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NEW QUESTION: 1
Jason Bennett is an analyst for Valley Airlines (Valley), a U.S. firm. Valley owns a stake in Southwest Air Cargo (Southwest), also a U.S. firm. The two firms have had a long-standing relationship. The relationship has become even closer because several of Valley's top executives hold seats on Southwest's Board of Directors.
Valley acquired a 45% ownership stake in Southwest on December 31, 2007. Acquisition of the ownership stake cost $9 million and was paid in cash. Valley's stake in Southwest is such that management can account for the investment using either the equity method or the acquisition method. While Valley's management desires to fairly represent the firm's operating results, they have assigned Bennett to assess the impact of each method on reported financial statements.
Immediately prior to the acquisition. Valley's current asset balance and total equity were $96 million and
$80 million, respectively. Southwest's current assets and total equity were $32 million and $16 million, respectively.
While analyzing the use of the equity method versus the acquisition method, Bennett calculates the return on assets (ROA) ratio. He arrives at two conclusions:
Statement 1: Compared to the acquisition method, the equity method results in a higher ROA because of the higher net income under the equity method.
Statement 2: Compared to the acquisition method, the equity method results in a higher ROA because of the smaller level of total assets under the equity method.
In order to get a better picture of Valley's operating condition, Bennett is also considering the use of proportionate consolidation to account for Southwest. He makes the following statements regarding the acquisition method and a proportionate consolidation:
Statement 3: Both methods are widely accepted under the provisions of U.S. GAAP and International Financial Reporting Standards (IFRS).
Statement 4: Both methods report the same level of assets on the parent's balance sheet.
Statement 5: Both methods report all of Southwest's liabilities on the parent's balance sheet.
In addition. Valley has always wanted to pursue its goal of vertical integration by expanding its scope of operations to include the manufacturing of airline parts for its own airplanes. Therefore, it established a subsidiary, Mountain Air Parts (Mountain), in Switzerland on January 1,2008. Switzerland was chosen as the location for economic and geographical diversification reasons. Mountain will operate as a self- contained, independent subsidiary. Local management in Switzerland will make the majority of operating, financing, and investing decisions.
The Swiss franc (CHF) is the official currency in Switzerland. On January 1, 2008, the USD/CHF exchange rate was 0.77. At December 31, 2008, the exchange rate had changed to 0.85 USD/CHF. The average exchange rate in 2008 was 0.80 USD/CHF. In its first year of operations. Mountain paid no dividends and no taxes. Mountain uses the FIFO assumption for its flow of inventory.
For this question only, assume that Mountain is operating in a highly inflationary environment. Which of the following statements is least correct? Mountain's:
A. nonmonetary assets and nonmonetary liabilities are adjusted for inflation in accordance with U.S.
GAAP.
B. functional currency is the U.S. dollar.
C. financial statements are adjusted for inflation, and the net purchasing power gain or loss is recognized in the income statement in accordance with IFRS.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
Under U.S. GAAP, the nonmonetary assets and liabilities of the foreign subsidiary are not restated for inflation. Under IFRS, the subsidiary's financial statements are adjusted for inflation, and the net purchasing power gain or loss is recognized in the income statement. Then, the subsidiary is translated into U.S. dollars using the all-current method. If Mountain operates in a highly inflationary environment, the appropriate method is the temporal method. Under the temporal method, the functional currency is considered to be the-parent's presentation currency. Thus, Mountain's functional currency is the U.S.
dollar. (Study Session 6, LOS 23.0)
NEW QUESTION: 2
Your network contains an Active Directory domain named contoso.com. The domain contains a server named Server1 that runs Windows Server 2012 R2.Server1 has the Hyper-V server role installed. Server1 has a virtual switch named RDS Virtual.
You replace all of the network adapters on Server1 with new network adapters that support single-root I/O visualization (SR-IOV).
You need to enable SR-IOV for all of the virtual machines on Server1.
Which two actions should you perform? (Each correct answer presents part of the solution. Choose two.)
A. On each virtual machine, modify the BIOS settings.
B. On each virtual machine, modify the Advanced Features settings of the network adapter.
C. Modify the settings of the RDS Virtual virtual switch.
D. Delete, and then recreate the RDS Virtual virtual switch.
E. On each virtual machine, modify the Hardware Acceleration settings of the network adapter.
Answer: D,E
Explanation:
The first step when allowing a virtual machine to have connectivity to a physical network is to create an external virtual switch using Virtual Switch Manager in Hyper-V Manager. The additional step that is necessary when using SR-IOV is to ensure the checkbox is checked when the virtual switch is being created. It is not possible to change a "non SR-IOV mode" external virtual switch into an "SR-IOV mode" switch. The choice must be made a switch creation time. Thus you should first delete the existing virtual switch and then recreate it.
E: Once a virtual switch has been created, the next step is to configure a virtual machine.
SR-IOV in Windows Server "8" is supported on x64 editions of Windows "8" as a guest operating system (as in Windows "8" Server, and Windows "8" client x64, but not x86 client).We have rearranged the settings for a virtual machine to introduce sub-nodes under a network adapter, one of which is the hardware acceleration node. At the bottom is a checkbox to enable SR-IOV.
NEW QUESTION: 3
Section B (2 Mark)
A bank plans to offer new subordinated notes in the open market next month but knows that its credit rating is being reviewed by a credit rating agency. The bank wants to avoid paying sharply higher credit costs. Which type of credit derivative contract would you most recommend for this situation?
A. Credit risk option
B. Credit option
C. Total return swap
D. Credit linked note
Answer: A
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