Accounting Theory Exam Review
Course Introduction
Accounting Theory explores the conceptual frameworks and underlying principles that guide the development and application of accounting practices. This course examines the philosophical, ethical, and regulatory foundations of accounting, analyzing how various theories influence standard-setting, financial reporting, and disclosure practices. Topics include the evaluation of accounting models, the role of accounting in economic decision-making, and the impact of emerging issues such as sustainability and international harmonization of accounting standards. Through critical analysis of contemporary research and case studies, students gain a comprehensive understanding of how accounting theory shapes real-world accounting policies and practices.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard
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20 Chapters
1041 Verified Questions
1041 Flashcards
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Baker
Page 2
Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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42 Verified Questions
42 Flashcards
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Sample Questions
Q1) Based on the information provided,what amount will be reported immediately following the business combination for Buildings and Equipment (net)in the combined company's balance sheet?
A)$300,000
B)$370,000
C)$330,000
D)$340,000
Answer: C
Q2) A statutory consolidation is a type of business combination in which:
A)one of the combining companies survives and the other loses its separate identity.
B)one company acquires the voting shares of the other company and the two companies continue to operate as separate legal entities.
C)two publicly traded companies agree to share a board of directors.
D)each of the combining companies is dissolved and the net assets of both companies are transferred to a newly created corporation.
Answer: D
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Chapter 2: Reporting Intercorporate Interests
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Sample Questions
Q1) Based on the preceding information,what amount would Gulfstream report as net income (after taxes)for the year?
A)$49,240
B)$68,000
C)$64,000
D)$67,500
Answer: A
Q2) Based on the preceding information,what is the annual amount of amortization of differential over the ten year period?
A)$0
B)$1,800
C)$4,500
D)$8,500
Answer: C
Q3) Based on the preceding information,during 2007,Firewire will report:
A)an increase in the investment account balance of $15,500.
B)a decrease in the investment account balance of $20,000.
C)an increase in the investment account balance of $36,000.
D)a decrease in the investment account balance of $31,500.
Answer: A
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Chapter 3: The Reporting Entity and Consolidated Financial Statements
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Sample Questions
Q1) Based on the preceding information,what amount would be reported in the consolidated financial statements for cost of goods sold for 2007?
A)$39,000
B)$36,000
C)$75,000
D)$0
Answer: D
Q2) Based on the preceding information,what amount will Jane Company report as common stock outstanding in its consolidated balance sheet at December 31,2009?
A)$120,000
B)$180,000
C)$156,000
D)$264,000
Answer: A
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Sample Questions
Q1) Based on the preceding information,the write-up of buildings and equipment will:
A)increase Sirius's reported net income for 2009 by $5,000.
B)decrease Sirius's reported net income for 2009 by $5,000.
C)increase Sirius's reported net income for 2009 by $50,000.
D)have no affect on Sirius's reported net income for 2009.
Q2) When companies employ push-down accounting:
A)the consolidated financial statements will appear exactly as if push-down accounting had not been used.
B)a special account called Revaluation Capital will appear in the consolidated balance sheet.
C)all consolidation elimination entries are made on the books of the subsidiary rather than in consolidated workpapers.
D)it means that the subsidiary is not substantially wholly owned by the parent.
Q3) Based on the preceding information,what amount of total retained earnings will be reported in the consolidated balance sheet for the year 2008?
A)$330,000
B)$450,000
C)$430,000
D)$370,000
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Page 6
Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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51 Verified Questions
51 Flashcards
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Sample Questions
Q1) Based on the preceding information,the amount of goodwill reported is:
A)$0.
B)$10,000.
C)$15,000.
D)$20,000.
Q2) Based on the information given,what is the amount of unpaid consulting services at December 31,2008,on work done by X Company for Y Company?
A)$0
B)$10,000
C)$5,000
D)$15,000
Q3) Based on the information given,what balance in accounts receivable did Y Company report at December 31,2008?
A)$28,000
B)$48,000
C)$40,000
D)$38,000
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Page 7
Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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Sample Questions
Q1) Based on the information provided,in the preparation of the 2008 consolidated financial statements,building will be _____ in the eliminating entries.
A)debited for $33,000
B)debited for $36,000
C)credited for $36,000
D)debited for $3,000
Q2) Based on the preceding information,the amount of income assigned to the controlling shareholders in the consolidated income statement for 2008 will be:
A)$190,000.
B)$170,000.
C)$175,000.
D)$150,000.
Q3) Based on the preceding information,the gain on sale of the equipment recorded by Mortar for 2008 is:
A)$150,000
B)$65,000
C)$110,000
D)$40,000
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Chapter 7: Intercompany Inventory Transactions
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Sample Questions
Q1) Based on the information given above,what amount should be reported in the 2008 consolidated income statement as cost of goods sold?
A)$36,000
B)$12,000
C)$48,000
D)$45,000
Q2) Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 2008?
