Advanced Accounting
Exam Answer Key
Course Introduction
Advanced Accounting delves into complex topics beyond the foundational principles of financial accounting, focusing on areas such as business combinations, consolidations, mergers and acquisitions, partnerships, foreign currency transactions, and segment and interim reporting. The course equips students with the skills to handle the accounting and reporting issues that arise with multi-entity corporate structures and international operations, while also exploring the regulatory environment and standards, such as International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Through case studies and practical applications, students learn how to analyze and prepare consolidated financial statements and develop a deeper understanding of the ethical and professional responsibilities in advanced accounting practices.
Recommended Textbook
International Accounting 4th Edition by Timothy Doupnik
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15 Chapters
899 Verified Questions
899 Flashcards
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Page 2
Chapter 1: Introduction to International Accounting
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59 Verified Questions
59 Flashcards
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Sample Questions
Q1) What is a "greenfield" investment?
A)Farm land held for speculation
B)Foreign direct investment whereby a new facility is constructed abroad
C)Purchasing an existing facility as a foreign direct investment
D)A foreign investment that has been approved by the Environmental Protection Agency
Answer: B
Q2) In the context of multinational corporations, the United States, Japan, and members of the European Union are collectively known as the:
A)G8.
B)Commonwealth.
C)triad.
D)OECD.
Answer: C
Q3) What percentage of world trade is represented by manufactured products?
A)64.6%
B)22.5%
C)8.5%
D)75.5%
Answer: A
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Page 3
Chapter 2: Worldwide Accounting Diversity
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Sample Questions
Q1) In Gray's framework for accounting system development, the cultural dimensions of individualism, power distance, uncertainty avoidance, and masculinity directly affect:
A)accounting systems.
B)accounting values.
C)external influences.
D)ecological influences.
Answer: B
Q2) The "Fair Presentation/Full Disclosure Model" is a classification scheme used by: A)Germany.
B)Japan.
C)the United States and the United Kingdom.
D)Brazil.
Answer: C
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Chapter 3: International Convergence of Financial Reporting
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Sample Questions
Q1) Which of the following statements is true of the International Accounting Standards Board (IASB)?
A)The Board consists of 16 members.
B)The Board should contain 6 part-time members.
C)At least 13 members of the Board must have experience as auditors.
D)All members of the Board should be from a single country.
Answer: A
Q2) What is the primary focus of IAS 1?
A)To establish the guidelines for financial statement presentation
B)To provide guidance to first-time adopters of IFRS issued by the IASB
C)To establish the framework of guidelines to be used by IASB in setting accounting standards
D)None of the above
Answer: A
Q3) Which of the following statements is true of IFRS 1?
A)It does not permit the recognition of intangible assets in balance sheets.
B)After its issuance in July 2001, it has not been amended as yet.
C)It deals primarily with fair value measurement of assets.
D)It provides exemptions to complying with IFRS in specific areas.
Answer: D
Page 5
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Chapter 4: International Financial Reporting Standards:
Part I
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Sample Questions
Q1) In what way does IAS 16 (Property, Plant, and Equipment) differ from U.S.GAAP concerning fixed asset measurement subsequent to initial recognition?
A)IAS 16 allows for upward revaluation of the asset based on fair value.
B)IAS 16 does not allow accumulated depreciation to be shown on the balance sheet.
C)IAS 16 requires that fixed assets be carried at fair value less accumulated impairment losses.
D)IAS 16 allows both upward and downward revaluation of fixed assets, whereas U.S.GAAP only allows upward revaluation.
Q2) What types of differences can cause issues between International Financial Reporting Standards and U.S.GAAP?
A)Measurement
B)Alternatives available
C)Disclosure
D)All of the above may be different between IFRS and U.S.GAAP.
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Chapter 5: International Financial Reporting Standards:
Part II
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Sample Questions
Q1) IAS 18, Revenue, covers which types of revenues?
A)Sale of goods
B)Rendering of services
C)Interest, royalties, and dividends
D)All of the above
Q2) IAS 32 defines a financial instrument as:
A)the currency of a foreign country in which the enterprise does business.
