Advanced accounting second half

For interim financial reporting, a gain from the sale of land occurring in the second quarter should be

Recognized in the second quarter.

Plume Company has a paper products operating segment. Which of the following items does it not have to report for this segment?

Research and development expense

Which of the following is a criterion for determining whether an operating segment is separately reportable?

Segment assets are 10 percent or more of combined segment assets.

The exchange rate today at which a foreign currency can be purchased or sold on a specific future date is the

forward rate.

What information about revenues by geographic area should a company present?

Disclose separately the amount of sales to unaffiliated customers but not the amount of intra-entity sales between geographic areas.

Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses? Type of TransactionForeignCurrencyForeignExchange Gain or Loss a.Export sale AppreciatesLoss b.Import purchaseAppreciatesGain c.Import purchaseDepreciatesGain d.Export saleDepreciatesGain

Option C

The current rate method of translation assumes that a foreign subsidiary is

a net asset that is exposed to foreign exchange risk.

There is no need to keep record of the acquisition date exchange rates related to

assets translated at the current exchange rate under the temporal method. assets translated under the current rate method.

When a balance sheet date falls between the date of a foreign currency denominated export sale and the date cash is collected on the foreign currency account receivable, the foreign currency account receivable is reported on the U.S. exporter's balance sheet

at a U.S. dollar amount to reflect the change in exchange rate since the date of sale.

Which of the following statements concerning FASB ASC 280 is true?

Does not require segment information to be reported in accordance with generally accepted accounting principles

Which of the following operating segment disclosures is not required under current U.S. accounting guidelines?

Liabilities

The exchange rate mechanism for the U.S. dollar can best be described as being

allowed to float independently of central bank intervention.

A transaction exposure to foreign exchange risk exists when an exporter

allows a foreign customer to pay in a foreign currency and allows the customer time to pay for its purchases.

When the U.S. dollar price for a foreign currency increases from one day to the next, the foreign currency is said to have

appreciated against the U.S. dollar.

When the strike price for a foreign currency option is the same as the spot rate the foreign currency option is

at-the-money.

Translating a foreign currency balance sheet account at the current exchange rate gives rise to

balance sheet exposure to foreign exchange risk.

Under the temporal method of translation, balance sheet accounts translated at the current exchange rate include

cash and receivables. accounts and notes payable.

Balance sheet accounts translated using the same exchange rate under both the current rate and temporal methods include

cash and receivables. additional paid in capital. long-term debt.

Assuming that all expenses are incurred evenly throughout the year, those expenses translated using a different exchange rate under the current rate method than under the temporal method include

cost of goods sold. depreciation expense.

The accounts of a foreign subsidiary are translated into the parent's currency using a combination of

current and historical exchange rates.

Fill in the blank question. The foreign currency rate is the price at which one currency can be traded for another currency.

exchange

The price at which foreign currency can be purchased with U.S. dollars is the rate for that foreign currency.

exchange

The price at which foreign currency can be purchased with U.S. dollars is known as the

exchange rate.

Companies must disclose the seasonal nature of their business operations when they

experience a spike in sales volume in one specific quarter each year.

Foreign currency balance sheet accounts that are translated at the current exchange rate are to translation adjustment.

exposed

The difference between the spot rate and the forward rate for a foreign currency on a given date is called

forward points.

The appreciation of a foreign currency will result in an exporter recognizing a foreign exchange when it makes a foreign currency sale to a foreign customer and receives payment after the date of sale.

gain

The depreciation of a foreign currency will result in an importer recognizing a foreign exchange ______ , Incorrect Unavailable when it makes a purchase from a foreign supplier and pays the supplier in foreign currency after the date of purchase.

gain

Under the temporal method, cost of goods sold (COGS) in foreign currency is decomposed into beginning inventory, purchases, and ending inventory and then each component is translated into U.S. dollars using the appropriate exchange rate.

historical

The accounting system must keep track of the acquisition date exchange rates related to those assets that are translated at

historical exchange rates under the temporal method.

The premium paid to acquire a foreign currency option is determined by adding together the option's value and its time value.

intrinsic

The forward rate for the purchase of foreign currency that will be settled in three months on October 31

is likely to change between the current date and the future settlement date.

The depreciation of a foreign currency will result in an exporter recognizing a foreign exchange when it makes a foreign currency sale to a foreign customer and receives payment after the date of sale.

loss

A company using LIFO to account for inventory sells more units of product in the first quarter of the year than it produces, which results in a LIFO liquidation. However, by the end of the year, the company expects there to be no LIFO liquidation. In preparing its first quarter financial statements the company should

make an adjustment to cost of goods sold to offset the effect of the LIFO liquidation.

Balance sheet exposure under the current rate method of translation is equal to a foreign operation's

net asset position.

A foreign currency call option gives the holder of the option the right but not the _______ to buy foreign currency in the future at a predetermined price.

obligation

The difference between the forward rate and the spot rate for a foreign currency on a given date is called forward

points

On the date a foreign currency option is acquired, the time value of the option is always

positive

Translating a foreign currency asset at the current exchange rate when the foreign currency has appreciated gives rise to a _____ translation adjustment.

positive

An unrealized foreign exchange loss on a foreign currency account receivable that results from a depreciation in the foreign currency from the date of sale to the balance sheet date is

recognized in net income.

