Select the best answer for each of the following. 1. Which of the following is not a characteristic of a partnership? (a) Limited life. (b) Mutual agency. (c) Limited liability. (d) Right to dispose of partnership interest. 2. The articles of partnership need not include which of the following? (a) Location of the place of business. (b) Allocation of profit/loss. (c) Procedures for admitting a new partner. (d) Fiscal period of the partnership. (e) All of the above should be included. 3. The High and Low partnership agreement provides special compensation to High for managing the business. High receives a bonus of 15% of partnership net income before salary and bonus, and also receives a salary of $45,000. Any remaining profit or loss is to be allocated equally. During 2014, the partnership had net income of $50,000 before the bonus and salary allowance. As a result of these distributions, Low’s equity in the partnership would (a) Increase. (b) Not change. (c) Decrease the same as High’s. (d) Decrease. 4. The allocation of an error correction should be based on the profit and loss agreement in effect when (a) The error was made. (b) The error was corrected. (c) The error was discovered. (d) The allocation should always be made equally. 5. If there is a provision for allocation of profits but not losses in the partnership agreement, courts have generally concluded that (a) Losses should not be allocated to the capital accounts, but matched against future earnings. (b) Losses should be allocated using the same approach as allocation of profits. (c) Losses should be allocated equally. (d) Losses should be allocated according to the ratio of balances in the capital accounts. 6. Partners E and F share profits and losses equally after each has been credited in all circumstances with annual salary allowances of $15,000 and $12,000, respectively. Under this agreement, E will benefit by $3,000 more than F in which of the following circumstances? (a) Only if the partnership has earnings of $27,000 or more for the year. (b) Only if the partnership does not incur a loss for the year. (c) In all earnings or loss situations. (d) Only if the partnership has earnings of at least $3,000 for the year.
> What is meant by an entity’s functional currency and what are the economic indicators identified by the FASB to provide guidance in selecting the functional currency?
> Explain the effects on income from hedging a foreign currency exposed net asset position or net liability position.
> Describe a forward exchange contract.
> Explain what is meant by the “two-transaction method” in recording exporting or importing transactions. What support is given for this method?
> Listed are typical financial activities of a local governmental unit. 1. The legislative unit approved the budget for the general operating fund. Estimated revenues are $4,000,000, and appropriations for expenditures are $3,800,000. 2. Statements of prop
> List some of the criteria laid out by the FASB that are required for a gain or loss on forecasted transactions (a cash flow hedge) to be excluded from the income statement. If these criteria are satisfied, where are the gains or losses reported, and when
> Differentiate between forward-based derivatives and option based derivatives.
> Define a derivative instrument, and describe the keystones identified by the FASB for the accounting for such instruments.
> What is a put option, and how might it be used to hedge a forecasted transaction?
> In a limited partnership with multiple general partners, the determination of which, if any, general partner within the group controls and consolidates the limited partnership is based on an analysis of the relevant facts and circumstances. List the righ
> Name the three stages of concern to the accountant in accounting for import–export transactions. Briefly explain the accounting for each stage.
> The FASB classifies forward contracts as those acquired for the purpose of hedging and those acquired for the purpose of speculation. What main differences are there in accounting for these two classifications?
> Define currency exchange rates and distinguish between “direct” and “indirect” quotations.
> List some of the major differences in accounting between IFRS and U.S. GAAP.
> How does the FASB view its role in the development of an international accounting system? Currently, two members of the IASB were previously affiliated with the FASB. Comment on what effect this might have on the likelihood that the U.S. standard-setters
> For each of the items listed below, determine how the amount would be classified in Fund Balance (either nonspendable, restricted, committed, assigned, or unassigned fund balance). 1. Inventory costing $17,000 was purchased to be used for highway repair
> Describe the attitude of the FASB toward the IASB (International Accounting Standards Board).
> Discuss the types of ADRs that non-U.S. companies might use to access the U.S. markets.
