Question: What are the differences in accounting for

> 2.1. If output is less than potential output, prices _________ and the short-run aggregate supply curve shifts _________. 2.2. Output will automatically return to full employment in the long run if it deviates from full employment. _________ (True/False

> 1.1. We measure the opportunity cost of holding money with _________. 1.2. If interest rate decreases, investment spending _________ (increases/decreases) and money demand _________ (increases/decreases). 1.3. The principle of _________ suggests that t

> 5.1. _________ (Inside/Outside) lags would be longer for the European Central Bank. 5.2. Compared to fiscal policy, the outside lag for monetary policy is longer for monetary policy. _________ (True/ False) 5.3. Current and future short-term interest r

> 4.1. When the Federal Reserve buys bonds on the open market, it leads to _________ (increase/decreases) in the price of bonds. 4.2. To decrease the level of output, the Fed should conduct an open market _________ (sale/purchase) of bonds. 4.3. An open

> 2.1. To increase the supply of money, the Fed should _________ bonds. 2.2. An increase in price levels leads to _________ money demand. 2.3. Banks trade reserves with one another in the _________ market. 2.4. Banks borrow from the Fed at the _________

> 3.1. Interest rates typically rise in booms because the demand for money depends _________ on changes in real income. 3.2. If interest rates are 12 percent per year, the price of a bond that promises to pay $100 next year will be equal to _________. 3.

> 4.1. The Federal Reserve arranged for JPMorgan Chase & Co. to _________ Bear Stearns during the financial crisis in 2008. 4.2. The Federal Reserve helps finance the deficit of the U.S. government by _________ (creating/reducing) money. 4.3. A stress te

> 1.1. Money provides a convenient measuring rod when the _________ of all goods are expressed in _________ terms. 1.2. Gold is a good example of commodity money. _________ (True/False) 1.3. In the United States, currency held by the public constitutes a

> 2.1. Banks are required by law to keep a fraction of their deposits as _________. 2.2. When reserves do not pay interest, banks prefer to keep reserves rather than make loans. _________ (True/ False) 2.3. If the reserve ratio is 0.3 and a deposit of $50

> 5.1. On a graph of the labor market, show the effects of an increase in the payroll tax. 5.2. On a graph of the labor market, show the effects of a negative shock to technology on wages and employment. 5.3. Two examples of major technological innovatio

> 3.1. The Federal Reserve is the “_________ of last resort.” 3.2. The United States is divided into 12 districts, each of which has a Federal Reserve Bank. These banks do not participate in monetary policy decisions, but liaise between the Fed and other

> 3.1. If a project costs $100 and pays $105 in year 1 and $110 in year 2, the maximum interest rate at which the present value of investment exceeds its cost is _________. 3.2. As real interest rates rise, investment spending in the economy _________. 3

> 4.1. An illiquid financial asset is one that can easily be used to buy goods and services. _________ (True/False) 4.2. Creation of _________ following the Great Depression has greatly reduced the likelihood of runs on banks today. 4.3. Securitization r

> 2.1. If the interest rate is 25 percent, the present value of $500 paid 2 years from now equals _________. 2.2. If the interest rate is 10 percent, the present value of $300 paid 1 year from now equals _________. If the $300 is received in 5 years, the

> 1.1. Investment is a larger component of GDP than consumption, but it is much more volatile. _________ (True/False) 1.2. Investment spending is very _________, since it moves in conjunction with GDP. 1.3. Keynes states that optimism and pessimism relat

> 6.1. An increase in the price level will _________ GDP and thereby move the economy _________ the aggregate demand curve. 6.2. At any price level, the income-expenditure model determines the level of equilibrium output and the corresponding point on the

> 2.1. The consumption function describes the relationship between consumption expenditures and the level of _________. 2.2. A decrease in consumer confidence will shift the consumption function _________ (upward/downward). 2.3. If housing prices fall, y

> 4.1. The multiplier for taxes is greater than the multiplier for government spending. _________ (True/False) 4.2. An increase in the tax rate will _________ the government spending multiplier. 4.3. Economic fluctuations have _________ since World War I

