Financial Reporting Under IFRS A Topic Based Approach 1st Edition Wolfgang Dick ,Franck Missonier-Piera - Solutions

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Which of the following statements about capital budgeting is most accurate? A. The capital budgeting analysis for expansion and replacement projects is the same. B. If the fixed assets are sold for book value, terminal year after-tax non- operating cash flows equal the cash proceeds from the sale
Which of the following factors is a firm least likely to consider when appropriately evaluating a new project? A. The depreciation expense tax shield on the new project. B. The current market value of any equipment to be replaced. C. Previous expenditures associated with a market test to determine
Under Gotham's current accounting system, which of the following securities are least accurately classified?A. Preferred stock.B. Package of mortgages.C. Corporate bonds.
The effect of Gotham's investment portfolio on reported net income in the last fiscal year was closest toto a gain of:A. $18,170,000.B. $19,270,000.C. $21,270,000.
Cullen Company created a qualified special purpose entity (QSPE) to securitize accounts receivable in accordance with generally accepted accounting principles. Cullen receives cash when the receivables are transferred to the QSPE. If the current accounting treatment for QSPEs is eliminated, what
The implied P/E multiple of Big, without regard to Small, is closest to: A. 16.1. B. 16.4. C. 17.2.
The percentage of Big's value explained by its ownership of Small is closest to: A. 10.9%. B. 11.6%. C. 13.6%.
Rainbow Corporation recently reported the following financial information for its two separate divisions:Rainbow is most likely overallocating resources to:A. Red only.B. Green only.C. Red and Green. Division EBIT Margin Total Assets % Total CapEx % Green 9.5% 60% 30% Red 3.2% 40% 70%
Selected financial information from Westcreek Corporation follows:At the end of 2009, Westcreek's total asset turnover, without regard to theinvestment in Creston, is closest to:A. 2.0.B. 2.3.C. 2.5.
McAdoo Corporation recently reported the following:Tax burden, without the regard to the investments in associates, is closest to:A. 57.6%.B. 60.0%.C. 67.1%.
Lorenzo Company recently reported EBIT margin of 11%, total asset turnover of 1.2, a financial leverage ratio of 1.5, and interest burden of 70%. Assuming an income tax rate of 35%, Lorenzo's return on equity is closest to:A. 9%.В. 10%.C. 11%.
When applying the financial analysis framework to the valuation of an equity security, communicating with company suppliers, customers, and competitors is an input that occurs while:A. establishing the objective of the analysis.B. processing data.C. collecting data.
When applying the financial analysis framework, which of the following is the best example of output from processing data?A. A written list of questions to be answered by management.B. Audited financial statements.C. Common-size financial statements.
Which of the following will most likely result in higher earnings quality?A. Using aggressive pension assumptions.B. Structuring a lease transaction to avoid capitalization on the balance sheet.C. Recognizing revenue once the earnings process is complete.
All of the following would immediately increase earnings except:A. selling more inventory than is purchased or produced.B. lowering the salvage value of depreciable assets.C. holding the accounting period open past year-end.
Which of the following is most likely a potential warning sign of overstated revenue?A. Over time, earnings have been growing faster than operating cash flow.B. Consistent bad debt allowance relative to receivables and past credit losses.C. Increase in inventory turnover of a toy retailer in the
Gateway Corporation reported sales of $180,000 for the current year. If accounts receivable increased $24,000 during the year and unearned revenue decreased $4,000 during the year, cash collected from sales was:A. $152,000.B. $156,000.C. $160,000.
Which of the following statements about mean reversion is least accurate?A. When earnings are largely comprised of accruals, mean reversion will occur more quickly.B. The competitive marketplace rewards successful results thereby increasing future returns.C. Extreme earnings should not be expected
Following are the balance sheet accrual ratios for Firm X and Firm Y:Which of the following statements is most accurate?A. Firm Y' s earnings quality is higher as compared to Firm X.B. Firm X's earnings quality is deteriorating.C. Firm Y's earnings quality is improving
Using the following information, calculate the cash flow accruals ratio: Operating income 20,000 Net income 12,000 Cash from operations 33,000 Cash from investing (30,000) Cash from financing (10,000) Average total assets 90,000 Average net operating assets 180,000 A. 5.0%. B. 10.0%. C. 11.1%.