> The following footnote was disclosed at the beginning of 2016 (January 1, 2016). The capital lease began on January 1, 2015 when the fair value of the capital lease was $21,776 (with a six-year life). The operating lease began on January 1, 2016 when t
> On December 1, 2014, King Company exported equipment that had cost $210,000 to a Brazilian company for 1,000,000 real. The account is to be settled on January 31, 2015. King Company is a calendar-year company and uses a perpetual inventory system. Direct
> The first two lines of Unilever Group’s 2013 consolidated income statement (using IFRS) report the following amounts (in millions of euros): Required: A. On the income statement, the first two lines in Unilever’s inc
> Is a debt restructuring always classified as a troubled debt restructuring if the entity is experiencing some financial difficulties? Explain.
> British Petroleum’s income statement was prepared using IFRS is presented below (in $ millions). ExxonMobil Corporation’s income statement prepared using U.S. GAAP is presented below (in $ millions). Required: A.
> Three funds of the Leukemia Foundation, a nonprofit welfare organization, began an investment pool on January 1, 2016. The costs and fair market values on this date were as follows: During 2016 the investment pool reinvested $20,000 in realized gains a
> The December 31, 2015, statement of financial position for the Blood Donors of America Foundation is presented below. Statement of Financial Position December 31, 2015 Assets Cash ………â
> Preston Library, a nonprofit organization, presented the following statement of financial position and statement of activities for its fiscal year ended February 28, 2014. The following transactions occurred during the fiscal year ended February 28,
> Several independent financial activities of a governmental unit are given below. 1. Revenue from the sale of licenses and permits for the first two months totaled $15,000. 2. Land that had been donated previously was sold for $100,000. 3. An order was pl
> The following transactions of Beltville College transpired during 2015. The funds necessary are the Endowment Fund, the Annuity Fund, the Plant Fund—Unexpended, the Plant Fund Investment in Plant, the Loan Fund, the Unrestricted Current
> A partial statement of financial position of Century University is shown below. Century University Partial Statement of Financial Position June 30, 2014 Assets Current Funds Unrestricted Cash ……â€&brvba
> On January 1, 2015, a new Board of Directors was elected for Bradley Hospital. The new board switched to a different accountant. After reviewing the hospital’s books, the accountant decided that the accounts should be adjusted. Effectiv
> The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2015. 1. Revenue from patient services totaled $16,000,000. The allowance for uncollectibles was established at $3,400,000. Of the $16,000,000 revenue, $6,0
> The Village of Oakridge, which was incorporated recently, began financial operations on July 1, 2015, the beginning of its fiscal year. The following transactions occurred during this first fiscal year, July 1, 2015, to June 30, 2016. 1. The Village Coun
> You have been engaged to examine the financial statements of the Town of Bridgeport for the year ended June 30, 2015. Your examination disclosed that, because of the inexperience of the town’s bookkeeper, all transactions were recorded
> Where in the Codification are the conditions listed that allow an entity that sells a product to recognize revenue on an accrual basis?
> The following transactions take place. 1. Bond proceeds of $1,000,000 were received to be used in constructing a firehouse. An equal amount is contributed from general revenues. 2. $800,000 of serial bonds matured. Interest of $120,000 was paid on these
> The following activities and transactions are typical of those that may affect the various funds used by a typical municipal government. Required: Prepare journal entries to record each transaction and identify the fund in which each entry is recorded.
