Accounting Theory
Exam Answer Key
Course Introduction
Accounting Theory explores the fundamental concepts, principles, and frameworks that underpin contemporary accounting practices. The course examines the development and evolution of accounting thought, addressing key theoretical approaches such as positive, normative, and critical perspectives. Students will analyze the objectives of financial reporting, the role of standard-setting bodies, and the impact of social, economic, and political factors on accounting regulation and disclosure. Through the study of conceptual frameworks, ethics, and real-world cases, this course equips students with a deeper understanding of how accounting information is produced, interpreted, and utilized by stakeholders.
Recommended Textbook
Advanced Accounting 13th Edition by
Floyd A. Beams
Available Study Resources on Quizplus
23 Chapters
1150 Verified Questions
1150 Flashcards
Source URL: https://quizplus.com/study-set/3508 Page 2
Chapter 1: Business Combinations
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/69703
Sample Questions
Q1) In the business combination of Polka and Spot,
A)all of the items listed above are treated as expenses.
B)all of the items listed above except the cost of registering and issuing the securities are included in the purchase price.
C)the costs of registering and issuing the securities are deducted from the fair market value of the common stock used to acquire Spot.
D)only the costs of closing duplicate facilities,the salaries of Polka's employees assigned to the merger,and the costs of the shareholders' meeting would be treated as expenses.
Answer: C
Q2) When considering an acquisition,which of the following is NOT a method by which one company may gain control of another company?
A)Purchase of the majority of outstanding voting stock of the acquired company.
B)Purchase of all assets and liabilities of another company.
C)Purchase of all the outstanding voting stock of the acquired company.
D)Purchase of 25% of outstanding voting stock of the acquired company.
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Stock Investments - Investor Accounting and Reporting
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/69702
Sample Questions
Q1) In reference to the determination of goodwill impairment,which of the following statements is correct?
A)The goodwill impairment test under ASC 350-20-35 is a three-step process.
B)If the reporting unit's fair value exceeds its carrying value,goodwill is unimpaired.
C)Under FASB 142,firms must first compare carrying values (book values)at the headquarter level.
D)Firms can reverse previously recognized impairment losses.
Answer: B
Q2) Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1,2013,but was not able to exercise significant influence over Lilypad.During 2014,Jacana reported income of $120,000,excluding its income from Lilypad,and paid dividends of $50,000.Lilypad reported net income of $40,000 during 2014 and paid dividends of $20,000.Jacana should report net income for 2014 in the amount of
A)$115,000.
B)$120,000.
C)$125,000.
D)$130,000.
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: An Introduction to Consolidated Financial Statements
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69701
Sample Questions
Q1) In the consolidated income statement of Wattlebird Corporation and its 85% owned Forest subsidiary,the noncontrolling interest share was reported at $45,000.Assume the book value and fair value of Forest's net assets were equal at the acquisition date.What amount of net income did Forest have for the year?
A)$52,941
B)$38,250
C)$235,000
D)$300,000
Answer: D
Q2) From the standpoint of accounting theory,which of the following statements is the best justification for the preparation of consolidated financial statements?
A)In substance the companies are separate,but in form the companies are one entity.
B)In substance the companies are one entity,but in form they are separate.
C)In substance and form the companies are one entity.
D)In substance and form the companies are separate entities.
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Consolidated Techniques and Procedures
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69700
Sample Questions
Q1) What is the amount of consolidated Retained Earnings?
A)$224,000
B)$259,200
C)$304,000
D)$324,000
Q2) Which one of the following will increase consolidated retained earnings?
A)An increase in the value of goodwill associated with a subsidiary subsequent to the parent's date of acquisition
B)The amortization of a $10,000 excess in the fair value of a note payable over its recorded book value
C)The depreciation of a $10,000 excess in the fair value of equipment over its recorded book value
D)The sale of inventory by a subsidiary that had a $10,000 excess in fair value over recorded book value on the parent's date of acquisition
Q3) What is the amount of total assets?
