Accounting Skills Test (Securities, Derivatives and Investments)
A _____________ is a financial instrument designed to help companies cope with various kinds of risk.
A derivative acquired to reduce risks involving fluctuations in a market value is called a __________________.
A lease must be accounted for as a capital lease if it meets any one of four conditions. Which of the following is NOT one of those conditions?
According to generally accepted accounting principles, which of the following methods must be used to account for investment in common stock of 20 percent to 50 percent?
An elimination entry for the parent company's Investment account would typically NOT include debits to which of the following accounts?
Debt securities that a company intends to hold to maturity should be reported on the Balance Sheet ____________________.
During Year 1, XYZ Company receives a four-month, 6 percent note in the amount of $28,500. How much interest will XYZ Company earn if it holds the note to maturity?
Eliminations to remove intercompany transactions are typically made __________________.
Financial statements for parent and subsidiary companies are generally consolidated for ______________________ investments.
Given the following entry, how has the lessee accounted for the lease? Dr: Interest Expense Dr: Liability - Present value of lease obligation Cr: Cash
If an acquisition qualifies as a pooling of interest, the reported income for the consolidated enterprise will ordinarily be ___________________.
In computing its income tax expense for the current year (its first year of operations), XYZ Company has an $18,000 temporary difference (accelerated depreciation for tax purposes). It is assumed t...
In the _________________, the owner or lessor merely sells the rights to use the property to the lessee for a specified period.
In which of the following situations would the lessee enjoy the economic benefits and bear the economic risks of leasing an asset?
Majority investments are generally reported _________________.
On its December 31 Year 2 Balance Sheet, XYZ Company reports a current liability for income tax payable of $180,000. During the year, the company's Deferred Tax Liability account increased by $54,0...
On January 1 of Year 1, the XYZ Company Clinic leases some diagnostic equipment under a capital lease for six years. Using 10 percent interest, the present value of the lease liability is $244,000 ...
On January 1 of Year 1, XYZ Company leases a building and records the leasehold asset and the liability at $210,620, which is the present value of five end-of-year payments of $50,000, each discoun...
On January 1 of Year 1, XYZ Company leases equipment under a capital lease that calls for five payments of $25,000 at the end of each year. The first payment is due on December 31 of Year 1. Using ...
On January 1 of Year 1, XYZ Company leases some equipment from ABC Supply under a four-year operating lease. Lease payments of $20,000 are payable at the end of each year. The first payment is due ...
Reporting revenues and expenses for book purposes in a different period than for tax purposes results in _______________.
The equity method is used to account for _________________.
The FASB requires companies to show in income each period the change in the fair value of any derivative that _________________.
The market value method is used to account for _______________.
The MNO Bank actively trades in debt securities with the intent of earning profits from short-term differences in market prices. How should the bank report the debt securities on its Balance Sheet?
The MNO Bank often purchases and sells debt and equity securities for their short-term profit potential. How should the bank account for these securities?
The ownership percentage of voting stock of minority, active investments is usually ___________.
The term "cash flow hedge" refers to _________________.
The unrealized gain or loss on changes in the fair value of a _________________ remains on the Balance Sheet in a separate shareholders' equity account.
What gives the lessee the right to purchase the asset for a price less than the predicted fair market value of the asset when the option is exercised?
What type of pension plan is an employee likely to prefer because it reduces the employee's risk in planning for retirement?
What would the investor company do under the equity method if the investee company declares dividends?
When a company acquires a derivative and attempts to reduce risks involving fluctuations in a market value, the FASB ________________.
When temporary differences that give rise to future tax deductions are multiplied by the enacted income tax rate expected to apply in the future periods of the deduction, the result is _____________.
When temporary differences that will result in future taxable income are multiplied by the enacted income tax rate expected to apply in the future period of the taxable income, the result is ______...
Which accounting treatment(s) for leases is/are favored by lessors and lessees?
Which of the following account titles is not associated with the use of the market value method?
Which of the following accounts would NOT be eliminated in the preparation of a consolidated financial statement?
Which of the following accounts would NOT be eliminated in the preparation of consolidated financial statements?
Which of the following is a reason that lessees prefer operating leases?
Which of the following is an important reason for the continued legal existence of subsidiary companies?
Which of the following is generally a worksheet procedure when preparing consolidated statements?
Which of the following is NOT a perceived advantage of "off balance sheet financing"?
Which of the following methods is used to recognize goodwill after a business acquisition is accounted for?
Which of the following methods of recording leases recognizes the signing of the lease as the acquisition of a long-term asset and the incurring of a long-term liability for lease payments?
Which of the following methods of recording leases requires the lessee to amortize the leasehold over its useful life and recognize each lease payment as part payment of interest and part payment o...
Which of the following scenarios is NOT an example of a situation resulting in a temporary difference and which, therefore, would NOT result in the debiting or crediting of a deferred income tax ac...
Which of the following statements about derivatives is true?
Which of the following statements about preparing consolidated financial statements is true?
Which of the following statements describing the effects of Investment in Securities on the Cash Flow Statement is NOT true?
Which of the following statements is NOT a criticism of the accounting for deferred income taxes?
Which of the following statements is NOT descriptive of a defined contribution pension plan?
Which of the following statements is NOT true?
XYZ Company acquires common stock of the ABC Company for the purpose of developing a long-term relationship with ABC, which is a major supplier of the raw material used to manufacture XYZ's product...
XYZ Company acquires marketable securities in Year 1 at a cost of $90,000. The securities can be readily converted into cash and XYZ Company intends to do so when it needs cash. How would XYZ Compa...
XYZ Company has three securities in its portfolio available for sale, as follows: Security 1: Beatty, Cost: $78,000, 12/31/06 Market Value: $93,600, 12/31/07 Market Value:$100,100 Security 2: Cole...
XYZ Company purchases a machine early in Year 1. For book purposes, XYZ Company uses straight-line depreciation. For tax purposes, the company follows ACRS. Excess depreciation for tax purposes in ...
XYZ Company purchases securities at a cost of $220,000 on April 16. At the time of purchase, XYZ pays a 5 percent commission ($11,000), a 6 percent tax ($13,200), and a transfer fee ($3,000). What ...
XYZ Company purchases some ABC Company stock for $56,000 on January 1 of Year 1. At December 31 of Year 1, the market value of the ABC stock is $48,000. On July 1 of Year 2, XYZ Company sells all o...
XYZ Company purchases some debt securities in Year 2 with the intent of selling the securities when XYZ needs the cash for its operations. Given generally accepted accounting principles, which of t...
XYZ Company reports book income of $600,000 and income for tax purposes of $570,000. The $30,000 difference is caused by the use of ACRS for tax purposes. Assume that the current tax rate is 35 per...
XYZ Company reports book income of $720,000 for Year 1, which includes a Warranty Expense of $80,000. For tax purposes, warranty costs are not deductible until incurred. Actual expenditures for war...
XYZ Company reports book income of $96,000 and taxable income of $120,000 (the $24,000 difference is attributed to warranty expenses). The statutory tax rate is 30 percent and the company reports a...
XYZ Company reports income tax expense of $224,000 on its Income Statement for the year ending December 31 Year 4. Included in Year 4's income is interest revenue of $40,000 from some tax-exempt mu...