Which of the following is least likely to prevent discretionary abuse? A. An independent audit. B. Certification by senior management. C. Lending covenants.
Which of the following would least likely be a motivation to overstate net income? A. Negotiate labor union contracts. B. Meet earnings expectations. C. Higher incentive compensation.
The main objective of an independent audit is to: A. assess how well managers of the organization have done their jobs. B. prepare all necessary financial statements for reporting purposes. C. determine whether financial statements were prepared in accordance with generally accepted accounting
Which of the following statements about accruals and the persistence of earnings is most accurate? A. If an investor fails to assign a higher weighting to the accrual component of earnings, securities become mispriced. B. Lower persistency is always the result of management manipulation. C. The
Which of the following accounting methods best provides timely and relevant information for decision making purposes?A. Cash basis. B. Tax basis. C. Accrual basis.
Which of the following statements about the accrual basis of accounting is least accurate? A. Revenue is recognized when cash is received, and expenses are recognized when payment is made. B. Revenues and expenses may be allocated to time periods other than those in which the cash flows occur. C.
Frankfurt Company, located in Germany, is a wholly owned subsidiary of New York Company. New York uses the all-current method to translate the financial statements of Frankfurt into U.S. dollars. New York wants to hedge its net asset position in Frankfurt by issuing euroro denominated bonds. If the
RGH Corporation is a coffee distributor. Next year, RGH anticipates purchasing 100 tons of coffee beans. Concerned that coffee bean prices will increase next year, RGH immediately purchases a futures contract and designates the contract as a cash flow hedge. At the end of this year, the price of
At the beginning of this year, KSG Company issued a $10 million, 8% coupon bond maturing in five years. KSG is concerned that if interest rates decrease, the fair value of its liability will increase. Consequently, KSG enters into an interest rate swap whereby it will receive payments at a fixed
BHG Corporation provides goods and services to its customers on credit.Customer payments are due 30 days from invoice date. Ignoring taxes, what is the likely impact on net income and operating cash flow if BHG recognizes revenue too soon?
Which of the following statements about earnings before interest, taxes, depreciation, and amortization (EBITDA) is least accurate?A. It is sometimes used as a proxy for operating cash flow.B. It is calculated without regard to working capital changes on the balance sheet.C. It is based on the cash
Cortez is concerned about depreciation of the peso and would like to change Gila's capital structure. This would be best accomplished by:A. borrowing pesos and reducing equity.B. using cash to reduce accounts payable.C. selling receivables and using the proceeds to pay down LTD.
Nonmonetary assets less nonmonetary liabilities are:A. 5,000,000.В. 41,000,000.C. 43,000,000.
How many of the following situations might result in a translation gain? . Total assets exceed total liabilities when the foreign currency is depreciating using the all-current method. Monetary liabilities exceed monetary assets when the foreign currency is appreciating using the temporal method.
Bob Haskell, CFA, is analyzing the financial statements of a U.S.-based company called Seriev Motor. Seriev has a foreign subsidiary located in Japan. Seriev translates the subsidiary results using the all-current method. Haskell determines that the following four ratios will remain the same after
The gross profit margin ratio from Vibrant's 2008 U.S. dollar financial statements remeasured using the temporal method is closest to:A. 28.5%.B. 30.9%.C. 32.7%.
