisition of Harley: Consideration transferred for 80% interest, January 1, 2022: $1,000,000 Harley's reported book value, January 1, 2022: 1,200,000 Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies. The following information is available regarding Harley and Buttercup: Compute the net income attributable to the noncontrolling interest for 2022

$13,600. $60,000 (reported separate income) + $10,500 (dividend) − $2,500 (amortization) = $68,000 × 20% = $13,600.

Britain Corporation acquires all of English, Inc. for $800,000 cash. On that date, English has net assets with fair value of $750,000 but a book value and tax basis of $500,000. The tax rate is 35%. Prior to this date, neither Britain nor English has reported any deferred income tax assets or liabilities. What amount of goodwill should be recognized on the date of the acquisition?

$137,500. Consideration transferred (cash) $800,000 To net assets at fair value$750,000 To deferred tax liability on net assets [($750,000 − $500,000) × 35%] (87,500) 662,500 Goodwill $137,500

Schrute Inc. had a receivable from a foreign customer that is due in the local currency of the customer (stickles). On December 31, 2021, this receivable for §200,000 was correctly included in Schrute's balance sheet at $167,000. When the receivable was collected on February 15, 2022, the U.S. dollar equivalent was $181,000. In Schrute's 2022 consolidated income statement, how much should have been reported as a foreign exchange gain?

$14,000. $181,000 − $167,000 = $14,000 Gain

Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: For Gardner Corp. and consolidated subsidiaries, what total amount would be reported for the net income attributable to the noncontrolling interest?

$152,200.

Priestly Corporation's revenues for the year ended December 31, 2020, were as follows: Consolidated Revenue per the Income Statement: $1,400,000 Division 1 Intersegment Sales: $200,000 Division 2 Intersegment Sales: $80,000 For purposes of the Revenue Test, what amount will be used as the benchmark for determining whether a segment is reportable?

$168,000. Consolidated Revenue $1,400,000 + Upstream I/E Sales $200,000 + Downstream I/E Sales $80,000 = $1,680,000 × 10% = $168,000

$188,800 increase. [$190,000 Sales Revenue] − [$3,000 Cost of Option] + [$1,800 Adjustment from 2021 Net Income] = $188,800 Increase to 2022 Net Income

$2,496 loss. $1.768 − $1.976 = ($0.208) × £12,000 = ($2,496) Loss

Clark Co., a U.S. corporation, sold inventory on December 1, 2021, with payment of 12,000 British pounds to be received in sixty days. The pertinent exchange rates were as follows: Dec. 1 Spot rate:$1.831 Dec. 31Spot rate:$1.976 Jan. 30Spot rate:$1.768 For what amount should Sales be credited on December 1?

$21,972. December 1st Spot Rate $1.831 × £12,000 = $21,972 Sales Revenue

On January 1, 2021, Harley Company bought 15% of Buttercup Company. Harley paid $200,000 for these shares, an amount that exactly equaled the proportionate book value of Buttercup. On January 1, 2022, Buttercup acquired 80% ownership of Harley. The following data are available concerning Buttercup's acquisition of Harley: Consideration transferred for 80% interest, January 1, 2022: $1,000,000 Harley's reported book value, January 1, 2022: 1,200,000 Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies. The following information is available regarding Harley and Buttercup: Compute Buttercup's accrual-based consolidated net income for 2022

$233,500. Parent's Accrual-based net income ($180,000 + $16,000 − $10,500) = $185,500 + Parent's Portion of Subsidiary's Accrual-based net income ($60,000 × 80%) $48,000 = $233,500

Lawrence Company, a U.S. company, ordered parts costing 1,000,000 Thailand bahts from a foreign supplier on July 7 when the spot rate was $0.025 per baht. A one-month forward contract was signed on that date to purchase 1,000,000 bahts at a rate of $0.027. The forward contract is properly designated as a fair value hedge of the 1,000,000 baht firm commitment. On August 7, when the parts are received, the spot rate is $0.028. What is the amount of accounts payable that will be paid at this date?

$28,000. $0.028 × ฿1,000,000 = $28,000

Clark Stone purchases raw material from its foreign supplier, Rinne Clay, on May 8. Payment of 1,500,000 foreign currency units (FC) is due in 30 days. May 31 is Clark's fiscal year-end. The pertinent exchange rates were as follows: May 8Spot rate:$1.16 May 31Spot rate:$1.18 June 7Spot rate:$1.12 How much Foreign Exchange Gain or Loss should Clark record on May 31?

