Question 1

Presented below is pension information related to Power Corp.for the year 2012:  The amount of pension expense to be reported for 2012 is
A) $36,000
B) $48,000
C) $54,000
D) $40,000

Accepted Answer

D

Question 2

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 on the basis of 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.

Question 3

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

D

Question 4

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

The calculation of the average tax rate requires dividing income tax expense by income before taxes, which would result in the effective tax rate. Option A is not correct because income tax payable is a balance sheet item and not a profit and loss item. Option C is also not correct because multiplying the statutory income tax rate by income before taxes would give the theoretical tax liability rather than the actual tax paid. Option D is not relevant to finding the average tax rate since a company can have multiple tax rates in different regions, and they would not be averaged together to find a single rate.

Question 5

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

SAB 104 does outline the condition that there must be pervasive evidence of an arrangement, delivery of goods or services must have occurred, and collectability must be reasonably assured in order for revenue recognition to occur. However, the seller's price to the buyer can be variable and this is not a condition outlined by SAB 104.

Question 6

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 answer of A minimum liability for pension expense is...

Question 7

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 31,2012.  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

The answer of Gorilla,Corp.implemented a defined-benefit pension plan for its...

Question 8

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

The other three characteristics listed (terms allowing net settlement, low initial net investment, and one or more underlyings/notional amounts) are commonly cited as distinguishing features of derivative instruments. However, the effectiveness of a derivative instrument can vary depending on the specific instrument and the market conditions in which it is used. Therefore, effectiveness is not always a reliable distinguishing characteristic.

Question 9

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

Accepted Answer

Derivatives derive their value from changes in stock prices, interest rates, and commodity prices, but not from percentage discounts on accounts receivable.

Question 10

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 between accounting for pensions and accounting for other postretirement benefits 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. This is because the employer has the option of paying the benefits as they come due, rather than funding them ahead of time. In contrast, for pensions, the employer is required to fund the benefits in advance and must report any underfunding as a liability on the balance sheet.

Question 11

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 12

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...

Question 13

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 generally include assessing the underfunded benefit obligation, the reasonableness of assumptions regarding healthcare cost increases and whether the postretirement fund is generating expected returns. However, the concern of whether the postretirement benefit fund is adequately paying benefits is not relevant as it is assumed that the payments will be made according to the terms of the plan.

Question 14

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 15

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

Accrual basis is a required method for recognizing expenses under IFRS.

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 federal effective tax rate for 2012.
A) 33.52%
B) 35.00%
C) 42.25%
D) 45.49%

Accepted Answer

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

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

The combined effective tax rate for Falcon Networks in 2012 can be calculated as follows:

Total Income Tax Expense = $578 million + $163 million
= $741 million

Income Before Tax = $2,087 million

Effective Tax Rate = Total Income Tax Expense ÷ Income Before Tax
= $741 million ÷ $2,087 million
= 0.354 × 100%
= 35.40%

However, the question is asking for the combined effective tax rate, which takes into account not only income tax but also other taxes such as sales tax and property tax. The company's income tax expense is the only tax information provided, so we cannot calculate the combined effective tax rate precisely. However, based on the information given, we can assume that the combined effective tax rate is likely to be higher than the income tax effective tax rate. Therefore, the best choice is C, 42.25%, which is the highest option provided.

Question 18

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

Derivative instruments not held for purposes of hedging should be recorded as an asset or liability and changes in fair value should be recognized currently in earnings. This treatment reflects the fact that these instruments are entered into for trading purposes and not to manage risks.

Question 19

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 20

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

Accepted Answer

Prepaid expense is not considered a reserve account because it represents a payment made in advance for goods or services that will be used in the future. Reserve accounts, on the other hand, are typically set aside to cover potential losses or expenses, such as bad debts, warranties, or depreciation. A, B, and D are all examples of reserve accounts.

Quiz 8: Operating Activities

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

The accumulated benefit obligation measures

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.

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

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

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 31,2012. What amount should Gorilla record as additional minimum pension liability at December 31,2012?

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

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

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

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

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?

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

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

All of the following are true regarding accrual accounting except:

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.

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

The projected benefit obligation measures

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