A)$1,380,000
B)$1,402,000
C)$1,470,000
D)$1,875,000
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Intercompany Profit Transactions - Inventories
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69699
Sample Questions
Q1) The elimination entry for unrealized profit is a debit to purchases and a credit to ending inventory.
A)True
B)False
Q2) The 2014 consolidated income statement showed noncontrolling interest share of
A)$3,200.
B)$6,400.
C)$8,800.
D)$12,000.
Q3) Assume there are routine inventory sales between parent companies and subsidiaries.When preparing the consolidated financial statements,which of the following line items is indifferent to the sales being either upstream or downstream?
A)Consolidated retained earnings
B)Consolidated gross profit
C)Noncontrolling interest share
D)Controlling interest share of consolidated net income
Q4) Parent sales to its subsidiary increase parent sales,COGS and gross profit.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Intercompany Profit Transactions - Plant Assets
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69698
Sample Questions
Q1) Paula's Pizzas purchased 80% of their supplier,Sarah's Sauces.Sarah's book values equaled fair values at the time of the acquisition.Paula sold Sarah some packaging equipment on January 2,2013 for $100,000.The equipment had a carrying value of $90,000,and original cost of $120,000,and had a remaining life of 10 years.Both Paula and Sarah depreciate their assets on the straight-line method.The equipment has no salvage value.
Required: Prepare the following entries:
1.Journal entries Paula and Sarah will prepare on their separate books in 2013.
2.Eliminating/adjusting entries on the consolidation worksheet at the end of 2013.
3.Eliminating/adjusting entries on the consolidation worksheet at the end of 2014.
Q2) In the eliminating/adjusting entries on consolidation working papers for 2014,the Truck account was
A)debited for $3,000.
B)credited for $3,000.
C)debited for $15,000.
D)credited for $15,000.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Intercompany Profit Transactions - Bonds
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69697
Sample Questions
Q1) When a company issues bonds,the bond liability will reflect the current market rate of interest.
A)True
B)False
Q2) Parkview Holdings owns 70% of Skyline Corporation.On January 1,2013,Skyline acquires half of the $2,000,000 of bonds originally issued by Parkview on January 1,2008.The bonds were issued at a stated rate of 5% for 10 years,for $1,920,000.Skyline purchased them for $950,000.Assume that both Parkview and Skyline will use the straight-line method for any bond-related amortization.Annual interest is paid on December 31.
Required: Prepare the entries required for the consolidating worksheet for the years ended December 31,2008 through December 31,2018.
Q3) The gain from the bond purchase that appeared on the December 31,2013 consolidated income statement was
A)$4,320.
B)$4,800.
C)$5,400.
D)$6,000.
To view all questions and flashcards with answers, click on the resource link above.
9
Chapter 8: Consolidations - Changes in Ownership
Interests
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69696
Sample Questions
Q1) A stock dividend by a subsidiary causes
A)the parent company investment account to decrease.
B)the parent company investment account to remain the same.
C)the parent company investment account to increase.
D)the noncontrolling interest equity to increase.
Q2) Anthony Company declared and paid $20,000 of dividends during 2014.The schedule of dividends follows: \[\begin{array} { l c }
\text { Date Dividend Declared \& Paid } & \text { Amount Paid } \\
\text { March 31, 2014 } & \$ 5,000 \\
\text { June 30, 2014 } & \$ 5,000 \\
\text { September 30, 2014 } & \$ 5,000 \\
\text { December 31, 2014 } & \$ 5,000
\end{array}\] Anthony Company was acquired on June 1,2014 by Google Company.Google acquired 100 percent of Anthony Company.Both companies have a December 31 fiscal year end.What is the amount of preacquisition dividends in 2014?
A)0
B)$5,000
C)$10,000
D)$15,000
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Indirect and Mutual Holdings
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69695
Sample Questions
Q1) Consolidation procedures for direct and indirect holdings are the same.