The gross profit margin ratio and the return on assets ratio from Vibrant's 2008 U.S. dollar financial statements translated using the all-current method are closest to:Gross profit margin Return on assets A. 22.7% 12.8%B. 30.9% 12.8%11.9%C. 30.9%
Assume for this question only that Vibrant operates relatively independently from FlexCo. For 2008, FlexCo most likely will report a cumulative translation loss on the consolidated:A. income statement of $77.1 related to Vibrant.B. balance sheet of $77.1 related to Vibrant.C. balance sheet of
Tiny Company, a subsidiary of Large Corporation, operates in a country that is experiencing hyperinflation. Assuming Large follows IFRS, which of the following exposures will result in a net purchasing power gain?A. Nonmonetary assets and current liabilities.B. Monetary liabilities.C. Nonmonetary
If a foreign subsidiary's functional currency and the parent's reporting currency are the same, the parent's exposure to changing exchange rates is based on:
Barkley Corporation, a wholly-owned subsidiary of a U.S. firm, is located in a country that is experiencing hyperinflation. Barkley's functional currency and the parent's presentation currency differ. What exchange rate should be used to convert Barkley's intangible assets into U.S. dollars
Which of the following statements about the temporal method and the all-current method is least accurate?A. Net income is generally more volatile under the temporal method than under the all-current method.B. Subsidiaries that operate in highly inflationary environments will generally use the
A foreign subsidiary is operating in a country whereby the local currency is depreciating relative to the parent's presentation currency. Assuming the subsidiary is a FIFO firm, which accounting method will result in the highest gross profit margin reported in the parent's consolidated income
On December 15, 2007, a U.S. firm sold merchandise to a Mexican firm.Payment (in pesos) was due in 30 days but was actually received on January 20, 2008. Using the following exchange rates, what is the effect on the U.S. firm's income statement when payment is received?Pesos per U.S. $December 15,
Mazeppa, Inc., is a multinational firm with its home office located in Toronto, Canada. Its main foreign subsidiary is located in Paris, but the primary economic environment in which the foreign subsidiary generates and expends cash is in the United States (New York). The:A. local currency is the
Which of the following ratios may be larger in the presentation currency versus the local currency when translated under the all-current method? A. Current ratio. B. Return on assets. C. Net profit margin.
XYZ's income statement shows 400 of net income and a 100 dividend that was paid on October 31 when the exchange rate was $1.60 per . The current exchange rate is $1.70 per , and the average rate is $1.55 per . The change in retained earnings for the period in U.S. dollars is closest to: A. $460. B.
Which of the following is least likely a condition that requires the use of the temporal method for a U.S. parent that reports results in U.S. dollars? A. The functional currency is the local currency. B. The foreign subsidiary is operating in a highly inflationary economy. C. The functional
Which of the following statements is most accurate regarding foreign currency translation? Under the: A. temporal method, the monetary asset accounts of a foreign subsidiary are translated using the current rate. B. temporal method, the nonmonetary asset accounts of a foreign subsidiary are
SCP Incorporated disclosed the following information related to its defined- benefit pension plan:
The net amount of the cost components of Heritage Bakery's projected benefit obligation for 2007 was $38 million. Cost components include current service cost, interest cost, actuarial gains and losses, and prior service costs. The fair market value of plan assets on January 1, 2007, was $159
Jacklyn King has been asked to do some accounting for Alexeeff Corp.'s pension plan. At the beginning of the period, the PBO was $12 million, and the fair market value of plan assets totaled $8 million. The discount rate is 9%, expected return on plan assets is $0.96 million, and the anticipated
Company Z has a defined-benefit plan. The projected benefit obligation is$60 million, the accumulated benefit obligation is $50 million, and the vested benefit obligation is $40 million. The fair value of the plan's assets is $40 million. According to SFAS No. 158, what amount should Company Z
Which of the following statements about share-based compensation is most accurate? A. Compensation expense is only recognized if an employee stock option has intrinsic value on the grant date. B. In a restricted stock plan, the employer recognizes compensation expense when the employee sells the
Which of the following are necessary inputs in order to compute share-based compensation expense using an option pricing model? A. The exercise price and the stock price one year after the grant date. B. The expected dividend yield and the firm's cost of capital. C. The expected term of the option
All else equal, a decrease in the discount rate will most likely have what impact on the funded status? A. Increase. B. Decrease. C. No effect.
Which of the following best describes the impact of an increase in the compensation growth rate? A. Retained earnings are lower. B. Both the PBO and the ABO are higher. C. The plan assets are higher.
All else equal, which of the following statements best describes the impact of an increase in the expected return on plan assets?A. Increase in plan assets and decrease in pension expense.B. Decrease in PBO and increase in service cost.C. Increase in net income.
Which of the following statements best describes the impact of an increase in the discount rate on PBO and pension expense of a defined-benefit retirement plan covering a relatively young workforce?