> 5.1 A decrease in the marginal propensity to import will _________ the multiplier for investment spending. 5.2. The _________ is positive because consumers import more goods and services as income rises. 5.3. Use the income-expenditure graph to illustr

> 3.1. In our simple model, if C = 100 + 0.8y, and I = 50, equilibrium output will be _________. 3.2. If in Exercise 3.1 I increase to 100, a. the equilibrium income will be _________. b. the multiplier is _________. 3.3. The slope of the consumption fu

> 4.1. Suppose the supply of labor increases. Draw a graph to show how potential output and wages change. 4.2. Draw a graph to show how potential output and wages change when the stock of capital decreases. 4.3. Full-employment output is the level of out

> A.1. Find the Multiplier. An economy has a marginal propensity to consume (b) of 0.6 and a marginal propensity to import (m) of 0.2. What is the multiplier for government spending for this economy? A.2. The Effects of Taxes and Spending. Suppose the eco

> 1.1. To decrease aggregate demand, a government can either decrease spending or _________ taxes. 1.2. Fiscal policy refers to the _________ and _________ policies used by the government to influence the economy. 1.3. If the multiplier for taxation is &

> 2.1. Fiscal year 2015 began on October 1, _________. 2.2. Corporate taxes are the largest component of federal revenue. _________ (True/False) 2.3. Federal spending consists of _________ and _________. 2.4. The largest category of federal spending is

> 3.1. _________ was the first president to consciously use fiscal policy to stabilize the economy. 3.2. Since both taxes and government spending increased in the United States during the 1930s, there was __________ (large/little/no) net fiscal expansion.

> 3.1. The __________ depicts the relationship between the level of prices and the total quantity of goods and services that firms supply. 3.2. A decrease in material costs will shift the short-run aggregate supply __________. 3.3. The aggregate supply c

> 2.1. Which of the following is not a component of aggregate demand? a. Consumption b. Investment c. Government expenditures d. The supply of money e. Net exports 2.2. When we draw the aggregate demand curve, __________ should be on the x-axis and _

> 1.1. Arthur Okun distinguished between auction prices, which changed rapidly, and __________ prices, which are slow to change. 1.2 Auction prices are prices that adjust __________, while custom prices are prices that adjust __________. 1.3 The price sy

> 4.1. Suppose the supply of money increases, causing output to exceed full employment. Prices will __________ and real GDP will __________ in the short run, and prices will __________ and real GDP will __________ in the long run. 4.2. Consider a decrease

> 5.1. For each of the following pairs of population groups, indicate which group has a higher poverty rate: a. white vs. Hispanic b. white vs. Asian c. married couple vs. femaleheaded ho

> 3.1. A patent increases the incentive to develop new products because it the price of the product and thus generates profit to cover a firm’s costs of . 3.2. In some cases, a patent is socially inefficient because it merely

> 1.1. The firm-specific demand curve shows the relationship between the charged by the firm and the by the firm. 1.2. Consumers do not have a strong preference for the output of one seller over that of another in a market because the firms sell a standar

> 3.1. The key region of the brain for the valuation of benefits is the . 3.2. In the dopamine learning system, learning happens when the about the pleasure from a product are (correct/wrong). 3.3. The key region of the brain for the valuation of costs is

> 1.1. To compute the price elasticity of demand, we divide the percentage change in _________ by the percentage change in _________ and then take the value of the ratio. 1.2. If a 10 percent increase in price decreases the quantity demanded by 12 percent

> 1.1. The dollar against the euro when the European central bank lowers interest rates. 1.2. If the dollar appreciates against the euro, then the euro also against the dollar. 1.3. The price of one country’s currency in terms of another country’s curren

> 4.1. Professors Don _________ and Franco _________ developed the adjustment-process model used in this chapter. 4.2. Keynes’s objection to Say’s law was that it is possible for demand to create its own supply. _________ (True/ False) 4.3. Economists wh

> A.1. ____________ and ____________ are the two factors that determine how the stock of capital changes over time. A.2. Which of the following causes capital deepening to come to an end? a. The marginal principle b. The principle of diminishing returns