$30,000 loss. $1.18 − $1.16 = ($0.02) × FC 1,500,000 = ($30,000) Loss

Woof Co. acquired all of Meow Co. for $502,000 cash in a tax-free transaction. On that date, the subsidiary had net assets with a $480,000 fair value but a $400,000 book value and income tax basis. The income tax rate was 30%. What amount of goodwill should have been recognized on the date of the acquisition?

$46,000. FV ($480,000) − Tax Basis ($400,000) = Temporary Tax Difference ($80,000) × 30% = Deferred Tax Liability ($24,000) + [Cash Paid ($502,000) − FV Assets ($480,000)] $22,000 = Goodwill ($46,000)

On January 1, 2021, Harley Company bought 15% of Buttercup Company. Harley paid $200,000 for these shares, an amount that exactly equaled the proportionate book value of Buttercup. On January 1, 2022, Buttercup acquired 80% ownership of Harley. The following data are available concerning Buttercup's acquisition of Harley: Consideration transferred for 80% interest, January 1, 2022: $1,000,000 Harley's reported book value, January 1, 2022: 1,200,000 Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies. The following information is available regarding Harley and Buttercup: Compute the amount allocated to trademarks recognized in the January 1, 2022 consolidated balance sheet.

$50,000. Acquisition-date fair value $1,000,000 ÷ 80% = $1,250,000 FV Harley − BV $1,200,000 = $50,000 Excess FV of Trademark

On December 1, 2021, Joseph Company, a U.S. company, entered into a three-month forward contract to purchase 50,000 pesos on March 1, 2022, as a fair value hedge of a foreign currency denominated account payable. The following U.S. dollar per peso exchange rates apply: Which of the following is included in Joseph's December 31, 2021 balance sheet for the forward contract?

$500 liability. $0.105 − $0.095 = ($0.010) × MP 50,000 = ($500.00) Liability

Florrick Co. owns 85% of Bishop Inc. The two companies file a consolidated income tax return and Florrick uses the initial value method to account for the investment. The following information is available from the two companies' financial statements: The income tax rate was 40%. What is the amount of taxable income reported on the consolidated income tax return?

$545,000.

On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What amount will Quality recognize in Sales from these transactions?

$548,000. [€400,000 × $1.36 = $544,000] (Alternate solution: [Recorded Sales (€400,000 × 1.37) − Amortized discount ((1.41 − 1.36) × €400,000) + Adjustment to close AOCI (20,000 − 4,000) = $544,000)]

Dog Corporation acquires all of Cat, Inc. for $400,000 cash. On that date, Cat has net assets with fair value of $350,000 but a book value and tax basis of $325,000. The tax rate is 30%. Prior to this date, neither Dog nor Cat has reported any deferred income tax assets or liabilities. What amount of goodwill should be recognized on the date of the acquisition?

$57,500. Consideration transferred (cash) $400,000 To net assets at fair value$350,000 To deferred tax liability on net assets [($350,000 − $325,000) × 30%] (7,500) 342,500 Goodwill $57,500

Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: The accrual-based net income of Lockhart Co. is calculated to be

$603,500.

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was entered into on December 16 as a fair value hedge, what would be the net foreign exchange gain or loss on Jackson's 2022 related to this transaction? Jackson amortizes forward points using the straight-line method. Ignore present values.

$700 (gain). The net effect will be a Foreign exchange gain equal to the amount of premium amortization for the period:[($0.00082 − $0.00089) × FC 20,000,000] = $1,400 Premium.$1,400 / 1 month × ½ month = $700 Amortization of premium for 2022.[($0.00086 − $0.00080) × FC 20,000,000] = $1,200 Foreign exchange gain to adjust Accounts receivable − [($0.00083 − $0.00086) × FC 20,000,000] = $600 Foreign exchange loss to adjust value of forward contract + $100 Foreign exchange gain to transfer deferred AOCI to net income and reflect current period's amortization of forward contract premium = $700 Net foreign exchange gain.

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: Assuming a forward contract was entered into on December 16 as a fair value hedge, what would be the net foreign exchange gain or loss on Jackson's 2021 income statement related to this transaction? Jackson amortizes forward points using the straight-line method. Ignore present values.