> An administrative section of the County Assessor’s Office of Mecklenburg County serves as the billing and collection agency for all property taxes assessed in Mecklenburg County. A charge of 1% of taxes and penalties collected is apport
> Q, R, S, and T are partners, sharing profits and losses 40%:20%:20%:20%, respectively. After sale of firm assets and payment of the available cash to the partnership creditors, a partnership trial balance and the personal status of each partner are as fo
> Beth, Steph, and Linda have been operating a small gift shop for several years. After an extensive review of their past operating performance, the partners concluded that the business needed to expand in order to provide an adequate return to the partner
> Bill and Jane share profits and losses in a 70:30 ratio. Mike is to be admitted into a partnership upon the investment of $14,000 for a one-third capital interest. Account balances for Bill and Jane on June 30, 2014 just before the admission of Mike are
> Phil Phoenix and Tim Tucson are partners in an electrical repair business. Their respective capital balances are $90,000 and $50,000, and they share profits and losses equally. Because the partners are confronted with personal financial problems, they de
> Hill, Jones, and Vose have been partners throughout 2014. Their average balances for the year and their balances at the end of the year before closing the nominal accounts are as follows: The income for 2014 is $108,000 before charging partnersâ&
> On January 1, 2014, Tony and Jon formed T&J Personal Financial Planning with capital investments of $480,000 and $340,000, respectively. The partners wanted to draft a profit and loss agreement that would reward each individual for the resources invested
> Mary and Nancy invested $80,000 each to form a partnership. Mary has been authorized a salary of $20,000, while Nancy’s salary is $25,000. Each partner is to receive 10% on the original capital investment. The profit and loss agreement stipulates that an
> Jones, Silva, and Thompson form a partnership and agree to allocate income equally after recognition of 10% interest on beginning capital balances and monthly salary allowances of $2,000 to Jones and $1,500 to Thompson. Capital balances on January 1 were
> Tom and Julie formed a management consulting partnership on January 1, 2014. The fair value of the net assets invested by each partner follows: During the year, Tom withdrew $15,000 and Julie withdrew $12,000 in anticipation of operating profits. Net p
> Kazma, Folkert, and Tucker are partners with capital account balances of $30,000, $75,000, and $45,000, respectively. Income and losses are divided in a 4:4:2 ratio. When Tucker decided to withdraw, the partnership revalued its assets from $225,000 to $2
> In the appendix to this chapter, the balance sheet for the General Fund for the City of Atlanta is reported. 1. How is the format used on the balance sheet for the general fund different from the format used by for-profit organizations? Which categories
> The partnership agreement of ABC Associates provides that income should be allocated in the following manner: 1. Each partner receives interest of 20% of beginning capital. 2. Sue receives a salary of $25,000 and Josh receives a salary of $21,000. 3. Jos
> Select the best answer for each of the following. 1. Jon and Joe formed a partnership on July 1, 2014, and invested the following assets: The realty was subject to a mortgage of $25,000, which was assumed by the partnership. The partnership agreement p
> John, Jeff, and Jane decided to engage in a real estate venture as a partnership. John invested $100,000 cash and Jeff provided office equipment that is carried on his books at $82,000. The partners agree that the equipment has a fair value of $110,000.
> Select the best answer for each of the following. 1. Which of the following is not a consideration in segment reporting for diversified companies? (a) Consolidation policy. (b) Defining the segments. (c) Transfer pricing. (d) Allocation of joint costs. 2
> Spur Company’s actual earnings for the first two quarters of 2014 and its estimate during each quarter of its annual earnings are: Actual first-quarter earnings ………………………………………………….. $ 400,000 Actual second-quarter earnings …………………………………………………. 510,000
> Day Company, which uses the FIFO inventory method, had 254,000 units in inventory at the beginning of the year at a FIFO cost per unit of $30. No purchases were made during the year. Quarterly sales information and two sets of end-of-quarter replacement
> The following information concerns the operations of Blane Company for the year ended December 31, 2014. Required: Determine the operating profit (loss) for each of Blane’s two segments for 2014. (In Thousands of Dollars) General
> Twodor Company is involved in four separate industries. Selected financial information concerning Twodor’s involvement in each of the four industries is presented below: Required: Using all tests, determine which of the industry segme
> Pong Industries’ operations involve four operating segments, A, B, C, and D. During the past year, the operating profit (loss) of each segment was Segment Operating Profit (Loss) A ……………………………………………………………………………… $(600) B ………………………………………………………………………