A)True
B)False
Q2) Page Corporation acquired a 60% interest in Ace Corporation at a price $40,000 in excess of book value and fair value on January 1,2013.On the same date,Ace acquired a 70% interest in Bader Corporation at a price $30,000 in excess of book value and fair value.The excess purchase cost paid by Page and Ace was attributed to goodwill.Separate net incomes (excluding investment income)for the three affiliates for 2013 are as follows: Page,$500,000,Ace,$300,000,and Bader,$400,000. Page's controlling interest share of consolidated net income for 2013 is A)$808,000.
B)$848,000.
C)$920,000.
D)$960,000.
Q3) For consolidated statements,indirect holding affiliation and mutual holding affiliation structures are treated the same.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Subsidiary Preferred Stock, consolidated
Earnings Per Share, and Consolidated Income Taxation
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69694
Sample Questions
Q1) The calculation of parent EPS and consolidated basic EPS are identical.
A)True
B)False
Q2) Parker Corporation owns an 80% interest in Sample Corporation's common stock.Throughout 2014,Sample had 10,000 shares of common stock outstanding and Parker had 100,000 shares of common stock outstanding.Sample's only dilutive security consists of $50,000 face amount of 8% bonds payable.Each $1,000 bond is convertible into 20 shares of Sample stock.Parker and Sample's separate incomes for the year are $100,000 and $75,000,respectively.Assume a 34% flat income tax rate.
Required:
Compute the amount of basic and diluted earnings per share for Parker (Consolidated)and Sample Corporations.
Q3) Salter has a 2014 net loss of $200,000.No dividends are declared or paid in 2014.What is the change in Pardy's Investment in Salter for the year ending December 31,2014?
A)$50,000
B)$70,000
C)$140,000
D)$210,000
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Consolidation Theories, push-Down Accounting, and Corporate Joint Ventures
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/69693
Sample Questions
Q1) On July 1,2013,Parslow Corporation acquired a 75% interest in Sanderson Corporation for $150,000.Sanderson's net assets on this date had a book value of $140,000 and a fair value of $160,000.The excess of fair value over book value at acquisition was due to understated plant assets with a remaining useful life of five years from July 1,2013.Separate net incomes (excluding investment income)of Parslow and Sanderson for 2014 were $400,000 and $20,000,respectively.
Required:
1.Compute goodwill at July 1,2013 under the parent company theory and the entity theory.
2.Determine consolidated net income and noncontrolling interest share for 2014 under the parent company theory and the entity theory.
Q2) Under the parent company theory,what amount of goodwill was reported on the consolidated balance sheet at December 31,2014?
A)$148,000
B)$153,000
C)$154,400
D)$160,000
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69692
Sample Questions
Q1) Forward contracts are very standardized and easily traded in the markets.
A)True
B)False
Q2) On November 4,2014,the Oak Corporation,a U.S.corporation,purchased components for an assembly machine from Maple Industries,a Canadian Company,which were put into Parts Inventory.The purchase price was 80,000 Canadian dollars and Oak agreed to pay in Canadian dollars in 90 days.Both corporations are on a calendar year accounting period.Assume that the spot rates for the Canadian dollar on November 4,2014,December 31,2014,and February 2,2015,are $0.9985,$1.0191,and $1.0064,respectively. Required:
Record the November 4,December 31,and February 2 transactions in the General Journals of Oak Corporation and Maple Industries.If no entry is required on a particular date,indicate "No entry" in the General Journal.
Q3) Forward contracts are negotiated contracts between three or more parties for the delivery or purchase of a commodity or foreign currency at a preagreed delivery date.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Accounting for Derivatives and Hedging Activities
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69691
Sample Questions
Q1) International accounting standards differ from U.S.Generally Accepted Accounting Principles in that International standards
A)require that firm sale or purchase commitments are accounted for as fair value hedges.
B)require that firm sale or purchase commitments are accounted for as cash flow hedges.
C)state that firm sale or purchase commitments may not be treated as a hedged transaction.
D)permit firm sale or purchase commitments to be accounted for as either fair value hedges or cash flow hedges.