> 1.1. The income-expenditure model is most appropriate for long-run analysis. _________ (True/False) 1.2. Equilibrium output occurs when real output equals planned expenditures. _________ (True/False) 1.3. In our most basic model of the economy, the onl

> 2.1. Arrows up or down: An increase in the wage the opportunity cost of leisure time, which tends to leisure time and labor time. 2.2. Arrows up or down: An increase in the wage real income, and if leisure is a normal good

> 4.1. Government transfer and tax policies increase the income share of the lowest quintile of the income distribution from about percent to about percent. 4.2. The college premium is defined as the percentage difference be

> 1.1. The marginal revenue product of labor equals times . 1.2. A profit-maximizing firm will hire the number of workers where equals . 1.3. Your favorite professional team is considering hiring a new player for $3 mil

> 3.1. Arrows up or down: A decrease in the supply of nurses will the equilibrium wage and the equilibrium quantity of nursing services. 3.2. Arrows up or down: An increase in the demand for nursing services will the equilibrium wage and

> 3.1. Compared to a pollution tax, a uniform-abatement policy is (more/less) efficient because it does not exploit differences in across firms. 3.2. The “command” part of a command-and-control pollution policy specifies a f

> 1.1. The optimal level of pollution abatement is the level at which the of abatement equals the of abatement. 1.2. The marginal cost of abatement typically (increases/decreases) with the level of abatement. 1.3. The

> 2.1. The private cost of production includes the amount a firm pays for , , and . 2.2. The external cost of production is the cost incurred by . 2.3. The social cost of production equals the cost plus the c

> 4.1. Under a system of marketable pollution permits, a firm with (low/high) abatement costs will buy permits from a firm with (low/high) abatement costs. 4.2. Arrow up or down: A switch from regular pollution permits to marketable perm

> 3.1. According to the model of voting developed in the chapter, the choices made by the government match the preferences of the voter. 3.2. The self-interest theory of government explains why many states have limits on and . 3.3

> 4.1. Who developed the theory of scale of the market? a. Joseph Schumpeter b. Milton Friedman c. Adam Smith d. John Maynard Keynes 4.2. The notion that innovation is promoted by the competitive desire to break production monopolies is known as creat

> 6.1. When the economy operates at full employment, an increase in government spending must crowd out consumption. __________ (True/False) 6.2. A(n) __________ economy is open to trade, whereas a closed economy is not. 6.3. In an open economy, increases

> What are the differences in accounting for a forward contract used as (a) a cash flow hedge and (b) a fair value hedge of a foreign-currency-denominated asset or liability?

> Buch Corporation purchased Machine Z at the beginning of Year 1 at a cost of $100,000. The machine is used in the production of Product X. The machine is expected to have a useful life of 10 years and no residual value. The straight line method of deprec

> What is the concept underlying the two-transaction perspective to accounting for foreign currency transactions?

> On August 1, Year 1, Huntington Corporation placed an order to purchase merchandise from a foreign supplier at a price of 100,000 dinars. The merchandise is received and paid for on October 31, Year 1, and is fully consumed by December 31, Year 1. On Aug

> On October 1, Year 1, Butterworth Company entered into a forward contract to sell 100,000 rupees in four months (on January 31, Year 2). Relevant exchange rates for the rupee are as follows: Butterworth Company’s incremental borrowing

> Artco Inc. engages in various transactions with companies in the country of Santrica. On November 30, Year 1, Artco sold artwork at a price of 400,000 ricas to a Santrican customer, with payment to be received on January 31, Year 2. In addition, on Novem

> On November 1, Year 1, Alexandria Company sold merchandise to a foreign customer for 100,000 francs with payment to be received on April 30, Year 2. At the date of sale, Alexandria Company entered into a six-month forward contract to sell 100,000 francs.