$700 (gain). [($0.00082 − $0.00089) × FC 20,000,000] = $1,400 Premium.$1,400 / 1 month × ½ month = $700 Amortization of premium for 2021.The net effect will be a Foreign exchange gain equal to the amount of premium amortization for the period:[($0.00089 − $0.00083) × FC 20,000,000] = $1,200 Foreign exchange gain to record forward contract − [($0.00082 − $0.00082) × FC 20,000,000] = $400 Foreign exchange loss to adjust Accounts receivable − $100 Foreign exchange loss recognized to adjust amount to reflect current period's amortization = $700 Net foreign exchange gain.

Wayne, Inc. has four operating segments with the following information: What is the operating profit or loss for the Cabinets segment?

$995,000. External revenue $5,350,000 + Intersegment transfer $125,000 − Segment expenses $4,480,000 = $995,000 Operating profit

Which of the following costs require similar treatment to Property Tax Expense in an interim financial report? 1) Annual major repairs. 2) Advertising expense. 3) Bonus expense, if estimable. 4) Quantity discounts based on annual sales.

1, 2, 3, and 4

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at the balance sheet date:

1. Adjust hedged asset or liability to fair value, with counterpart (change in fair value) reported as foreign exchange gain or loss in net income, 2. Adjust forward contract to fair value (either an asset or a liability), with counterpart (change in fair value) reported in OCI, 3. Recognize a loss or gain related to the hedging instrument to offset the foreign exchange gain or loss on the hedged item recognized in 1, and 4. Recognize a portion of the forward points (discount or premium) in net income with the counterpart reported in OCI.

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at initiation date requires which of the following?

1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability 2. No entry related to forward contract (zero fair value)

Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned 35% of Tayle. What percentage of Tayle's income is attributed to Buckette's ownership interest?

61%.

According to International Financial Reporting Standards (IFRS), all of the following are part of minimum components of interim financial reporting except: A condensed statement of cash flows. A condensed statement of financial position. A condensed statement of accumulated pension liabilities. Correct A condensed statement of net income and comprehensive income. A condensed statement of changes in equity.

A condensed statement of accumulated pension liabilities.

Buckette Co. owned 60% of Shuvelle Corp. and 40% of Tayle Corp., and Shuvelle owned 35% of Tayle. What is this pattern of ownership called?

A connecting affiliation.

For companies that provide quarterly reports, how is the fourth quarter reported? Every company that reports for the first three quarters must also publish a fourth-quarter report. A fourth-quarter report is not required. Correct Companies must publish a fourth-quarter report if there are significant changes from the third quarter. The SEC requires selected quarterly financial data to be reported separately as a fourth-quarter report. When fourth-quarter financial statements are provided, special accounting items of that quarter must also be separately disclosed in the annual financial statements.

A fourth-quarter report is not required.

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: According to the revenue test, which segments would require disaggregation?

A, B, D, and E. (Total External Rev + Total I/E Sales) × 10% = Threshold for Segment Reporting

Natarajan, Inc. had the following operating segments, with the indicated amounts of segment revenues and segment expenses: According to the profit or loss test, which segments would require disaggregation?

A, D, and E. The $2,150,000 in total profit is larger in an absolute sense than the $600,000 in losses. The $2,150,000 is the basis for the test and any segment with a profit or loss of $215,000 ($2,150,000 × 10%) or larger qualifies as a segment for disaggregation.

Generally accepted accounting principles require a U.S. corporation to disclose the following disaggregated information for each operating segment, except: Revenues from external customers. Unusual items. Cost of goods sold. Correct Depreciation expense. Intersegment revenues.

Cost of goods sold.

Which is a true statement regarding the fundamental requirement of accounting for derivatives? Derivatives are reported on the balance sheet only as an asset. Derivatives are reported on the balance sheet only as a liability. Changes in derivative cost basis are recorded in the asset value. Changes in derivative fair value are included in comprehensive income. Changes in derivative cost basis are recorded in the liability value.

Changes in derivative fair value are included in comprehensive income.

What is the appropriate treatment in an interim financial report for inventory that has cost below net realizable value?

There is no loss to report.

On January 1, 2021, Harley Company bought 15% of Buttercup Company. Harley paid $200,000 for these shares, an amount that exactly equaled the proportionate book value of Buttercup. On January 1, 2022, Buttercup acquired 80% ownership of Harley. The following data are available concerning Buttercup's acquisition of Harley: Consideration transferred for 80% interest, January 1, 2022: $1,000,000 Harley's reported book value, January 1, 2022: 1,200,000 Excess fair value over book value (assigned to trademarks) is amortized over 20 years. The initial value method is used by both companies. The following information is available regarding Harley and Buttercup: What would be included in a consolidation worksheet entry for 2022?