An unrealized foreign exchange gain on a foreign currency account receivable that results from an appreciation in the foreign currency from the date of sale to the balance sheet date is

recognized net income

A foreign currency call option gives the holder of the option the

right but not the obligation to purchase foreign currency at a predetermined price.

A toy manufacturing company makes more than one-half of its annual sales in the fourth quarter of the year when customers place orders for the holiday season. In accordance with FASB ASC 270, the company must disclose the nature of its business operations.

seasonal

The current or ______ exchange rate is the price at which a foreign currency can be purchased or sold today.

spot

The current or exchange rate is the price at which a foreign currency can be purchased or sold today.

spot

The price at which the holder of a foreign currency option can trade foreign currency at an agreed upon date in the future is the

strike price.

Under the temporal method, expenses are translated using

the average-for-the-year and historical exchange rates.

Under the temporal method, revenues that are earned evenly throughout the year are translated using

the average-for-the-year exchange rate.

Under the temporal method of translation, assets carried on the foreign entity's balance sheet at a current or future value are translated using

the current exchange rate.

The intrinsic value of a put option to sell foreign currency is determined by the difference in the option's strike price and

the current spot rate for that foreign currency.

The fair value of a foreign currency option is equal to the sum of its intrinsic value and its value.

time

The fair value of a foreign currency option is the sum of its intrinsic value and its

time value

When a company allows a foreign customer to pay in a foreign currency and allows the customer time to pay for its purchases the company has a exposure to foreign exchange risk.

transaction

A company is able to enter into a forward contract with its bank for a wide variety of foreign currencies.

true

Foreign exchange gains and losses that arise from revaluing foreign currency balances at the balance sheet date are

unrealized but recognized as a component of net income.

The current spot rate to sell a foreign currency is $1.00. The intrinsic value of an option to sell that foreign currency at a strike price of $0.90 is

zero; the option has no intrinsic value.

The up-front price a company pays its bank to enter into a foreign currency forward contract is

zero; there is no up-front cost to enter into a forward contract.

A company with a December 31 year-end plans to pays its president a bonus at the end of December. The bonus will be based on the current year's year-to-date income at the time the bonus is paid. The company should

estimate the amount of bonus to be paid in December and recognize 1/4 of this amount as expense in the first quarter of the year.

True or false: The forward rate for a specific future settlement date always stays the same as the specific future settlement date gets closer in time.

false

The ________ exchange rate is the price today at which a foreign currency can be purchased or sold at a specific date in the future.

forward

A company makes an accounting change in the third quarter of the current year. That change must be applied to the first and second quarters of the year.

retrospectively

On March 15, Calloway, Inc., paid property taxes of $530,000 for the calendar year. How much of this expense should Calloway's income statement reflect for the quarter ending March 31?

$132,500 = 530,000/4

Baton Company estimates that the amounts for total depreciation expense for the year ending December 31 will be $66,000 and for year-end bonuses to employees will be $132,000. What total amount of expense relating to these two items should Baton report in its quarterly income statement for the three months ended March 31?

$49,500.

Some companies are organized and provide segment disclosures on the basis of geographic areas only. An example of such a company is

Apple

In considering interim financial reporting, how does current U.S. GAAP require that such reporting be viewed?

As reporting for an integral part of an annual period

Which of the following statements is not true under U.S. GAAP?

Companies must combine individual foreign countries into geographic areas to comply with the geographic area disclosure requirements.

Grace Co. had a Chinese yuan payable resulting from imports from China and a Mexican peso receivable resulting from exports to Mexico. Grace recorded foreign exchange losses related to both its yuan payable and peso receivable. Did the foreign currencies increase or decrease in dollar value from the date of the transaction to the settlement date? YuanPeso a.Increase Increase b.Increase Decrease c.Decrease Increased. Decrease Decrease

Option B

Under current U.S. accounting guidelines, which of the following items of information is a company not required to disclose, even if it were material in amount?

Revenues generated from export sales

How should material seasonal variations in revenue be reflected in interim financial statements?

The seasonal nature should be disclosed, and the interim report should be supplemented with a report on the 12-month period ended at the interim date for both the current and preceding years.

When the forward rate for a foreign currency is higher than its spot rate on a given date the foreign currency is selling at

a premium in the forward market.

The value of the euro can best be described as being

allowed to float freely against other currencies.

An increase in the direct quote in U.S. dollars for a foreign currency from one day to the next means that the foreign currency has increased or against the U.S. dollar.

appreciated

Foreign currency payables and receivables must be at the balance sheet date to reflect changes in foreign exchange rates.

revalued

Matthias Corp. had the following foreign currency transactions during 2020: Purchased merchandise from a foreign supplier on January 20 for the U.S. dollar equivalent of $68,400 and paid the invoice on April 20 at the U.S. dollar equivalent of $52,600. On September 1, borrowed the U.S. dollar equivalent of $310,000 evidenced by a note that is payable in the lender's local currency in one year. On December 31, the U.S. dollar equivalent of the principal amount was $330,000. In Matthias's 2020 income statement, what amount should be included as a net foreign exchange gain or loss?

