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1. Year 1.X'(ZInc jlUrchased a call optioo contract 00 the stock of ABC Company that givesX'(Zthe right to jlUrchase 1.000 shares of ABC
Company stock at $50 I'"r share anytime in the next &0 days. X'(Z paid a jll'emium of it/share to enter into the option. X'(Zexercised the option on
February 6. Year 1. when the ABC stock is selling for $60 I'"r share Enter the approjll'iate amounts into the shaded cells.
On January

What is the underlying?

What is the notional amount?
tlt....

What is the initial net investment?

What is the settlement amount?

Which of the following are possible settlement optioos when the option is exercised on February

6, Year 1

(check all that

aj}Jliy)?

o 5. The

option writer delivers

1,000

o 6. The

option writer can pay

$10,000

o 7. The

option writer has the optioo to jlUll out of the contract rather than incur. loss.

shares of ABC Company stock toX'(Zand receives

$50,()()0

toX'(Zto settle the cootract

1000

shares of ABC stock

toDD shares ofX'(Zstock

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1.

1.

100.00000 February 28. Year 2. for $1 441f.

On August
Year
X'(Z entered into a forward cootract in which it agreed to sell
the spot exchange rate is
Enter the awopriate am<><Jnts into the shaded cells

$1 521f.

On February

28. Year 2.

What is the underlying?

What is the notional amoont?
What is the initial net investment?
What is the settlement amoont?

When the forward cootract is settled

00 February 28. Year 2. which of the following are possible settlement options (check all

that ai>Jlly)?

5. X'(Z receives $144.000 from the other JI3'ly to the contract and del;"ers fl00.000.

6. X'(Z receives $152.000 from the other JIiIrty to the contract in exchange for 100.000

7. The other party to the contract JIiIYs $8.000 to X'(Z.

100.000
$144.000
$152.000
$1.44/
$1.52/

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In order to hedge certain risks, XYI Company entered into the following der"ative contracts during the current year

AJI of the hedging relationships are

highly effective_ For each der"ative, determine the hedging designation and the impact on current year earnings and/or other comprehensive income_
Double-dic k on the shaded cells in Colu".., B and select the appropriate hedging designation from the list prcMded. Enter the aJlP'opriate amounts in
Colu".., C and Colu".., D

"'

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A
Hedgillg Desigllatioll

On December

1.

the coml"'ny borrowed

an annual rate of LIBOR

3%

$1.000.000

at

Impact

Oil

EarRillgs

SelKt lt...,

Impact Oil
0"

Fair value hedge

Cash flow hedge

On that date. the company

entered into a I"'y-hed. receive-floating intetest rate swap.

On December

$15.000
2

31.

the coml"'ny h1td an unre1llized loss of

Foreign currency fair value hedge

on the swap_
Foreign currency cash flow hedge

On March I, the company decided to hedge the risk 0(

changes in the value 0( its ifMlntory using a fulures

contract On December
gain of

$12,000

31,

the c ompany had an unrealized

on the futures contract and a

Foreign currency hedge of a net inves tment in a

$12,050

foreign operation

unrealized loss due to a decrease in the fair value of the

inventory

On July

1.

the coml"'ny purchased

100%

of a Japanese

coml"'ny The functional currency of the Japanese

coml"'ny is the yen_ To hedge against decreases in the
value of the investment. the company entered into a forward
currency contract on July

On December

31.

the

coml"'ny had an unrealized gain on the forward contract of

$100.000
$99.400_

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SpI: HDnz

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Not: The data required to answer this question is locate<! in the tab title<!1nformation'
Prepare the journal entries required to accoont for the hedge on the dates indicated below

Doubie-clink on the shooed cells in Column A and select

the appropriate account from the list prcMde<l. Enter the appropriate amounts in Columns Band C.

A>

XV

<0.
"

I
A

I . N"""mber I , Year

,
,
,

2. December

31. Year 1

OO

CREDIT

Accoonts rece"abie
Cash
Cash now hedge
Gain on cash now hedge

,
,
,

3.