Q2) When preparing their year-end financial statements,the Warner Company includes a footnote regarding their hedging activities during the year.Which of the following is NOT required to be disclosed?
A)How hedge effectiveness is determined and assessed
B)The specific types of risks being hedged,and how they are being hedged
C)Alternative hedging options declined
D)The net gain or loss reported for the period for fair value hedges and where in the financial statements it is reported
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Foreign Currency Financial Statements
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69690
Sample Questions
Q1) A foreign entity is a subsidiary of a U.S.parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company.Which one of the following statements is false?
A)The U.S.dollar is the functional currency of this company.
B)Changes in exchange rates between the subsidiary's country and the parent's country are not expected to affect the foreign entity's cash flows.
C)Translation adjustments are shown in stockholders' equity as increases or decreases in other comprehensive income.
D)Translation adjustments are not shown on the income statement.
Q2) A U.S.parent corporation loans funds to a foreign subsidiary to be used to purchase equipment.The loan is denominated in U.S.dollars and the functional currency of the subsidiary is the euro.This intercompany transaction is a foreign currency transaction of A)neither the subsidiary nor the parent,as it is eliminated as part of the consolidation procedure.
B)the subsidiary but not the parent.
C)both the subsidiary and the parent.
D)the parent but not the subsidiary.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Segment and Interim Financial Reporting
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/69689
Sample Questions
Q1) Which of the following conditions would not indicate that two business segments should be classified as a single operating segment?
A)They have similar amounts of intersegment revenues or expenses.
B)They have a similar distribution method for products.
C)They have similar production processes.
D)They have similar products or services.
Q2) Pensions and corporate headquarters are all part of an operating segment.
A)True
B)False
Q3) Similar operating segments may be combined if the segments have similar economic characteristics.Which one of the following is a similar economic characteristic under GAAP?
A)The segments' management teams
B)The tax reporting law sections
C)The distribution method for products or services
D)The expected rates of return and risk for the segments' productive assets
Q4) Management-approach-based segments are called operating segments.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Partnerships - Formation,operations,and
Changes in Ownership Interests
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69688
Sample Questions
Q1) What is the weighted-average capital for Bertram and Ernest in 2014?
A)$224,000 and $245,000
B)$203,333 and $221,167
C)$221,333 and $239,167
D)$256,000 and $220,000
Q2) Required:
1.Prepare a schedule to allocate income to the partners assuming that partnership net income for 2014 is $330,000.
2.Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).
Q3) Required:
1.Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $36,000 for 2014.
2.Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the partnership).
Q4) Under a partnership,each partner has mutual agency and limited liability.
A)True
B)False
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Partnership Liquidation
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69687
Sample Questions
Q1) When liquidating a partnership the first payment is to amounts due partners liquidating their capital balance.
A)True B)False
Q2) If a partner has a debit capital balance at the time of liquidation,the partner may be required to use their personal funds to settle their partnership obligations.
A)True B)False
Q3) A partnership is considered insolvent if the cash available after all noncash assets have been converted into cash is not enough to pay partnership creditors.
A)True
B)False
Q4) Using a safe payments schedule,how much cash should Melvin receive in the first distribution?
A)$81,000
B)$165,000
C)$168,600
D)$202,500
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Corporate Liquidations
and Reorganizations
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/69686
Sample Questions
Q1) Aqua Corporation filed a petition under Chapter 7 of the bankruptcy act in January,2014.On February 28,the following information was presented regarding Aqua's financial status.
\(\begin{array}{llll}
&\text { Book Values}&\text { Fair Values }\\
\text { Cash } & \$ 50,000 \$ & 50,000 \\
\text { A/R - net } & 100,000 & 90,000 \\
\text { Inventories } & 80,000 & 60,000 \\
\text { Fixed Assets - net } & 200,000 & 230,00
\end{array}\) \[\begin{array} { l l }
\text { Prionty Clains } & 80,000 \\
\text { A/P } & 100,000 \\
\text { N/P } & 110,000 \\
\text { Mortgage Payable } & 200,000
\end{array}\] The Note Payable is secured by Accounts Receivable,and the Mortgage Payable is secured by the Fixed Assets.
