B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: FAR 5

Question 1

A foreign subsidiary's functional currency is the euro. When translating to USD for consolidation, which exchange rate is used for plant and equipment?

Accepted Answer

Current rate at balance sheet date

Answer

Under the current rate method (ASC 830), all assets and liabilities of a foreign subsidiary are translated at the current exchange rate at the balance sheet date.

Question 2

Which of the following creates a permanent difference between book income and taxable income?

Accepted Answer

Tax-exempt municipal bond interest income

Answer

Tax-exempt interest is included in book income but never taxable, creating a permanent difference that does not reverse and generates no deferred tax.

Question 3

A company reports basic EPS of $3.00 and has 10,000 stock options with an exercise price of $20 when the average market price is $25. How many incremental shares are added using the treasury stock method?

Accepted Answer

2,000 shares

Answer

Under the treasury stock method: proceeds = 10,000 × $20 = $200,000; shares repurchased = $200,000 / $25 = 8,000; incremental shares = 10,000 – 8,000 = 2,000.

Question 4

Under ASC 958, a not-for-profit hospital receives volunteer services from licensed nurses. How should these services be recorded?

Accepted Answer

Recorded at fair value if they create or enhance a nonfinancial asset or require specialized skills

Answer

ASC 958-605 requires recognition of contributed services that require specialized skills (such as nursing) and would otherwise be purchased.

Question 5

Which of the following is an example of an other post-employment benefit (OPEB) obligation?

Accepted Answer

Employer-sponsored retiree health insurance

Answer

OPEBs include benefits other than pensions, most commonly retiree healthcare coverage provided by employers after the employee retires.

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: FAR 5