$4,200 loss

On March 15, Calloway, Inc., paid property taxes of $530,000 for the calendar year. The journal entry at March 15 to record the payment of property taxes would include which of the following?

A debit to Prepaid Property Taxes of $397,500

On July 1, 2020, Mifflin Company borrowed 220,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2021. The note is denominated in euros. The U.S. dollar equivalent of the note principal is as follows: DateAmountJuly 1, 2020 (date borrowed)$235,000December 31, 2020 (Mifflin's year-end) 228,100July 1, 2021 (date repaid) 214,600 In its 2021 income statement, what amount should Mifflin include as a foreign exchange gain or loss on the note?

$13,500 gain

On October 1, Tile Co., a U.S. company, purchased products from Azulejo, a Portuguese company, with payment due on December 1. If Tile's operating income included no foreign exchange gain or loss, the transaction could have

Been denominated in U.S. dollars.

Nottage Company has four separate operating segments: East West North SouthSales to outsiders$142,000 $90,500 $104,500 $86,500 Intersegment transfers 35,750 30,750 14,900 19,900 What revenue amount must one customer generate before it must be identified as a major customer?

42,340

When the U.S. dollar direct quote for the Chinese yuan is $0.20 per yuan, the indirect quote is

5 yuan per U.S. dollar.

Which of the following is not necessarily true for an operating segment?

An operating segment regularly generates a profit from its normal ongoing operations.

Which of the following items is required to be disclosed by geographic area?

Revenues from external customers

Which of the following information items with regard to a major customer must be disclosed?

The operating segment making sales to the major customer

In determining whether a particular operating segment is of significant size to warrant disclosure, which of the following is true?

Three tests are applied, and only one must be met.

True or false: Under the temporal method, inventory reported at cost on the foreign currency balance sheet could be reported at either cost or at net realizable value on the parent currency balance sheet.

True

In accounting for foreign currency transactions, which of the following approaches is used in the United States?

Two-transaction perspective; accrue foreign exchange gains and losses

Which of the following statements is true for a company that has managers responsible for product and service lines of business and managers responsible for geographic areas (matrix form of organization)?

Under IFRS, the company must refer to the core principle of IFRS 8 to determine operating segments.

For a U.S.-based company, which of the following would be an acceptable presentation of countries for providing information by geographic area?

United States, Mexico, Japan, Spain, All Other Countries

As time passes, the time value of a foreign currency option

decreases.

The number of U.S. dollars needed to purchase one unit of a foreign currency is the quote for that foreign currency.

direct

A company should estimate its annual tax rate in calculating income tax at the end of each interim period.

effective

The premium paid to acquire a foreign currency option is

equal to the sum of the option's intrinsic value and time value.

Which of the following does U.S. GAAP not consider to be an objective of segment reporting?

It helps users make comparisons between a segment of one enterprise and a similar segment of another enterprise.

When the forward rate for a foreign currency is lower than its spot rate on a given date the foreign currency is selling at

a discount in the forward market.

In accounting for a foreign currency borrowing, both the note payable and any accrued interest payable on the note are

exposed to foreign exchange risk. revalued for changes in the foreign exchange rate.

A U.S. exporter sells goods to a foreign customer who pays in foreign currency in 90 days. The difference between the U.S. dollar value of the transaction at the date of sale and at the date cash is collected is recognized as

a foreign exchange gain or loss in net income.

A U.S. importer has a foreign currency-denominated import purchase. With regard to the difference in the amount of U.S. dollars that could have been paid on the date of purchase and the amount of U.S. dollars actually paid on the date of payment, the U.S. importer should recognize

a foreign exchange gain or loss in net income.

Translating an asset on a foreign subsidiary's balance sheet at the current exchange rate results in

a negative translation adjustment when the foreign currency has depreciated. a positive translation adjustment when the foreign currency has appreciated

Brief, Inc., had a receivable from a foreign customer that is payable in the customer's local currency. On December 31, 2020, Brief correctly included this receivable for 255,000 local currency units (LCU) in its balance sheet at $165,000. When Brief collected the receivable on February 15, 2021, the U.S. dollar equivalent was $177,900. In Brief's 2021 consolidated income statement, how much should it report as a foreign exchange gain?

$12,900

Rouge Company's $256,000 net income for the quarter ended September 30 included the following after-tax items: A $32,000 cumulative effect loss resulting from a change in inventory valuation method made on September 1. $0 of the $66,000 annual property taxes paid on February 1. For the quarter ended September 30, the amount of net income that Rouge should report is

$271,500.

In March of the current year, Mooney Company estimated its year-end executive bonuses to be $1,120,000. The executive bonus paid in the previous year was $1,010,000. What amount of bonus expense, if any, should Mooney recognize in determining net income for the first quarter of the current calendar year?

$280,000. = 1,120,000x 1/4