Area 1: Financial Reporting

On October 1, Year 1, Host Co. committed to a plan to dispose of a major component of its business that qualifies as a discontinued operation. The sale is expected to occur on March 1, Year 2. For the year ended December 31, Year 1, the component had an operating loss of $300,000. The estimated fair value of the component is $1,500,000, and its carrying amount is $1,800,000. Estimated costs to sell are $50,000. The corporate tax rate is 25%. What amount should Host report as the loss from discontinued operations in its Year 1 income statement?

A company has a debt covenant requiring a current ratio of at least 2.0. On December 31, Year 1, the company has current assets of $800,000 and current liabilities of $500,000. On January 15, Year 2, before the financial statements are issued, the company refinances $200,000 of its short-term debt into a long-term note due in 5 years. The refinancing agreement is non-cancelable. How should the $200,000 debt be classified on the December 31, Year 1 balance sheet, and is the covenant violated?

Orion Corp. reports under US GAAP. In preparing its statement of cash flows for the year ended December 31, Year 1, the following data is available:<br/>- Net Income: $500,000<br/>- Gain on sale of equipment: $20,000<br/>- Purchase of treasury stock: $50,000<br/>- Amortization of bond discount: $5,000<br/>- Increase in net accounts receivable: $30,000<br/>- Decrease in prepaid expenses: $10,000<br/>- Payment of cash dividends: $40,000<br/><br/>What is the net cash provided by operating activities?

Parent Co. owns 80% of Sub Co. During Year 1, Parent sold inventory to Sub for $500,000. The cost of the inventory to Parent was $350,000. At December 31, Year 1, Sub had sold 60% of this inventory to outside parties. The tax rate is 25%. In the consolidated balance sheet at December 31, Year 1, by what amount should the inventory be reduced to eliminate the intercompany profit?

On January 1, Year 1, Acquirer Inc. purchased 100% of Target Corp. for $1,000,000. Target's equity consisted of $200,000 Capital Stock and $600,000 Retained Earnings. The fair value of Target's identifiable net assets was $900,000. The difference between fair value and book value was due to a patent with a 10-year remaining life. What is the annual amortization expense adjustment required for the consolidation worksheet for Year 1?

Regarding SEC reporting requirements, which of the following statements is correct concerning a 'Large Accelerated Filer'?

Alpha Corp. has the following capital structure during Year 1:<br/>- Net Income: $800,000<br/>- Weighted Average Common Shares Outstanding: 100,000<br/>- 5,000 shares of 6% Cumulative Preferred Stock, $100 par, convertible into 20,000 common shares. No dividends were declared.<br/>- $1,000,000 of 4% Convertible Bonds, convertible into 30,000 common shares.<br/><br/>Tax rate is 25%. What is Diluted Earnings Per Share (EPS)?

A company reports the following for its operating segments:<br/>- Segment A: Revenue $400, Profit $50, Assets $1,000<br/>- Segment B: Revenue $100, Loss ($30), Assets $200<br/>- Segment C: Revenue $50, Profit $5, Assets $100<br/>- Segment D: Revenue $40, Loss ($40), Assets $50<br/><br/>Total Revenue = $590. Total Assets = $1,350.<br/>Which segments are reportable based on the quantitative thresholds?

On January 15, Year 2, before the Year 1 financial statements were issued, a customer of Apex Corp. declared bankruptcy due to a fire that occurred on January 10, Year 2. The customer owed Apex $50,000 at December 31, Year 1. How should this event be treated in the Year 1 financial statements?

Under ASC 820, which of the following inputs would be considered Level 3 in the fair value hierarchy?

Company X is preparing its interim financial statements for the first quarter. The company expects to earn $200,000 pre-tax income each quarter. It has a permanent difference of $20,000 (tax-exempt income) expected for the full year. The statutory tax rate is 30%. No other temporary differences exist. What is the income tax expense for the first quarter?