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Question 1

what is the JE for pmt for rent kicker?

Answer 1

Rent exp 1500

cash 1500

Question 2

what is the underlying and notional amt?

Answer 2

• underlying = right to buy $/share

* notional = right to buy amt of shares

Question 3

what is the JE for G/L on CF hedge?

Answer 3

*loss:
CF hedge 60
OCI 60

*gain
OCI 60
CF hedge 60

Question 4

what is a short position in a forward contract?

Answer 4

betting that the price will drop in the future. Compare initial date to settlement date

Question 5

how will a company profit from a put and call option?

Answer 5

• buyer of put = stock goes down
• seller of put = stock goes up
• buyer of call = stock goes up
• seller of call = stock goes down

Question 6

which type of exch rate would be the most important rate to use in a hedge to minimize the risk of currency fluctuation?

Answer 6

forward rate

Question 7

what method do we use when the reporting currency is the functional currency?

Answer 7

we use the remeasurement method

Question 8

what method do we use when the local currency is the functional currency?

Answer 8

we use the translation method

*if remeas. is needed, it would come before translation

Question 9

do we roll forward RE by transferring NI to RE under translation method?

Answer 9

yes, this is the proper treatment

Question 10

what are the primary factors in det’ing fxn’l currency for IFRS?

Answer 10

• currency that primarily influences entity’s labor, mat, and other costs of providing G + S’s
• currency of country whose competitive forces and reg’s primarily det. the entity’s SP for P+S’s offered
• whether the local economy of the foreign entity is highly inflationary

Question 11

how do we calculate for investment in stock rights?

Answer 11

cost of sh’s acq’d

* (stock rights/stock rights+ex-rights)

Question 12

do PD’s affect inter and intraperiod tax allocation?

Answer 12

no, they do not affect either

Question 13

is cash collection a critical event for income recog. for cost recovery and installment methods?

Answer 13

yes,critical for both

Question 14

when reporting transaction G/L, what must we do first?

Answer 14

convert the currency to USD, then report G/L

Question 15

what is the direct/indirect method for reporting currency?

Answer 15

• direct = 1 unit of the domestic currency compared to other

* indirect = 1 unit of foreign price compared to domestic

Question 16

what is the initial JE when a company purch’s goods in a foreign transaction?

Answer 16

Dr: purchases
Cr: A/P

Question 17

will the exchange rate be irrelevant if paid in its own currency?

Answer 17

yes - only exchanges settled from foreign currency will have G/L.

Question 18

when does a def’d (fake) loss occur in a sales-leaseback trans?

Answer 18

when SP < FV

• def’d loss = SP - CV
• if minor (<10%), recog. G/L immediately

Question 19

under IFRS, in an op. sales-leaseback with SP > FV, how should we amort. it?

Answer 19

amort. over UL of asset

Question 20

how is profit recog’d under an op. sales-leaseback calc’d for GAAP?

Answer 20

SP - CV - def’d portion
(for 10-90%) -> PV pmt compared to SP

*def’d portion is lesser of PV min pmt or FV and amort’d over lease life

Question 21

what are “minor rights” in a sales-leaseback?

Answer 21

when PV of rent pmt is 10% or less of FV

*usually acct’d as op. leases