Best Taste Marketing follows IFRS and reports a $33 million net pension liability in its balance sheet at the end of 2009. In the footnotes to the financial statements, the company discloses a projected benefit obligation (PBO) of$106 million and a fair value of pension plan assets of $81 million.
The funded status of NICEE Company's pension plan on December 31, 2007, is $85 million underfunded. Unrecognized actuarial gains total $12 million and unrecognized prior service cost is $27 million. What is the amount of the net pension liability reported on NICEE's balance sheet on December 31,
Suppose management changes its assumption related to mortality rates of its employees, which results in an increase in the projected benefit obligation(PBO). The increase in the PBO is most likely to be reported as:A. an increase in prior service cost.B. an actuarial loss.C. an actuarial gain.
Tanner's economic pension expense (in millions) for the year ended 2009 is closest to:A. $0.B. $15.C. $41.6 For analytical purposes, what adjustment to the cash flow statement would best reflect the substance of Tanner's pension contributions?A. Increase operating cash flow and decrease financing
The funded status of the Tanner pension plan (in millions) as of December 31, 2009, is closest to:A. underfunded by $212.B. underfunded by $120.C. overfunded by $120.
Assuming there were no deferred or unamortized amounts as of January 1, 2009, Tanner's reported pension expense (in millions) for the year ended December 31, 2009, is closest to:
Which of the following components of the projected benefit obligation is most likely to increase every year as a direct result of the employee working another year for the company?A. Current service cost.B. Interest cost.C. Benefits paid.
Which of the following statements about retirement plans is most accurate?A. The amount recorded on the balance sheet for a defined-benefit plan under IFRS is the plan's funded status.B. In a defined-contribution plan, pension expense is calculated as the difference in the contribution amount and
Lowdown, Inc., uses the acquisition method to report the results of its investment in Highbrow Company because it controls 51% of the voting shares. Highbrow has reported positive net income in each of the last five years. Martha Patterson, an analyst with Cauldron Associates, determines that the
Selected operating results for Lowdown, Inc., in 2008 and 2009 are shown in the following table:The appropriate forecast of Lowdown's operating income in 2010 based on Patterson's analysis is closest to:A. $500.B. $650.C. $700.
A company accounts for its investment in a subsidiary using the equity method.The reported return on equity (ROE) is 21%, and return on assets (ROA) is 14%. An analyst adjusts the financials to reflect proportionate consolidation.ROE based on proportionate consolidation is most likely to be:A. less
A company accounts for its investment in a subsidiary using the equity method.The reported net profit margin is 14%. An analyst adjusts the financials to reflect consolidation and determines that the adjusted net profit margin is 8%.The net profit margin based on proportionate consolidation is most
According to U.S. GAAP, which of the following statements about the method used to account for a joint venture whereby each party owns 50% is most accurate?A. The investor can choose between the proportionate consolidation method and the equity method.B. The equity method is required.C. The
Adam Corporation acquired Hardy Corporation recently using the acquisition method. Adam is preparing to report its year-end results to include Hardy according to IFRS. Which of the following statements regarding goodwill is most accurate?
According to U.S. GAAP, goodwill is considered impaired if the: A. implied goodwill at the measurement date exceeds the carrying value of goodwill. B. carrying value of the reporting unit is greater than fair value of the reporting unit. C. goodwill can be separated from the business and valued
Assuming proportionate consolidation, Company C's cost of goods sold and net income for the year ended 2009 are closest to: Cost of goods sold A. $8,000 B. $7,000 C. $8,000 Net income $930 $930 $830
Assuming proportionate consolidation, Company C's total assets at the end of 2009 is closest to: A. $15,250. B. $15,650. C. $17,850.
Assuming proportionate consolidation, Company C's stockholders' equity at the end of 2009 is closest to: A. $5,950. B. $6,350. C. $6,750.
If Company M can significantly influence Company N, what amount of income should Company M recognize from its investment for the year ended 2009?A. ($90,000).В. ($210,000).C. $30,000.
If Company M can significantly influence Company N, what is the balance sheet carrying value of Company M's investment at the end of 2009?A. $5,790,000.B. $5,970,000.C. $6,000,000.
On its December 31, 2009, consolidated balance sheet, Company P should report a minority ownership interest of:A. $0.B. $39,000.