> On April 19, 2011, IBM announced first-quarter 2011 earnings of $2.31 per share (compared to earnings of $1.97 per share in the first quarter of 2010), an increase of 17%. First-quarter net income was $2.9 billion, compared to $2.6 billion in the first q
> In its 10-K amended filing on April 30, 2010, Bronco Drilling reported the financial statements of Challenger Limited (an unconsolidated subsidiary) for its year ending December 31, 2009. The balance sheet and the income statement are reported as follows
> You have purchased a put option on Kimberly Clark common stock. The option has an exercise price of $95.00 and Kimberly Clark’s stock currently trades at $96.18. The option premium is $1.25 per contract. a. Calculate your net profit on the option if Kimb
> You have purchased a call option contract on Johnson & Johnson common stock. The option has an exercise price of $89.00 and J & J’s stock currently trades at $90.43. The option premium is quoted at $2.17 per contract. a. Calculate your net profit on the
> Refer to Table 10–6. a. How many ExxonMobil October 2016 $90.00 put options were outstanding at the open of trading on August 3, 2016? b. What was the closing price of a 10-year Treasury note December 13300 futures call option on August
> You have written a put option on Diebold Inc. common stock. The option has an exercise price of $28 and Diebold’s stock currently trades at $30.50. The option premium is $0.75 per contract. a. What is your net profit if Diebold’s stock price increases to
> Refer to Table 10–4. a. What was the settlement price on the December 2017 Eurodollar futures contract on August 3, 2016? b. How many five-year Treasury note futures contracts traded on August 2, 2016? c. What is the face value on a Swi
> Jones Bank has been borrowing in the U.S. markets and lending abroad, thereby incurring foreign exchange risk. In a recent transaction, it issued a one-year $5 million CD at 4 percent and is planning to fund a loan in yen at 6 percent for a 2 percent exp
> North Bank has been borrowing in the U.S. markets and lending abroad, thereby incurring foreign exchange risk. In a recent transaction, it issued a one-year $2 million CD at 6 percent and is planning to fund a loan in British pounds at 8 percent for a 2
> East Bank has purchased a 5 million one-year Swiss franc (Sf) loan that pays 6 percent interest annually. The spot rate of U.S. dollars for Swiss francs (CHF/USD) is 1.0175. It has funded this loan by accepting a Canadian dollar (C$)– denominated deposit
> Sun Bank USA has purchased a 16 million one-year Australian dollar loan that pays 12 percent interest annually. The spot rate of U.S. dollars for Australian dollars (AUD/USD) is $0.757/ A$1. It has funded this loan by accepting a British pound (BP)– deno
> Bankone issued $200 million worth of one-year CD liabilities in Brazilian reals at a rate of 6.50 percent. The exchange rate of U.S. dollars for Brazilian reals at the time of the transaction was $0.305/Br 1. a. Is Bankone exposed to an appreciation or d
> A bond you are evaluating has a 10 percent coupon rate (compounded semiannually), a $1,000 face value, and is 10 years from maturity. a. If the required rate of return on the bond is 6 percent, what is its fair present value? b. If the required rate of r
> Bank USA recently purchased $10 million worth of euro denominated one-year CDs that pay 10 percent interest annually. The current spot rate of U.S. dollars for euros is $1.104/€1. (LG 9-5) a. Is Bank USA exposed to an appreciation or depreciation of the
> On July 15, 2016, you convert 500,000 U.S. dollars to Japanese yen in the spot foreign exchange market and purchase a six-month forward contract to convert yen into dollars. How much will you receive in U.S. dollars at the end of six months? Use the data
> The following table lists balance of payment current accounts for Country A. a. What is Country A’s total current accounts? b. What is Country A’s balance on goods? c. What is Country A’s balance on
> Assume that annual interest rates are 5 percent in the United States and 4 percent in Turkey. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.3310/Turkish lira (TL). a. If the forward rate is $0.3420/TL,
> Assume that annual interest rates are 8 percent in the United States and 4 percent in Switzerland. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $1.02/Sf. a. If the forward rate is $1.08/Sf, how could the
> If a bundle of goods in Japan costs ¥4,000,000 while the same goods and services cost $40,000 in the United States, what is the current exchange rate of U.S. dollars for yen? If, over the next year, inflation is 6 percent in Japan and 10 percent in the U
> Refer to Table 9–1. a. On June 15, 2016, you purchased a British pound– denominated CD by converting $1 million to pounds at a rate of 0.7605 pound for U.S. dollars. It is now July 15, 2016. Has the U.S. dollar appreci
> Suppose all of the conditions in Problem 18 hold except that the forward rate of exchange is also $1.35/£1. How could an investor take advantage of this situation? Data from Problem 18: If the interest rate in the United Kingdom is 8 percent, the inter
> If the interest rate in the United Kingdom is 8 percent, the interest rate in the United States is 10 percent, the spot exchange rate is $1.35/£1, and interest rate parity holds, what must be the one-year forward exchange rate?
