Question 1

2 out of 2 points

Benefits of the FASB Accounting Standards Codification (ASC) include all of the following except

Answer

Selected Answer:

increases the independence of the FASB.

Correct Answer:

increases the independence of the FASB.

Question 2

2 out of 2 points

The major difference between IFRS and US GAAP in accounting for inventories is that

Answer

Selected Answer:

US GAAP allows the use of the LIFO cost flow assumption.

Correct Answer:

US GAAP allows the use of the LIFO cost flow assumption.

Question 3

2 out of 2 points

All of the following are options for non-US companies who wish to list securities on a US exchange except

Answer

Selected Answer:

If a company uses their local GAAP they must reconcile net income and shareholders’ equity and fully disclose all financial information required of US

companies

Correct Answer:

If a company uses their local GAAP they must reconcile net income and shareholders’ equity and fully disclose all financial information required of US companies

Question 4

2 out of 2 points

The goals of the International Accounting Standards Committee include all of the following except

Answer

Selected Answer:

To formulate a single set of auditing standards to be applied in all countries.

Correct Answer:

To formulate a single set of auditing standards to be applied in all countries.

Question 5

2 out of 2 points

On January 1, 2010, AirFrance purchases an airplane for €14,400,000. The components of the airplane and their useful lives are as follows:

Component Cost Useful life

Frame €7,200,000 24 years

Engine 4,800,000 20 years

Other 2,400,000 10 years

AirFrance uses the straight-line method of depreciation. The asset is assumed to have no salvage value. Under IFRS, the entry to record depreciation expense on the asset at December 31, 2011 will include a credit to accumulated depreciation of

Answer

Selected Answer:

€800,000.

Correct Answer:

€800,000.

Question 6

2 out of 2 points

One difference between IFRS and GAAP in valuing inventories is that

Answer

Selected Answer:

IFRS, but not GAAP, allows reversals so that inventories written down under lower-of-cost-or-market can be written back up to the original cost.

Correct Answer:

IFRS, but not GAAP, allows reversals so that inventories written down under lower-of-cost-or-market can be written back up to the original cost.

Question 7

2 out of 2 points

Property, plant and equipment are valued at

Answer

Selected Answer:

historical cost under US GAAP while IFRS allows the assets to be valued at either historical cost or revalued amounts.

Correct Answer:

historical cost under US GAAP while IFRS allows the assets to be valued at either historical cost or revalued amounts.

Question 8

2 out of 2 points

The amount of a long-lived asset impairment loss is generally determined by comparing

Answer

Selected Answer:

the asset’s carrying amount and its fair value under US GAAP.

Correct Answer:

the asset’s carrying amount and its fair value under US GAAP.

Question 9

2 out of 2 points

SFAS No.162, the Accounting Standards Codification, is directed to

Answer

Selected Answer:

entities.

Correct Answer:

entities.

Question 10

2 out of 2 points

IFRS and US GAAP differ with regard to financial statement presentation in all of the following except

Answer

Selected Answer:

US GAAP requires expenses to be listed by function while IFRS requires expenses to be listed by nature.

Correct Answer:

US GAAP requires expenses to be listed by function while IFRS requires expenses to be listed by nature.

Question 11

2 out of 2 points

Accounting under IFRS and US GAAP is similar for all of the following topics except

Answer

Selected Answer:

research and development costs.

Correct Answer:

research and development costs.

Question 12

2 out of 2 points

Concerns of the SEC with regard to the mandatory adoption of IFRS by US entities include all of the following except:

Answer

Selected Answer:

the enhancement of IASB independence through a system of voluntary contributions from firms in the accounting profession.

Correct Answer:

the enhancement of IASB independence through a system of voluntary contributions from firms in the accounting profession.

Question 13

2 out of 2 points

In accounting for research and development costs.

Answer

Selected Answer:

US GAAP generally expenses all research and development costs while IFRS expenses research costs as incurred but capitalizes development costs once technological and economic feasibility has been demonstrated.

Correct Answer:

US GAAP generally expenses all research and development costs while IFRS expenses research costs as incurred but capitalizes development costs once technological and economic feasibility has been demonstrated.

Question 14

0 out of 2 points

On January 1, 2010, AirFrance purchases an airplane for €14,400,000. The components of the airplane and their useful lives are as follows:

Component Cost Useful life

Frame €7,200,000 24 years

Engine 4,800,000 20 years

Other 2,400,000 10 years

AirFrance uses the straight-line method of depreciation. The asset is assumed to have no salvage value.