Required:
Calculate the amount expected to be available for unsecured claims and the percentage recovery that the unsecured class should expect to receive.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: An Introduction to Accounting for State and Local Governmental Units
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/69685
Sample Questions
Q1) Government-wide financial statements exclude the A)general fund.
B)fiduciary funds.
C)proprietary funds.
D)special revenue funds.
Q2) The accounting equation for a governmental fund is
A)Assets = Liabilities + Equity.
B)Current assets + Noncurrent assets - Current liabilities - Noncurrent liabilities = Net position.
C)Current assets - Current liabilities = Fund Balance.
D)Assets = Liabilities + Fund Balance.
Q3) General governmental activities provide goods and services to citizens without regard to their ability to pay.
A)True
B)False
Q4) The accounting equation for an agency fund is Assets = Liabilities. A)True
B)False
21
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Accounting for State and Local Governmental Units
- Governmental Funds
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/69684
Sample
Questions
Q1) Governments must record a liability for uncollected taxes instead of revenues for uncollected taxes if the taxes are going to be collected
A)30 days after the fiscal year end.
B)45 days after the fiscal year end.
C)60 days after the fiscal year end.
D)75 days after the fiscal year end.
Q2) What statements are required for Government-wide financial statements?
A)Statement of Cash Flows and Balance Sheet
B)Statement of Cash Flows and Statement of Net Assets
C)Statement of Net Position and Statement of Activities
D)Operating Statement and Balance Sheet
Q3) Encumbrance accounting records commitments made for goods on order and for unperformed contracts.
A)True
B)False
Q4) GASB 54 requires that a special revenue fund balance be classified as nonspendable,restricted,encumbered or assigned.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69683
Sample Questions
Q1) Platinum City collects state sales taxes quarterly from local businesses and then gives the state revenue department the money at the end of the year.The sales taxes would go in Platinum City's
A)special revenue fund.
B)general fund.
C)agency fund.
D)enterprise fund.
Q2) GASB requires ________ method(s)for the cash flow statement for proprietary funds.
A)the reconciliation
B)the indirect
C)the direct
D)either the direct or indirect
Q3) The three financial statements for a proprietary fund: statement of net position; statement of revenues,expenses,and changes in fund net position; and statement of cash flows.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Accounting for Not-For-Profit Organizations
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/69682
Sample Questions
Q1) Voluntary health and welfare organizations must report expenses classified by A)restriction.
B)function and natural classification.
C)restriction and natural classification.
D)restriction,function and natural classification.
Q2) In a nonprofit,nongovernmental hospital,courtesy allowances are A)charity care services.
B)revenue deductions.
C)expenses.
D)revenues earned even if the standard charge is above or below the allowance.
Q3) Not-for-profits organizations report expenses by functional classification: program services and supporting services.
A)True
B)False
Q4) Which one of the following statements is not required for voluntary health and welfare organizations?
A)A statement of financial position
B)A statement of activities
C)A statement of functional expenses
D)A statement of changes in net assets
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Estates and Trusts
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/69681
Sample Questions
Q1) Which type of trust is created pursuant to a will?
A)A testamentary trust
B)A Crummey trust
C)A generation-skipping trust
D)A life estate trust
Q2) Under the Revised Uniform Principal and Income Act,gains or losses incurred on investments that occur after the death of the decedent
A)are considered to be income of the estate.
B)are included in the inventory fair value at the time of death.
C)are taxed separately from other estate income.
D)are adjustments to the principal of the estate.
Q3) Under the amended Uniform Probate Code,if the decedent dies intestate,and if there are descendants from a prior marriage or relationship,the surviving spouse receives what?
A)$25,000 and 2/3 of the remaining intestate estate
B)$200,000 and 1/3 of the remaining intestate estate
C)$50,000 and 1/2 of the remaining intestate estate
D)$100,000 and 1/2 of the remaining intestate estate
To view all questions and flashcards with answers, click on the resource link above.
25