January

loss

31, Ye", 2

"

00

cash ow hedge

No journal entry

,
Other comprehensive income

"
"
"

4 F eburary

Sales revenue

1. Year 2

B
"

"

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Oeffl..... JoumaI Enrnes

Inl"'''''!ioo
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AlItJ>otJ;atNe Ut..3t"'

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________

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1. Year 1. X'fZ Company f"'e<:3StS productioo of 10,000 Ilanels of oil in January ofY.ar 2 0;1 is currently selling f<>r $85 I"" barrel To hedge the risk that the pOCe of oil will
denease l>efore the oil is sold. X'fZ takes a shoo position in a (}/Ward contract f<>r 10,000 Ilarrels of oil at $85 per Ilarrel to be settle<! 00 January 31. Year 2 The f<>rW.rd cootr",,! requires net
settlement. rather than the octu.1 delMl'Y of oil The oil is sold on February 1 f<>r $11 per Ilarrel. X'fZ classies the hedge as a cash now hedge of the anticipated change in cash nOW" from the

On Nwember

(<>recasted oil sales

Relevant f<>rW.rd cootroc! Jll'ices are as follows:

1. Year 1
De<:emoor 31. Year 1
January 31. Year 2
N"""mber

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$85.00
$79.00
$11.00

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He!

I oil Co py I i& Paste I

Haste Waste Inc operates a 4-ac," landfill that news to be caJlP"<l.nd closed in Sye.rs

00

January

1. Year

6. The total future cost of this octMty is

estimated to be $710.000 The relevant accretion rate is 6% and the asset will be depre<:iate<l straight-line over the 5 year period. Please enter yoo,
answers to the foliO'Mng questions in the shaded cells

I. What is the initial joumal entry for booking this ARO using a present value factor of .14726 (round all amounts to the
nearest dollar)?

)l( V

fx

2. Calculate the Year

aceretioo expense (round to the nearest dollar).

.. " (
.

'

Year 1 Ae<:retion Expense

3. What

is the total aceretioo expense O"Ier the five years (round to the nearest dollar)?
.
.. " (
"

Total Ae<:retion Expense

4. Eoch year. the occretion eXl'"nse will

______

. (P1ease complete this sentence by selecting an answer from

the droJKiown menu).

5. What is the Deceml>er

)l( V

31.Vear 1 journal entry

(round all amounts tothe nearest dollar)?

fx

6. What will the balances 00 in the following occounts at the end ofVear j?

.. " F
"

Ae<:umulated Depr&iation
Net As
s et Retirement Cost
Asset Retirement Obligation

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On January 1. Vear 1. Johnson (J). S""th (S). and Henry (H) formed a legal S"MCeS partnership. Initially. J contributed $12.000.000. S contributed

$18.000.000. and H c""tributed $30.000.000 lor a [I'Irtnership profit and loss sharing ratio 0120%. 30%. and 50%. respectively. As [I'Irt oIthe <>I'iginal
[I'Irtnership agreement. the [I'Irtnership will [I'Iy H an annual salary 01$100.000 1<>1' averseeing daily business act;";ty In addition. the [I'Irtners agreed H
shoold receive a 10% guaranteed bonus 01 any [I'Irtnership profits pri<>l' to distributing any eamings to the ind;";dual [I'Irtners The [I'Irtnership will pay
interest 012% "" the [I'Irtners' capitaillalances at each fiscal year end. The [I'Irtnership generated net profit 01$4.000.000 during its first year 01
operations.
At the beginning 01Year 2 the [I'Irtnership ad""tted Cunningham (C) as an additi""al [I'Irtner. As [I'Irt 01 the agreement. Cunningham prcMded a capital
contribution 01$20.000.000 in retum 1<>1' a 20% [I'Irtnership interest
In the third quarter 01Year 2. S decided to withdraw fr om the [I'Irtnership. The [I'Irtnership deter""ned that the lair value 01 the [I'Irtnership's assets was

$110.000.000 and the adjusted profit/loss ratios lor J. S. H. and C were now 15%. 25%. 40%. and 20%. respectively
Answer the questions below. insening the correct dollar amounts in the shaded cells.

