Question 1

The accumulated benefit obligation measures
A) the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels.
B) an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement.
C) the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels.
D) the shortest possible period for funding to maximize the tax deduction.

Accepted Answer

The accumulated benefit obligation measures the pension obligation based on the plan formula applied to years of service to date and based on existing salary levels. It does not take into account future salary levels or estimated total benefits at retirement. The other options are not relevant to the definition of the accumulated benefit obligation.

Question 2

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?
A) Record as an asset or liability and recognize changes in fair value in other comprehensive income.
B) Do not record as an asset or liability, record income from the transaction at maturity and recognize in earnings.
C) Record as an asset or liability, recognize changes in fair value currently in earnings.
D) Record as an asset or liability if off-balance sheet risk is material.

Accepted Answer

For derivative instruments not held for purposes of hedging, they should be recorded as an asset or liability on the balance sheet, and any changes in the fair value should be recognized currently in earnings. This is in accordance with the fair value accounting principle. Option A is incorrect because changes in fair value should be recognized in earnings, not other comprehensive income. Option B is incorrect because income should be recognized as the transaction is taking place, not just at maturity. Option D is incorrect because materiality should not be the only consideration when deciding to record an asset or liability.

Question 3

To calculate a company's average tax rate an analyst would
A) Divide income tax payable by income before taxes
B) Divide income tax expense by income before taxes
C) Multiply the statutory income tax rate by income before tax
D) Average a firm's Federal, State, Local and Foreign tax rates.

Accepted Answer

To calculate a company's average tax rate, an analyst would divide income tax expense by income before taxes. This reflects the amount of taxes actually paid by the company on its pre-tax income. Dividing income tax payable (choice A) may not reflect the actual taxes paid in the current period as it includes amounts that have not yet been paid. Multiplying the statutory income tax rate by income before tax (choice C) does not reflect the actual taxes paid as it does not take into account any tax credits or deductions. Averaging a firm's Federal, State, Local and Foreign tax rates (choice D) gives an effective tax rate but not an average tax rate.

Question 4

Falcon Networks
Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below:
 
-Using the information provided by Falcon Networks determine the federal effective tax rate for 2012.
A) 33.52%
B) 35.00%
C) 42.25%
D) 45.49%

Accepted Answer

Income tax expense / income before tax

Question 5

Analysts concerns with postretirement benefits include all of the following except:
A) should the underfunded postretirement benefit obligation be added to liabilities in assessing risk?
B) How reasonable are the firms' assumptions regarding health care cost increases?
C) Is the postretirement benefit fund adequately paying benefits.
D) Is the postretirement benefit fund generating returns consistent with the expected rate of return?

Accepted Answer

Analysts' concerns with postretirement benefits include assessing the adequacy of the fund in paying benefits, the reasonableness of assumptions related to health care cost increases, and whether the fund is generating returns consistent with the expected rate of return. The underfunded postretirement benefit obligation is usually already added to liabilities, so it is not a concern for analysts.

Question 6

All of the following are conditions for revenue recognition outlined by SAB 104 except:
A) There is pervasive evidence that an arrangement exists.
B) Delivery has occurred or services have been performed.
C) The seller's price to the buyer can be variable.
D) Collectability is reasonably assured.

Accepted Answer

The conditions for revenue recognition outlined by SAB 104 are: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable, and (4) collectability is reasonably assured. The variability of the seller's price to the buyer is not a condition for revenue recognition according to SAB 104.

Question 7

Which of the following accounts would not be considered a reserve account?
A) Allowance
For Doubtful Accounts
B) Estimated Warranty Liability
C) Prepaid Expense
D) Accumulated Depreciation

Accepted Answer

A reserve account is set aside to cover future expenses or losses, while prepaid expenses represent payments made in advance for goods or services that will be received later. Therefore, prepaid expenses are not considered reserve accounts. Allowance for Doubtful Accounts, Estimated Warranty Liability, and Accumulated Depreciation would all be considered reserve accounts.

Question 8

Derivatives are financial instruments that derive their value from changes in any of the following underlying securitiesexcept:
A) Stock prices
B) Percentage discount on accounts receivable
C) Interest rates
D) Commodity prices

Accepted Answer

Derivatives do not derive their value from changes in the percentage discount on accounts receivable.

Question 9

All of the following are true regarding accrual accounting except:
A) Accrual basis measures operating success by the extent to which accomplishments exceed efforts.
B) Accrual basis measures operating success by the extent to which revenues exceed expenses.
C) Accrual basis reports operating activities in terms of their success in generating value.
D) Accrual basis for the recognition of expenses is not required under IFRS.

Accepted Answer

The statement "Accrual basis for the recognition of expenses is not required under IFRS" is false. Accrual accounting, which includes recognizing expenses when they are incurred, is required under IFRS. Therefore, option D is incorrect. Options A, B, and C are true statements about accrual accounting.

Question 10

Which of the following calculations is used to determine the amount of the liability reported on the balance sheet for underfunding?
A) Plan assets less projected benefit obligation.
B) Projected benefit obligation less plan assets.
C) Plan assets less accumulated benefit obligation.
D) Accumulated benefit obligation less plan assets.

Accepted Answer

The answer of Which of the following calculations is used...