> The same facts apply as in Exercise 14 except that Budvar Company purchases parts from a foreign supplier on December 1, Year 1, with payment of 20,000 crowns to be made on March 1, Year 2. On December 1, Year 1, Budvar enters into a forward contract to

> The Budvar Company sells parts to a foreign customer on December 1, Year 1, with payment of 20,000 crowns to be received on March 1, Year 2. Budvar enters into a forward contract on December 1, Year 1, to sell 20,000 crowns on March 1, Year 2

> Beech Corporation has three finished products (related to three different product lines) in its ending inventory at December 31, Year 1. The following table provides additional information about each product: Beech Corporation expects to incur sellin

> On September 30, Year 1, the Lester Company negotiated a two-year loan of 1,000,000 markkas from a foreign bank at an interest rate of 2 percent per annum. Interest payments are made annually on September 30, and the principal will be repaid on September

> On December 1, Year 1, El Primero Company purchases inventory from a foreign supplier for 40,000 coronas. Payment will be made in 90 days after El Primero has sold this merchandise. Sales are made rather quickly, and El Primero pays this entire obligatio

> Garden Grove Corporation made a sale to a foreign customer on September 15, Year 1, for 100,000 foreign currency units (FCU). Payment was received on October 15, Year 1. The following exchange rates apply: Date……………………………………U.S. Dollar per FCU September

> The process of professionalization of accounting in China has been unique. Required: Discuss the unique features of professionalization of accounting in China.

> Zorba Company, a U.S.-based importer of specialty olive oil, placed an order with a foreign supplier for 500 cases of olive oil at a price of 100 crowns per case. The total purchase price is 50,000 crowns. Relevant exchange rates are as follows: Zorba

> “In 2012, there were major reforms affecting accounting and financial reporting in the United Kingdom.” Do you agree? Explain.

> This chapter describes the mechanisms in place to regulate accounting and financial reporting in five countries. Required: Compare and contrast these mechanisms in the United Kingdom and China.

> Refer to Exhibits 6.3, 6.5, 6.7, 6.8, and 6.12. Required: Identify a. An issue in respect of which the practices of several countries discussed in this chapter are at variance with IFRS. b. The most important financial accounting practice for each of th

> Refer to the IASB Web site (www.iasb.org.uk). Required: a. Determine the manner in which IFRS are used in each of the five countries included in this chapter. b. Determine which of these countries has a resident who is a member of the IASB.

> Chapter 1 identified and described six major reasons for accounting diversity: legal system, taxation, providers of financing, inflation, political and economic ties, and culture. Required: a. Which factor or factors appear to have exerted the greatest

> How does a foreign currency option differ from a foreign currency forward contract?

> The number of professional accountants in a country indicates the status of the accounting profession in that country. Required: Determine the number of accountants per 100,000 of population in the United Kingdom and Japan. Explain why the numbers are s

> The NAFTA agreement has had a major impact on accounting and financial reporting by Mexican companies. Required: Discuss the nature of the impact referred to in the preceding statement.

> The JICPA has taken a number of positive steps toward convergence between Japanese GAAP and IFRS. Required: Explain the steps taken by the JICPA in this regard.

> Refer to Exhibits 6.3, 6.7, and 6.9. Required: Explain the main areas you would focus on in comparing financial statements prepared by companies in China, Japan, and Mexico with those prepared by companies using IFRS. Exhibits 6.3: Exhibits 6.7:

> The financial reporting issues facing Mexico are different in some respects from those of other countries covered in this chapter. Required: Provide two main reasons to support the above statement.

> China Petroleum and Chemical Corporation (CPCC) is one of a growing number of Chinese companies that has cross-listed its stock on foreign stock exchanges. To provide information that might be useful for a wide audience of readers outside of China, CPCC

> The Act of 2010 to modernize German accounting reflects a willingness to change as well as retain traditional German accounting practices. Required: Do you agree with the preceding statement? Explain.

> This chapter describes the major changes that have been introduced recently in Germany and Japan in the area of accounting regulation. Required: Describe any similarities between those changes in Germany and Japan.

> Indicate whether each of the following describes an accounting treatment that is acceptable under IFRS, U.S. GAAP, both, or neither by checking the appropriate box. Acceptable Under U.S. GAAP Both Neither IFRS • Bank overdrafts are netted against c

> This problem consists of two parts. Part A. On January 1, Year 1, Stone Company issued 100 stock options with an exercise price of $38 each to 10 employees (1,000 options in total). The employees can choose to settle the options either (a) in shares of

> Under what conditions can hedge accounting be used to account for a foreign currency option used to hedge a forecasted foreign currency transaction?