"

..

fx

I
,

"

Goodwill

1 What is the total Jl'ofit distribution made

to H inYea, 1?
2 Using the boo". method, calculate the
change in co",tal for partners J, S, and H
when C was admitted as " new partner in
Year 2.

3 lithe JI'lrtnership used the goodwill

method (instead). d eter""ne the amount of
goodwill reco<ded when C was admitted as "
Jl3rtner inYea, 2 and the change in the
existing Jl"rtners' capital ""counts

4 Wha t is the amount JIiIid to S upon

withd rawallr om the JI'Irtnership in Ve.r 2
assuming the goodwill method is use<l?
Assume there was no change to the
partners" c apital occoon!. after admitting C
at the beginning olYe" 2.

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011

the disclosure of gains and losses on derrvat"" instruments

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205-10-05-1, 323-740-S25-1, 260-1 0-60-1A, 260-10-55-99 and
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the disclosure of gains and losses on derrvatMl instruments

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205-10-05-1, 323-740-S25-1, 260-10-60-1A, 260-10-55-99 and
115-60-35--128A

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the disclosure of gains and losses on derrvative instruments

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the disclosure of gains and losses on derrvatr.e instruments

Type the paragraph here. Correctly formatted FASS ASe paragraphs are
t, 2, or 3 digs folklwed il1 some cases by at) upper case ef_ Note:
Correctly formatted paragraph responses are in bokl font in FASS ASe
arxl does 001 ;ncllXle subfhlragraphs deooled by a kJwer case tlef_

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Note: This additional research question is provided for extra practice. On the Financial exam, there will be one research question.
A recently issued demographic reJlOrt indicates that there is a re",ooable probability that Lambert's oosiness may be ad'Versely imJ)OCted in the future.
The companys cootroller wants to begin accruing a general contingency rese"", now for unspecied oosiness cootingencies. such as the JIOtential
decline in oosiness that may occur in the future. Find authoritat;"e guidance as to whether or not such an accrual is allowed under GAAP

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Note: This additional research question is provided for extra practice. On the Financial exam, there will be one research question.
A recently issued demographic reJlOrt indicates that there is a reasooable probability that Lambert's oosiness may be adversely imJ)OCted in the future.
The coml"'ny"s cootroller wants to begin accruing a general contingency rese"", now for unspecied oosiness cootingencies. such as the JIOtential
decline in oosiness that may occur in the future. Find authoritat;"e guidance as to whether or not such an accrual is allowed under GAAP

Type the subtopic h e f e. Correctly fOfTTliltted FASBASC subtopics are 2

or3 d gs
i

FASBASC

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Time Elapsed

Derivative.

o hours

2 minutes

Note: This additional research question is provided for extra practice. On the Financial exam, there will be one research question.
A recently issued demographic report indicates that there is " re",,,,,able probability that Lambert's oosiness may be adversely imJ)OCted in the luture.
The company's cootroller wants to beg;n accruing a general contingency rese"", now f<>runspe<:ied business cootingen<:ies. such as the ""tential
decline in business that may occur in the luture. Find authOfitat,," guidance as to whether

(}f

not such an accrual is allowed under GAAP

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digs or,m llppef caseef followed by 2 digs

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Some examples of cOITectly formatted FASS ASe respooses are

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Time Elapsed

Derivative.

o hoors

2 minutes

Note: This additional research question is provided for extra practice. On the Financial exam, there will be one research question.
A recently issued demographic report indicates that there is a re",<>nable probability that Lambert's oosiness may be i!d'versely imJ)OCted in the luture.
The company's cootroller wants to begin accruing a general cootingency rese"", now !of unsJl"<'ied business cooling"n<:ies. such as the ""tential
decline in business that may occur in the luture. Find authoritat,," guidance as to whether or not such an accrual is allowed under GAAP

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