Debit treasury stock, $187,500. Acquisition-date fair value $1,000,000 ÷ 80% = $1,250,000 FV Harley × 15% = $187,500 Debit to Treasury Stock Account

D Corp. had investments, direct and indirect, in several subsidiaries: E Co. is a domestic firm in which D Corp. owned a 90% interest F Co. is a domestic firm in which D Corp. owned 60% and E Co. owned 30% G Co. is a domestic firm wholly owned by E Co. H Co. is a foreign subsidiary in which D Corp. owned a 90% interest I Co. is a domestic firm in which D Corp. owned 50% and G Co. owned 25% Which of these subsidiaries may be included in a consolidated income tax return?

E, F, and G.

Evanston Co. owned 60% of Montgomery Corp. Montgomery owned 75% of Noir Inc., and Noir owned 15% of Montgomery. This pattern of ownership would be called...

Mutual ownership.

Coulanger Corp. identified four operating segments: A, B, C, and D. Segment A met the revenue test for identifying reportable segments while Segment C met the revenue test, profit or loss test, and asset test. Segment B and Segment D did not meet any of these tests. Which of these segments must be disclosed separately?

Option C.

What is the appropriate treatment in an interim financial report for a LIFO liquidation? The LIFO liquidation is always ignored for interim reporting. The LIFO liquidation should always be reflected in gross profit on an interim income statement. The LIFO liquidation should always result in replacement cost valuation of ending inventory on the interim balance sheet and the interim income statement. The LIFO liquidation should always result in replacement cost valuation of ending inventory on the interim income statement but not the interim balance sheet. The LIFO liquidation should only be reflected in gross profit on an interim income statement if it is determined that it will not be replaced by year-end.

The LIFO liquidation should only be reflected in gross profit on an interim income statement if it is determined that it will not be replaced by year-end.

Which of the following is not a condition of accounting for hedge derivatives? The derivative is minimally effective in offsetting changes in the cash flows or fair value related to the hedged item. The derivative is properly documented as a hedge. The derivative is used to hedge a cash flow exposure to foreign exchange risk. The derivative is highly effective in offsetting changes in the cash flows or fair value related to the hedged item. The derivative is used to hedge a fair value exposure to foreign exchange risk.

The derivative is minimally effective in offsetting changes in the cash flows or fair value related to the hedged item.

All of the following data points are needed to determine the fair value of a forward contract (at any point), except The forward rate when the forward contract was entered into. The current forward rate for a contract that matures on the same date as the forward contract entered into. The forward rate for a contract that has the same duration as the forward contract entered into. A discount rate which is typically the company's incremental borrowing rate. A future rate which is typically the company's incremental borrowing rate.

The forward rate for a contract that has the same duration as the forward contract entered into.

A spot rate may be defined as

The price a foreign currency can be purchased or sold today.

When defining a reportable segment, which of the following conditions would be sufficient to allow a company to combine two operating segments for purposes of testing? The products sold by each segment are produced in the same plant. Both segments have several customers in common. The segments may sell different products, but they have a similar economic environment and similar business activities. Correct Both segments are required to adhere to U.S. Department of Labor regulations regarding immigration laws. Both segments are owned by the same parent company.

The segments may sell different products, but they have a similar economic environment and similar business activities.

In a tax-free business combination, The income tax basis for acquired assets and liabilities is adjusted to current fair value. Any goodwill created by the combination may be amortized in calculating taxable income. The subsidiary's assets and liabilities are assigned an income tax basis of zero dollars, so that they will have no future income tax consequences. Any goodwill created by the combination must be deducted in total in calculating taxable income. The subsidiary's cost basis for assets are retained for income tax calculations.

The subsidiary's cost basis for assets are retained for income tax calculations.

What is the appropriate treatment in an interim financial report for variances arising from the use of a standard costing system? The variances are always ignored for interim reporting. The variances should always be reflected in gross profit on an interim income statement. The variances expected to be absorbed by year-end should not be reflected in the interim statement. Correct The variances should always be reflected in the interim income statement but not the interim balance sheet. The variances should only be reflected in the interim balance sheet.

The variances expected to be absorbed by year-end should not be reflected in the interim statement.

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