Under IFRS, the entry to record the acquisition of the airplane would include

Answer

Selected Answer:

cannot be determined from the information given.

Correct Answer:

a debit to Asset/ Airplane engine of €4,800,000.

Question 15

2 out of 2 points

Bellingham Electronics Inc. offers one model of laptop computer for £1000 and a two-year warranty for £250. The retailer, as part of a Boxing Day promotion, offers a limited-time offer for the laptop, including delivery and the two-year warranty for £1,180. The cost of the computer to Bellingham is £700. Any warranty repairs are assumed to be done ratably over time. Bellingham accounts for transactions using the customer consideration model. In the first twelve months following the sale, Bellingham incurred £980 of costs servicing the computers under warranty. In the first twelve months, Bellingham would record warranty expense of

Answer

Selected Answer:

£980

Correct Answer:

£980

Question 16

2 out of 2 points

On April 1, 2011, Trent Company entered into two forward exchange contracts to purchase 300,000 euros each in 90 days. The relevant exchange rates are as follows:

Spot rate

Forward Rate For Aug. 1, 2011

April 1, 2011 1.16 1.17

April 30, 2011 (year-end) 1.20 1.18

The first forward contract was to hedge a purchase of inventory on April 1, payable on December 1. On April 30, what amount of foreign currency transaction loss should Trent report in income?

Answer

Selected Answer:

$12,000.

Correct Answer:

$12,000.

Question 17

2 out of 2 points

On September 1, 2011, Swash Plating Company entered into two forward exchange contracts to purchase 250,000 euros each in 90 days. The relevant exchange rates are as follows:

Spot rate

Forward Rate

For Dec. 1, 2011

September 1, 2011 1.46 1.47

September 30, 2011 (year-end) 1.50 1.48

The second forward contract was strictly for speculation. On September 30, 2011, what amount

of foreign currency transaction gain should Swash Plating report in income?

Answer

Selected Answer:

$2,500.

Correct Answer:

$2,500.

Question 18

0 out of 2 points

On November 1, 2011, National Company sold inventory to a foreign customer. The account will be settled on March 1 with the receipt of 200,000 foreign currency units (FCU). On November 1, National also entered into a forward contract to hedge the exposed asset. The forward rate is $0.80 per unit of foreign currency. National has a December 31 fiscal year-end. Spot rates on relevant dates were:

Date

Per Unit of Foreign Currency

November 1 $0.83

December 31 0.81

March 1 0.84

What will be the adjusted balance in the Accounts Receivable account on December 31, and how much gain or loss was recorded as a result of the adjustment?

Receivable Balance Gain/Loss Recorded

a. $170,000 $4,000 gain

b. $162,000 $4,000 loss

c. $168,000 $2,000 gain

d. $164,000 $2,000 loss

Answer

Selected Answer:

c

Correct Answer:

b

Question 19

0 out of 2 points

The forward exchange rate quoted for the remaining term of a forward contract is used to account for the contract when the forward contract:

Answer

Selected Answer:

is a hedge of an identifiable foreign currency commitment.

Correct Answer:

was acquired to speculate in foreign currency.

Question 20

0 out of 2 points

Stuart Corporation a U.S. company, contracted to purchase foreign goods. Payment in foreign currency was due one month after delivery. Between the delivery date and the time of payment, the exchange rate changed in Stuart’s favor. The resulting gain should be reported in the financial statements as a(n):

Answer

Selected Answer:

[None Given]

Correct Answer:

component of income from continuing operations.

Question 21

2 out of 2 points

On April 1, 2011, Trent Company entered into two forward exchange contracts to purchase 300,000 euros each in 90 days. The relevant exchange rates are as follows:

Spot rate Forward Rate For Aug. 1, 2011

April 1, 2011 1.16 1.17

April 30, 2011 (year-end) 1.20 1.18

The second forward contract was strictly for speculation. On April 30, 2011, what amount of foreign currency transaction gain should Trent report in income.

Answer

Selected Answer:

$3,000.

Correct Answer:

$3,000.

Question 22

0 out of 2 points

An indirect exchange rate quotation is one in which the exchange rate is quoted:

Answer

Selected Answer:

in terms of how many units of the domestic currency can be converted into

one unit of foreign currency.