> The Campolino Company has a defined benefit post-retirement health-care plan for its employees. To fund the plan, Campolino makes an annual cash contribution to a health-care benefit fund on December 31 of each year. At the beginning of Year 5, Campolino

> n December 1, Year 1, Traylor Company sells $100,000 of short-term trade receivables to Main Street Bank for $98,000 in cash by guaranteeing to buy back the first $15,000 of defaulted receivables. Traylor’s historic rate of non collection on receivables

> On November 1, Year 1, Farley Corporation sells receivables due in six months with a carrying amount of $100,000 to Town Square Bank for a cash payment of $95,000, subject to full recourse. Under the right of recourse, Farley Corporation is obligated to

> Five years ago, Macro Arco Corporation (MAC) borrowed $12 million from Friendly Neighbor Bank (FNB) to finance the purchase of a new factory to be able to meet an expected increase in demand for its products. The expected increase in demand never materia

> On January 1, Year 1, Tempe extinguishes $10 million of 10 percent bonds payable due December 31, Year 2, that were originally issued at a discount by calling them at par value. The current carrying amount of the bonds payable is $9,950,000. To finance t

> The Bockster Company issues $20 million of preferred shares on January 1, Year 1, at par value. The preferred shares have a 5 percent fixed annual cash dividend. Part A. The preferred shareholders have the option to redeem the preferred shares for cash e

> A. Harrington Company is a U.S.-based company that prepares its consolidated financial statements in accordance with U.S. GAAP. The company reported income in 2015 of $5,000,000 and stockholders’ equity at December 31, 2015, of $40,000,000. T he CFO of S

> On January 1, Year 1, Spectrum Fabricators Inc. issues $20 million of convertible bonds at par value. The bonds have a stated annual interest rate of 6 percent, pay interest annually, and come due December 31, Year 5. The bonds are convertible at any tim

> Saffron Enterprises Inc., a U.S.-based company, purchases a 4 percent bond denominated in euros for $1,500 on January 1, Year 1, when the exchange rate is $1.50 per euro. (In other words, the purchase price was 1,000 euros.) The bond was purchased at par

> Phil’s Sandwich Company sells sandwiches at several locations in the northeastern part of the country. Phil’s customers receive a card on their first visit that allows them to receive one free sandwich for every eight sandwiches purchased in a three-mont

> What is hedge accounting?

> Cypress Company enters into a fixed-fee contract to provide architectural services to the Gervais Group for $240,000. The Gervais Group, which will make monthly payments of $40,000, is a new client for Cypress Company. Cypress has agreed to provide Gerva

> he Miller-Porter Company sells powder coating equipment at a sales price of $50,000 per unit. The sales price includes delivery, installation, and initial testing of the equipment, as well as a monthly service call for one year in which a technician chec

> Ultima Company offers its customers discounts to purchase goods and take title before they actually need the goods. The company offers to hold the goods for the customers until they request delivery. This relieves the customers from making room in their

> Mishima Technologies Company introduced Product X to the market on December 1. The new product carries a one-year warranty. In its first month on the market, Mishima sold 1,000 units of the new product for a total of $1,000,000. Customers have an uncondi

> Gotti Manufacturing Inc., a U.S.-based company, operates in three countries in addition to the United States. The following table reports the company’s pretax income and the applicable tax rate in these countries for the year ended Dece

> Updike and Patterson Investments Inc. (UPI) holds equity investments with a cost basis of $250,000. UPI accounts for these investments as available-for sale securities. As such, the investments are carried on the balance sheet at fair value, with unreali

> SC Masterpiece Inc. granted 1,000 stock options to certain sales employees on January 1, Year 1. The options vest at the end of three years (cliff vesting) but are conditional upon selling 20,000 cases of barbecue sauce over the three-year service period

> Bessrawl Corporation is a U.S.-based company that prepares its consolidated financial statements in accordance with U.S. GAAP. The company reported income in 2014 of $1,000,000 and stockholders’ equity at December 31, 2014, of $8,000,000. The CFO of Bess