Question 11

Presented below is pension information related to Roberts Corp.for the year 2012: 
The amount of pension expense to be reported for 2012 is
A) $46,000
B) $48,000
C) $54,000
D) $40,000

Accepted Answer

$36,000+ 12,000 + 6,0000 - 8,000= $46,000

Question 12

The projected benefit obligation measures
A) the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels.
B) an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement.
C) the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels.
D) the shortest possible period for funding to maximize the tax deduction.

Accepted Answer

The answer of The projected benefit obligation measures
A) the pension...

Question 13

A minimum liability for pension expense is reported when
A) the projected benefit obligation exceeds the fair value of pension plan assets.
B) the pension expense reported for the period is greater than the funding amount for the same period.
C) the accumulated benefit obligation exceeds the fair value of pension plan assets.
D) vested benefits exceed the fair value of pension plan assets.

Accepted Answer

The minimum liability for pension expense is reported when the accumulated benefit obligation exceeds the fair value of pension plan assets. This is because the accumulated benefit obligation measures the present value of benefits earned by employees based on their current salaries, while the fair value of pension plan assets represents the value of the assets held by the plan to pay for those benefits. If the accumulated benefit obligation is greater than the fair value of pension plan assets, then the plan is underfunded and the minimum liability for pension expense is reported in the company's financial statements.

Question 14

Gorilla,Corp.implemented a defined-benefit pension plan for its employees on January 2,2012.The following data are provided for year 2012,as of December 31 
What amount should Gorilla record as additional minimum pension liability at December 31,2012?
A) $0
B) $5,000
C) $20,000
D) $45,000

Accepted Answer

Current pension liability is $90,000 - $70,000 = $20,000
Need an additional $5,000

Question 15

Falcon Networks
Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below:
 
-Based on the information provided by Falcon Networks how much cash did income taxes use during 2012?
A) $154.19 million
B) $54.17 million
C) $208.36 million
D) $284.84 million

Accepted Answer

The answer of Falcon Networks
Falcon Networks is a leading semiconductor...

Question 16

Falcon Networks
Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below:
 
-Using the information provided by Falcon Networks determine the foreign effective tax rate for 2012.
A) 33.52%
B) 35.00%
C) 42.25%
D) 45.49%

Accepted Answer

Income tax expense / income before tax

Question 17

Falcon Networks
Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below:
 
-Using the information provided by Falcon Networks determine the combined effective tax rate for 2012.
A) 33.52%
B) 35.00%
C) 42.25%
D) 45.49%

Accepted Answer

Income tax expense / income before tax

Question 18

Which of the following is not one of the GAAP classifications for derivatives?
A) Speculative investment
B) Fair value hedge
C) Asset-Liability hedge
D) Cash flow hedge

Accepted Answer

The answer of Which of the following is not one...

Question 19

The major difference between accounting for pensions and the accounting for other postretirement benefits is that firms
A) do not need to report an excess of the accumulated benefits obligations over assets in a postretirement benefits fund as a liability on the balance sheet.
B) do not need to disclose any estimates used in calculating projected benefits.
C) postretirement benefits are normally not material for most companies and do not need to be disclosed.
D) do not need to set aside funds for future postretirement benefits as they do for pension benefits.

Accepted Answer

The major difference is that firms do not need to report an excess of the accumulated benefits obligations over assets in a postretirement benefits fund as a liability on the balance sheet, whereas they do with pension benefits.

Question 20

Which of the following is not a distinguishing characteristic of a derivative instrument?
A) Derivative instruments have terms that require or permit net settlement.
B) Derivative instruments have a low initial net investment.
C) Derivative instruments are highly effective throughout their term.
D) Derivative instruments have one or more underlyings and notional amounts.

Accepted Answer

All of the other choices are distinguishing characteristics of derivative instruments. Derivatives have terms that require or permit net settlement (A), have a low initial net investment (B), and have one or more underlyings and notional amounts (D). Additionally, derivatives can be highly effective throughout their term, so this is not a characteristic that distinguishes them from other financial instruments.

Quiz 9: Operating Activities

The accumulated benefit obligation measures

Which of the following best describes the accounting treatment for derivative instruments not held for purposes of hedging?

To calculate a company's average tax rate an analyst would

Falcon Networks Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below: -Using the information provided by Falcon Networks determine the federal effective tax rate for 2012.

Analysts concerns with postretirement benefits include all of the following except:

All of the following are conditions for revenue recognition outlined by SAB 104 except:

Which of the following accounts would not be considered a reserve account?

Derivatives are financial instruments that derive their value from changes in any of the following underlying securitiesexcept:

All of the following are true regarding accrual accounting except:

Which of the following calculations is used to determine the amount of the liability reported on the balance sheet for underfunding?

Presented below is pension information related to Roberts Corp.for the year 2012: The amount of pension expense to be reported for 2012 is

The projected benefit obligation measures

A minimum liability for pension expense is reported when

Gorilla,Corp.implemented a defined-benefit pension plan for its employees on January 2,2012.The following data are provided for year 2012,as of December 31 What amount should Gorilla record as additional minimum pension liability at December 31,2012?

Falcon Networks Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below: -Based on the information provided by Falcon Networks how much cash did income taxes use during 2012?

Falcon Networks Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below: -Using the information provided by Falcon Networks determine the foreign effective tax rate for 2012.

Falcon Networks Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below: -Using the information provided by Falcon Networks determine the combined effective tax rate for 2012.

Which of the following is not one of the GAAP classifications for derivatives?

The major difference between accounting for pensions and the accounting for other postretirement benefits is that firms

Which of the following is not a distinguishing characteristic of a derivative instrument?