A)$117,000
B)$120,000
C)$150,000
D)$128,000
Q3) Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 2009?
A)$187,000
B)$221,000
C)$1,422,000
D)$2,963,000
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9
Chapter 8: Intercompany Indebtedness
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Sample Questions
Q1) Based on the information given above,what amount of interest income will be eliminated in the preparation of the 2009 consolidated financial statements?
A)$17,000
B)$13,300
C)$18,500
D)$22,200
Q2) Based on the information given above,what was the carrying amount of the bonds on Junior's books on the date of purchase?
A)$533,750
B)$516,875
C)$545,000
D)$550,625
Q3) Based on the information given above,what amount of interest expense will be eliminated in the preparation of the 2009 consolidated financial statements?
A)$17,000
B)$13,300
C)$18,500
D)$22,200
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Chapter 9: Consolidation Ownership Issues
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Sample Questions
Q1) Based on the information provided,what amount will be reported as consolidated net income for 2009 under the treasury stock method?
A)$150,000
B)$100,000
C)$75,000
D)$175,000
Q2) Based on the preceding information,in the journal entry recorded by Vision for sale of shares,Additional Paid-in Capital will be credited for:
A)$0.
B)$15,000.
C)$9,000.
D)$45,000.
Q3) Based on the preceding information,what will be the equity method income reported by Company A from its investment in Company B during 2009?
A)$32,000
B)$30,000
C)$72,000
D)$48,000
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11
Chapter 10: Additional Consolidation Reporting Issues
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Sample Questions
Q1) Based on the preceding information,what is the amount of earnings available to common shareholders reported in the consolidated financial statements for the year?
A)$89,200
B)$87,000
C)$91,000
D)$82,800
Q2) Which of the following observations concerning the comparisons between the direct and indirect approaches of presenting a cash flow statement is true?
A)The final number of cash flows from operating activities is different under the two approaches.
B)The direct approach provides a clearer picture of cash flows related to operations.
C)Authoritative bodies have generally expressed a preference for the indirect method.
D)A separate reconciliation of operating cash flows and net income is required under the indirect approach.
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12
Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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55 Verified Questions
55 Flashcards
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Sample Questions
Q1) Based on the preceding information,what is the overall effect of speculation on 2008 net income?
A)$4,000 gain
B)$6,000 gain
C)$8,000 loss
D)$8,000 gain
Q2) Based on the preceding information,what is the market price of Linked Corporation stock on December 31,2008?
A)$40
B)$37
C)$36
D)$38
Q3) Based on the preceding information,the entries on January 30,2009,include a:
A)Credit to Foreign Currency Units (SFr),$184,000.
B)Credit to Cash,$180,000.
C)Debit to Foreign Currency Transaction Loss,$4,000.
D)Debit to Dollars Payable to Exchange Broker,$184,000.
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Page 13
Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Sample Questions
Q1) If the restatement method for a foreign subsidiary involves remeasuring from the local currency into the functional currency,then translating from functional currency to U.S.dollars,the functional currency of the subsidiary is: I.U.S.dollar.
II)Local currency unit.
III)A third country's currency.
A)I
B)III
C)II
D)Either I or II
Q2) Based on the preceding information,what amount of unrealized intercompany gross profit is eliminated in preparing the consolidated financial statements for the year?
A)$0
B)$5,000
C)$10,000
D)$15,000
Q3) Use the information given in question 52 to prepare a schedule providing a proof of the translation adjustment.
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Page 14
Chapter 13: Segment and Interim Reporting
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Sample Questions
Q1) On March 15,2009,Clarion Company paid property taxes of $60,000 on its factory building for calendar year 2009.On July 1,2009,Clarion made $40,000 in unanticipated repairs to its machinery.The repairs will benefit operations for the remainder of the calendar year.What total amount of these expenses should be included in Clarion's quarterly income statement for the three months ended September 30,2009?
A)$55,000
B)$15,000
C)$35,000
D)$40,000
Q2) Based on the preceding information,the cost of goods sold for the second quarter is:
A)$416,000
B)$364,000
C)$304,000
D)$424,000
Q3) FASB has specified a "75% percent consolidated revenue test".
Required:
a)What is the 75% test?
b)How is the 75% test impacted by the "10% Significance Rule"?
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Chapter 14: Sec Reporting
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Sample Questions
Q1) Proxy statements are:
A)filed by an entity that acquires a beneficial ownership of more than 5 percent in a company.
B)interim financial statements need not be audited.
C)materials submitted to shareholders for votes on corporate matters.
D)used to disclose unscheduled material events.
Q2) According to the provisions of the Sarbanes-Oxley Act,
A)accounting firms can provide both audit and non-audit services to the same company.
B)the auditor should report directly to,and have its work overseen by,the company's management.
C)audit committees should be composed of non-management members of a company's board of directors.