> Suppose that the current spot exchange rate of U.S. dollars for Australian dollars, SUS$/A$, is 0.757 (i.e., $0.757 can be received for 1 Australian dollar). The price of Australian- produced goods increases by 5 percent (i.e., inflation in Australia, IP
> Suppose that the current one-year rate (one-year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1 R 1 = 6%, E( 2 r 1 ) = 7%, E( 3 r 1 ) = 7.5%, E( 4 r 1 ) = 7.85%
> The following are the foreign currency positions of an FI, expressed in the foreign currency: The exchange rate of dollars for Sf is 1.02, of dollars for British pound is 1.31, and of dollars for yen is 0.00953.The following are the foreign currency po
> P.J. Chase Stanley Bank holds $75 million in foreign exchange assets and $68 million in foreign exchange liabilities. P.J. Chase Stanley also conducted foreign currency trading activity in which it bought $165 million in foreign exchange contracts and so
> Citibank holds $23 million in foreign exchange assets and $18 million in foreign exchange liabilities. Citibank also conducted foreign currency trading activity in which it bought $5 million in foreign exchange contracts and sold $12 million in foreign e
> Suppose that, instead of funding the $200 million investment in 10 percent German loans with U.S. CDs, the FI manager in Problem 10 funds the German loans with $200 million equivalent one-year euro CDs at a rate of 7 percent. Now the balance sheet of the
> Suppose that a U.S. FI has the following assets and liabilities: The promised one-year U.S. CD rate is 4 percent, to be paid in dollars at the end of the year; one-year, default risk–free loans in the United States are yielding 6 per
> Refer to Table 9–1. a. What was the spot exchange rate of Canadian dollars for U.S. dollars (USD/CAD) on July 15, 2016? b. What was the six-month forward exchange rate of Canadian dollars for U.S. dollars (USD/CAD) on July 1
> Use the information in the following stock quote to calculate McKesson’s earnings per share over the last year. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) Net 52 Week 52 Week YTD Name Symbol Open High Low Clo
> Refer to the stock market quote in Table 8–1. a. What was the closing stock price for Abercrombie & Fitch on July 6, 2016? b. What was the dividend yield on El Paso Electric stock as of July 7, 2016. c. What were the earnings per s
> Suppose you own 100,000 shares of common stock in a firm with 12.5 million total shares outstanding. The firm announces a plan to sell an additional 2.5 million shares through a rights offering. The market value of the stock is $22.50 before the rights o
> Suppose you own 50,000 shares of common stock in a firm with 2.5 million total shares outstanding. The firm announces a plan to sell an additional 1 million shares through a rights offering. The market value of the stock is $35 before the rights offering
> Suppose the Federal Reserve instructs the Trading Desk to purchase $1 billion of securities. Show the result of this transaction on the balance sheets of the Federal Reserve System and commercial banks.
> Suppose a firm has 50 million shares of common stock outstanding and eight candidates are up for election to six seats on the board of directors. a. If the firm uses cumulative voting to elect its board, what is the minimum number of votes needed to ensu
> Use the information in the following stock quote to calculate Abercrombie & Fitch’s earnings per share over the last year. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) Net 52 Week 52 Week YTD Symbol Open Hi
> Suppose a firm has 15 million shares of common stock outstanding and six candidates are up for election to five seats on the board of directors a. If the firm uses cumulative voting to elect its board, what is the minimum number of votes needed to ensure
> You plan to purchase a $240,000 house using either a 30-year mortgage obtained from your local bank with a rate of 5.75 percent, or a 15-year mortgage with a rate of 5.00 percent. You will make a down payment of 20 percent of the purchase price. a. Calcu
> You plan to purchase a $200,000 house using either a 30-year mortgage obtained from your local savings bank with a rate of 7.25 percent, or a 15-year mortgage with a rate of 6.50 percent. You will make a down payment of 20 percent of the purchase price.
> You plan to purchase a $200,000 house using a 30-year mortgage obtained from your local credit union. The mortgage rate offered to you is 6.50 percent. You will make a down payment of 20 percent of the purchase price a. Calculate your monthly payments on
> You plan to purchase a $150,000 house using a 15-year mortgage obtained from your local credit union. The mortgage rate offered to you is 5.25 percent. You will make a down payment of 20 percent of the purchase price. a. Calculate your monthly payments o
> You plan to purchase an $80,000 house using a 15-year mortgage obtained from your local bank. The mortgage rate offered to you is 8.00 percent. You will make a down payment of 20 percent of the purchase price. a. Calculate your monthly payments on this m
