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726 Sample Final Exam S07

# 726 Sample Final Exam S07 - ECON 726 ADVANCED FINANCIAL...

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ECON 726 – A DVANCED F INANCIAL S TATEMENT A NALYSIS F INAL E XAM S PRING 2006 You must answer all questions on this exam on your own. You are NOT allowed to collaborate with anyone from class. You may use a CFA Institute approved calculator in answering the exam. Violating any of these conditions is considered cheating and will be penalized by an F on the exam. Where calculations are required please make clear what formulas you used to arrive at each number in the answer. Good Luck! Q UESTION T OPICS T IME 1-5 International Accounting 25 points 6-10 Merger Accounting 25 points 11-12 Footnotes 20 points 13-18 FX Calculations 20 points 19-22 Pension Accounting 20 points 23-26 Miscellaneous Accounting 20 points Total 130 points Exam will be graded out of 115 points. This means there are 15 bonus points built into the grade scheme. ECON 726 Final Exam 1 of 15

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International Accounting Question At the beginning of the year the U.S. company NanoProducts established a 100% owned European subsidiary, NanoProduits, with Current Assets of €1 million, Fixed Assets of €2 million, Current Liabilities of €1 million, and Long Term Liabilities of €1 million. At the end of the year, NanoProduits showed Current Assets of €1.5 million, Fixed Assets of €2 million, Current Liabilities of €1 million, and Long Term Liabilities of €1 million. During the year, NanoProduits showed revenues of €3 million, Net Income of €1 million, and paid dividends of €.5 million over the year. The exchange rate at the beginning of the year was \$1.30/€, the average exchange during the year was \$1.20/€, and the ending exchange rate was \$1.10/€. 1. Given the information above, what is cumulative translation adjustment under the all-current method for NanoProduits? Show calculations to justify your choice in the space below. 2. Given the information above, what would be the translation gain or loss on the income statement under the temporal method? Show calculations to justify your choice in the space below. ECON 726 Final Exam 2 of 15
3. What is the correct relationship between the following two accounting ratios in Local Currency financial statements vs. translated Reporting Currency financial statements under the temporal method? i.e. The ratio in Local currency terms is ___ than the same ratio in the Reporting Currency COGS/Sales Debt/Assets A. Larger Larger B. Larger Smaller C. Smaller Larger D. Smaller Smaller Show calculations to justify your choice in the space below.

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726 Sample Final Exam S07 - ECON 726 ADVANCED FINANCIAL...

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