For the year ended December 31, 2009, Company P's consolidated net income is:A. $300,000.B. $348,000.C. $360,000.
Immediately after the acquisition, Company P will report total assets of:A. $1,080,000.B. $1,440,000.C. $1,560,000.
Company P received cash flow from the investee of:A. $50,000.B. $150,000.C. $200,000.
Company P reported investment income of:A. $50,000.B. $150,000.C. $200,000.
At the end of 2007, Company P reported investment in Company A as:A. $1.5 million.B. $1.65 million.C. $1.7 million.
Assume for this question only that Security A and Security B are both debt securities held-to-maturity. At t = 2, Kirk will report the carrying value of these securities as:A. $1,030.B. $1,200.C. $1,250.
Based on the information provided, which of the following statements is most accurate?A. Classifying the shares as trading securities would result in greater reported earnings volatility for Kirk.B. Classifying the shares as available-for-sale securities would result in a $220 realized gain for
At t = 2, Kirk will report the carrying value of its financial assets as:A.C. ww
At t = 1, Kirk will:A. carry the financial assets at cost.B. write down the financial assets to $1,030 and recognize an unrealized loss of$170.C. write down the financial assets to $1,030 and recognize a realized loss of$170.
Kirk Company will report the initial value of its investment in financial assets as:A. $1,030. B. $1,200.C. $1,250.
If a company uses the equity method to account for an investment in another company:A. income is combined to the extent of ownership.B. all income of the affiliate is included except intercompany transfers.C. earnings of the affiliate are included but reduced by any dividends paid to the company.
Cross-Reference to CFA Institute Assigned Reading #21 - Intercorporate Investments Tall Company owns 30% of the common equity of Short Incorporated. Tall has been unsuccessful in its attempts to obtain representation on Short's board of directors. For financial reporting purposes, Tall's ownership
3. Cash Flow Statement The Schneider group cash flow statement for the year 2007 is disclosed in Figure 9.32, and some additional information provided in the notes is disclosed in Figure 9.33. Using that information, please answer the following questions:1. What action produced the most important
2. EPS Boulay & Ken carried out a net income before tax of £2m in 2007. The number of common shares is 500,000. To finance its growth, Boulay & Ken issued 2,000 convertible bonds. It is specified that the interest is 5% per year and that 2,000 convertible bonds can be converted into 500 common
1. Cash flow statement During 2008, Finesse Corp. sold land for £40,000 and bought furniture for £15,000. The firm paid £3,000 dividends to its shareholders and borrowed £20,000 from its bank after having paid back a £10,000 debt. Balance sheet 12/31/08 01/01/08 Cash Trade receivables
7. Consolidation Process In 2007, at the creation of Basteau, Astra has acquired 90% of the shares of this company. Neither firm pays dividends during year 2007, and on 12/31/2007, the balance sheets of both firms are as follows (thousands):1. Calculate the net profit of the group.2. Prepare a
6. Goodwill On 12/31/2008, Keio balance sheet is disclosed as follows (in thousands):During the consolidation process, the fair values of Keio’s identifiable assets and liabilities have been estimated as follows (thousands):1. At the acquisition date, which is the amount of Keio’s net assets at
5. Goodwill Calculation Locaplus acquired 100% of Transcar for €10m. The fair values of assets and liabilities of Transcar are estimated at €7m.1. Determine the goodwill to be disclosed in the Locaplus group accounts.2. Will that goodwill be different if Locaplus only purchases 80% of Transcar?
4. Intercompany Eliminations In 2008, Seki bought goods for €120m. It sold them to its parent company Kaa for €150m. Kaa sold 90% of those goods to a third party for €180m.1. Considering a 33% tax rate and disregarding other costs, how much will the income tax paid by Seki and Kaa at the end
3. Foreign Currency Adjustment A foreign subsidiary of a European group discloses the followings accounts (in millions of dollars):At the historical exchange rate, net fixed assets are up to €1,100m. Reserves had been added for $80m in 2008 and for $70m in 2007. The capital has been paid in

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Financial Reporting Under IFRS A Topic Based Approach 1st Edition Wolfgang Dick ,Franck Missonier-Piera - Solutions

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