Correct Answer:

in terms of how many units of the foreign currency can be converted into one unit of domestic currency.

Question 23

0 out of 2 points

On November 1, 2011, American Company sold inventory to a foreign customer. The account will be settled on March 1 with the receipt of $450,000 foreign currency units (FCU). On November 1, American also entered into a forward contract to hedge the exposed asset. The forward rate is $0.70 per unit of foreign currency. American has a December 31 fiscal year-end. Spot rates on relevant dates were:

Date

Per Unit of Foreign Currency

November 1 $0.73

December 31 0.71

March 1 0.74

What will be the adjusted balance in the Accounts Receivable account on December 31, and how much gain or loss was recorded as a result of the adjustment?

Receivable Balance Gain/Loss Recorded

a. $319,500 $9,000 gain

b. $319,500 $9,000 loss

c. $333,000 $4,500 gain

d. $333,000 $18,000 gain

Answer

Selected Answer:

a

Correct Answer:

b

Question 24

2 out of 2 points

On September 1, 2011, Swash Plating Company entered into two forward exchange contracts to purchase 250,000 euros each in 90 days. The relevant exchange rates are as follows:

Spot rate

Forward Rate

For Dec. 1, 2011

September 1, 2011 1.46 1.47

September 30, 2011 (year-end) 1.50 1.48

The first forward contract was to hedge a purchase of inventory on September 1, payable on December 1. On September 30, what amount of foreign currency transaction loss should Swash Plating report in income?

Answer

Selected Answer:

$10,000.

Correct Answer:

$10,000.

Question 25

2 out of 2 points

A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a:

Answer

Selected Answer:

hedge of an identifiable foreign currency commitment.

Correct Answer:

hedge of an identifiable foreign currency commitment.

Question 26

0 out of 2 points

A transaction loss would result from:

Answer

Selected Answer:

a decrease in the exchange rate applicable to a liability denominated in a foreign currency.

Correct Answer:

a decrease in the exchange rate applicable to an asset denominated in a foreign currency.

Question 27

0 out of 2 points

Craiger, Inc. a U.S. corporation, bought machine parts from Reinsch Company of Germany on March 1, 2011, for 70,000 marks, when the spot rate for marks was $0.5395. Craiger’s year-end was March 31, 2011, when the spot rate for marks was $0.5445. Craiger bought 70,000 marks and paid the invoice on April 20, 2011, when the spot rate was $0.5495. How much should be shown in Craiger’s income statements as foreign exchange (transaction) gain or loss for the years ended March 31, 2011 and 2012?

2011 2012

a. $0 $0

b. $0 $350 loss

c. $350 loss $0

d. $350 loss $350 loss

Answer

Selected Answer:

a

Correct Answer:

d

Question 28

2 out of 2 points

Jackson Paving Company purchased equipment for 350,000 British pounds from a supplier in London on July 7, 2011. Payment in British pounds is due on Sept. 7, 2011. The exchange rates to purchase one pound is as follows:

July 7 August 31, (year end) September 7

Spot-rate 2.08 2.05 2.04

30-day rate 2.07 2.03 --

60-day rate 2.06 1.99 --

On its August 31, 2011 income statement, what amount should Jackson Paving report as a foreign exchange transaction gain:

Answer

Selected Answer:

$10,500.

Correct Answer:

$10,500.

Question 29

0 out of 2 points

A transaction gain or loss at the settlement date is:

Answer

Selected Answer:

synonymous with the translation of foreign currency financial statements into dollars.

Correct Answer:

the difference between the recorded dollar amount of an account receivable denominated in a foreign currency and the amount of dollars received.

Question 30

2 out of 2 points

Caldron Company purchased equipment for 375,000 British pounds from a supplier in London on July 3, 2011. Payment in British pounds is due on Sept. 3, 2011. The exchange rates to purchase one pound is as follows:

July 3 August 31, (year end) September 3

Spot-rate 1.58 1.55 1.54

30-day rate 1.57 1.53 --

60-day rate 1.56 1.49 --

On its August 31, 2011, income statement, what amount should Caldron report as a foreign exchange transaction gain:

Answer

Selected Answer:

$11,250.

Correct Answer:

$11,250.

Sunday, December 2, 2012 9:48:33 PM EST

OK