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ACC 423 Week 2 Individual Assignment



ACC 423 Week 2 Individual Assignment On July 1, year 2, Stone Company lent $120,000 to a foreign supplier, evidenced by an interest-bearing note due on July 1, year 3. The note is denominated in the currency of the borrower and was equivalent to 840,000 local currency units (LCU) on the loan date. The note principal was appropriately included at $140,000 in the receivables section of Stone’s December 31, year 2 balance sheet. The note principal was repaid to Stone on the July 1, 2011 due date when the exchange rate was 8 LCU to $1. In its income statement for the year ended December 31, year 3, what amount should Stone include as a foreign currency transaction gain or loss? $0. $15,000 loss. $15,000 gain. $35,000 loss. An investor uses the equity method to account for an investment in common stock. Assuming the fair value option of reporting financial assets is not elected, the investor’s equity in the earnings of the investee would be affected by Cash dividends from investee A change in market value of the investee’s common stock No Yes No No Yes No Yes Yes Anchor Co. owns 40% of Main Co.’s common stock outstanding and 75% of Main’s noncumulative preferred stock outstanding. Anchor exercises significant influence over Main’s operations. During the current period, Main declared dividends of $200,000 on its common stock and $100,000 on its noncumulative preferred stock. Anchor does not elect the fair value option for reporting its investment in Main. What amount of dividend income should Anchor report on its income statement for the current period related to its investment in Main? $ 75,000 $ 80,000 $120,000 $225,000 Dale, Inc., a U.S. corporation, bought machine parts from Kluger Company of Germany on March 1, year 2, for 30,000 euros, when the spot rate for euros was $1.10. Dale’s year-end was March 31, year 2, when the spot rate for euros was $1.07. Dale bought 30,000 euros and paid the invoice on April 20, year 2, when the spot rate was $1.12. How much should be shown in Dale’s income statements as foreign exchange transaction gain or loss for the years ended March 31, year 2 and year 3? Year 2 Year 3 $0 $0 $0 $900 loss $900 loss $0 $900 gain $1,500 loss On January 1, year 1, Ball, Inc. purchased a $1,000,000 ordinary life insurance policy on its president. The policy year and Ball’s accounting year coincide. Additional data are available for the year ended December 31, year 3. Cash surrender value, 1/1/Y3 $43,500 Cash surrender value, 12/31/Y3 54,000 Annual advance premium paid 1/1/Y3 20,000 Dividend received 7/1/Y3 3,000 Ball, Inc. is the beneficiary under the life insurance policy. How much should Ball report as life insurance expense for year 3? $ 6,500 $ 9,500 $17,000 $20,000 The following information pertains to Lark Corp.’s available-for-sale securities portfolio: December 31 Year 2 Year 1 Cost $200,000 $200,000 Market value 240,000 180,000 Lark does not elect to use the fair value option for reporting financial assets. Differences between cost and market values are considered to be temporary. The decline in market value was properly accounted for at December 31, year 1. What is the amount of “Unrealized gain (loss) on marketable equity securities,” a component of other comprehensive income, for the year ended to December 31, year 2? $60,000 $40,000 $20,000 $0 According to ASC Topic 815, any financial or physical variable that has either observable changes or objectively verifiable changes qualifies as a(n) Hedge. Financial instrument. Notional amount. Underlying. Which of the following is not a type of foreign currency hedg


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