Download Quiz 2 with answers

ACCY593-Fall 2004
Prof. Doogar
Quiz 2 solutions:
Question 1: Multiple Choices: for each question, please circle the letter for the one
answer that is most accurate.
1. During the first quarter, a company's application of lower of cost or market
methods indicated a $150,000 loss from a temporary market decline, which is
expected to be restored in the fiscal year. During the second quarter, the
market reversed the decline. Which of the following situations indicates a
proper treatment of these facts? (5 points)
a. A $37,500 loss recognized in the first quarter and no recovery
recognized in the second quarter.
b. A $150,000 loss recognized in the first quarter and a $90,000 recovery
in the second quarter.
c. A $150,000 loss recognized in the first quarter and a $50,000 recovery
in the second quarter.
d. No loss recognized in the first quarter and no recovery recognized in
the second quarter.
ANS: D
2. Caliper Corporation sold land in the first quarter of 20X1 at a $150,000 loss.
How much of the loss should appear in the second- and third-quarter income?
(5 points)
a.
b.
c.
d.
$37,500 and $37,500
$50,000 and $50,000
$0 and $0
$100,000 and $0
ANS: C
3.
Rutherford, Inc. has several potentially reportable segments. The following
financial information has been determined for the current fiscal year:
Consolidated net income ......................... $ 1,000,000
Operating income before taxes....................
1,500,000
Net operating income of all segments.............
1,350,000
Total consolidated revenue.......................
8,000,000
Total revenue of all segments,
excluding intersegments sales....................
7,000,000
Total intersegment sales ........................
1,200,000
Consolidated total assets........................ 50,000,000
Total assets of all segments..................... 45,000,000
2
1) The minimum amount of revenues a segment must have to qualify as
reportable is __________.(5 points)
a.
b.
c.
d.
$700,000
$800,000
$820,000
The answer cannot be determined from the information given.
CC
ANS: C
2) The minimum amount of profit or loss a segment must have to qualify as
reported is __________.(5 points)
a.
b.
c.
d.
$100,000
$135,000
$150,000
The answer cannot be determined from the information given.
ANS: D
3) The minimum amount of assets a segment must have to qualify as reportable
is __________.(5 points)
a.
b.
c.
d.
$ 4,500,000
$ 5,000,000
$37,500,000
The answer cannot be determined from the information given.
ANS: A
4) For Rutherford to report a significant portion of its financial
information as segments, its segments, in total, must represent
(5 points)
a.
b.
c.
d.
$37,500,000 in assets.
$ 6,000,000 in revenues.
$ 1,125,000 in operating income before taxes.
The answer cannot be determined from the information given.
ANS: B
3
Question 2 (20 points):
Ace Co., a U.S. firm, formed a German company in 20X1 by purchasing the common
stock of the newly formed Duce Inc. The functional currency of Duce is the
German mark. During their first three years, Duce experienced the following
activity in retained earnings:
20X1.................................
20X2.................................
January 1, 20X3......................
20X3.................................
Net loss
Net income
Dividend
Net income
100,000
200,000
50,000
75,000
marks
marks
marks
marks
The following exchange rates could be relevant:
Date
December 31, 20X0..........................
December 31, 20X1..........................
Average 20X1...............................
January 1, 20X3............................
Average 20X2...............................
December 31, 20X3..........................
Average 20X3...............................
1
1
1
1
1
1
1
Rate
mark = $0.20
mark = $0.22
mark = $0.215
mark = $0.245
mark = $0.24
mark = $0.26
mark = $0.25
Required:
What is the translated December 31, 20X3, balance of the retained earnings
for Duce?
ANS:
20X1 net loss (100,000 marks) ´ .215.......
20X2 net income 200,000 marks ´ .24........
20X3 dividend (50,000 marks) ´ .245........
20X3 net income 75,000 marks ´ .25........
Translated balance on December 31, 20X3....
$(21,500)
48,000
(12,250)
18,750
$ 33,000
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