D)both the lead audit partner and the audit review partner for publicly held companies should be rotated at least every two years.
Q3) Staff Accounting Bulletins
Q4) Customary Review
Q5) Comment Letter
Q6) Accounting and Auditing Enforcement Releases
Page 16
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Chapter 15: Partnerships: Formation,operation,and
Changes
in Membership
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Sample Questions
Q1) When a new partner is admitted into a partnership and the old partners' goodwill is recognized,the goodwill is allocated to: I.all the partners in their profit-and-loss-sharing ratio.
II)the old partners in their profit and loss sharing ratio.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q2) The ABC partnership had net income of $100,000 for 2009.They allocate profits and losses in the ratio 5:3:2.After closing the 12/31/2009 books they discovered that $30,000 was spent on a piece of land in December 2009 and was expensed.What should happen?
Q3) Refer to the information provided above.David directly purchases a one-fifth interest by paying Allen $34,000 and Daniel $10,000.The land account is increased before David is admitted.What are the capital balances of Allen and Daniel after David is admitted into the partnership?
A)Option A
B)Option B
C)Option C
D)Option D
Page 17
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Chapter 16: Partnerships: Liquidation
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Sample Questions
Q1) Based on the preceding information,what amount will be paid out to Scott upon liquidation of the partnership?
A)$0
B)$2,500
C)$5,000
D)$6,429
Q2) The JKL partnership liquidated its business in 2009.Due to an expected long liquidation period,a cash distribution plan was developed.The initial sale and realization of cash from noncash assets resulted in partner K properly getting $24,000.No other partners received cash along with K.Based upon this information,which of the following statements is correct? I.K's loss absorption power (LAP)was higher than J's LAP and L's LAP.
II)K's capital balance was substantially larger than the balances of J and L.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q3) A partnership may be involved in "Dissociation" or "Dissolution".
Required:
Describe "Dissociation" and "Dissolution."
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Chapter 17: Governmental Entities: Introduction and General
Fund Accounting
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Sample Questions
Q1) When an internal service fund (ISF)enters into a capital lease the transaction is recorded in the: I.fixed assets of the ISF.
II)long-term debt of the ISF.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q2) Which organization has the authority to establish generally accepted accounting principles for state and local government entities?
A)The National Council on Governmental Accounting
B)The Governmental Accounting Standards Board
C)The Financial Accounting Standards Board
D)The Municipal Officers Finance Organization
Q3) All of the following funds have a financial resources measurement focus with the exception of which fund?
A)debt service fund
B)special revenue fund
C)capital projects fund
D)private-purpose trust fund
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Chapter 18: Governmental Entities: Special Funds and Government-Wide Financial Statements
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Sample Questions
Q1) Upon completion of construction,and full payment of all construction costs in a capital projects fund,the entry to record the transfer of any remaining cash should include a debit to: I.Contract Payable-Retained Percentage.
II)Transfer Out to Debt Service Fund.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q2) For which of the following long-term debt obligations would payments not be accounted for in a debt service fund?
A)Notes and warrants secured by specific tax revenues.
B)Special assessment bonds sold to acquire enterprise fund assets.
C)Notes and warrants.
D)Special assessment bonds may be used to finance capital projects.
Q3) Which of the following funds report fixed assets on their balance sheets?
A)I,II
B)II,III
C)I,IV
D)III,IV
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Chapter 19: Not-For-Profit Entities
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Sample Questions
Q1) Transaction: Acquired investments with cash received in the previous item. Effect on Statement of Operations:
A)Increases operating income.
B)Decreases operating income.
C)The transaction is reported on the statement of operations,but there is no effect on operating income.
D)The transaction is not reported on the statement of operations.
Q2) Unrestricted gifts and endowment income of a private university are reported as A)increases in the unrestricted current fund balance on the statement of changes in fund balances.
B)unrestricted revenues on the statement of current funds revenues,expenditures,and other changes.
C)unrestricted revenues on the statement of activities.
D)increases in the unrestricted current fund balance on the statement of activities.
Q3) Endowment income was earned.The donor specified that the income be used for community service.
Q4) Income was earned from investments of assets that the board previously designated for plant expansion.
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Chapter 20: Corporations in Financial Difficulty
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Sample Questions
Q1) Eagle Company recently petitioned for bankruptcy and is now in the process of preparing a statement of affairs.The following information has been assembled for this statement: What amount will be paid to the fully secured creditors and the creditors with priority?
A)Option A
B)Option B
C)Option C
D)Option D
Q2) On a debtor-in-possession income statement,which of the following items should be reported under the heading "Reorganization Items"?
A)Sales
B)Selling expenses
C)Income tax benefit
D)Loss on disposal of assets
Q3) Under the Bankruptcy Code,an insolvent corporation may be: I.Reorganized.
II)Liquidated.
A)I
B)II
C)Either I or II
D)Neither I nor II
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