B)a certified check.
C)any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
D)a recognized stock exchange.
Q3) Under IAS 32, which of the following is a financial liability?
A)A payable
B)A bank loan
C)An intercompany loan payable
D)All of the above
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Chapter 6: Comparative Accounting
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Sample Questions
Q1) Which of the following is NOT considered a part of GAAP in Mexico?
A)MIPA Bulletins
B)MIPA Interpretations
C)International Financial Reporting Standards
D)NBSC Statements on Accounting Practice
Q2) Under what circumstance should a German company prepare its financial statements under German GAAP rather than international financial reporting standards?
A)Reporting to banks
B)Reporting consolidated financial statements
C)Calculating tax
D)German GAAP should always be used instead of IRFS.
Q3) What type of economic system presently exists in Mexico?
A)Socialist market
B)Communist
C)Free market
D)Planned economy
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) What term is used to describe the circumstances under which Amazing Corporation is entering the forward contract?
A)Hedge of an unrecognized foreign currency firm commitment
B)Hedge of a recognized foreign-currency-denominated asset
C)Hedge of a forecast foreign-currency-denominated transaction
D)Hedge of net investment in foreign operations
Q2) Under U.S.GAAP, what is the proper treatment of unrealized foreign exchange losses?
A)They should be deferred on the Balance Sheet until the cash is paid.
B)They should not be recognized until cash is received to complete the transaction.
C)They should be recorded on the Income Statement in the period the exchange rate changes.
D)They should be deferred on the Balance Sheet until an offsetting foreign exchange gain is realized.
Q3) What is the intrinsic value of a foreign currency option?
A)The difference between the spot rate and the strike price
B)The gain that could be realized if the option was exercised immediately
C)The chance that a currency will rise over time to make the option in the money
D)The difference between a call option and a put option
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Chapter 8: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Excellent Inc.is located in the U.S., but it has subsidiaries in Japan.When the yen depreciates relative to the U.S.dollar, what is the direction of the translation adjustment to consolidate Excellent's financial statements?
A)When there is net asset exposure, the translation adjustment will be positive. B)There will be no adjustment necessary unless the difference is realized.
C)When there is net liability exposure, the translation adjustment will be positive.
D)The direction of the adjustment is indeterminate.
Q2) Parentco, Inc.had a negative cumulative translation adjustment of ($250,000) on its balance sheet pertaining to its investment in Subko Ltd at the point in time that Parentco sold its interest in Subko.How must Parentco handle this translation adjustment when it records the sale of Subko?
A)As an increase in income (gain on disposal)
B)As a decrease in income (loss on disposal)
C)The cumulative translation adjustment will not be affected by the sale.
D)It will be a prior period adjustment to retained earnings.
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Page 10
Chapter 9: Additional Financial Reporting Issues
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Sample Questions
Q1) Holding monetary liabilities during a period of inflation results in:
A)purchasing power gains.
B)purchasing power losses.
C)transaction gains.
D)translation losses.
Q2) What issue of reporting effects of changing prices is addressed by IAS 29, issued by the International Accounting Standards Board in 1989?
A)Choice between current replacement cost and general purchasing power method
B)Making inflation-adjusted reporting optional or required
C)Specifying the European Central Bank as the official source of inflation rates in the European Union
D)Mandating inflation adjustment for primary financial statements of companies in hyperinflationary economies
Q3) Prior to 2007, which method of accounting for inflation most closely represented the supplemental reporting required in Mexico?
A)Current replacement cost
B)Current cost
C)General purchasing power
D)Historical cost
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Page 11
Chapter 10: Analysis of Foreign Financial Statements
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Sample Questions
Q1) What is the probable reason that many foreign countries provide convenience translations of their financial statements into English?
A)U.S.GAAP is the most widely used set of financial accounting standards.
B)Globalization of capital markets has increased the demand for English language financial statements.
C)England is the home of more multinational corporations than any other country.
D)The Securities and Exchange Commission requires all foreign companies doing business in the U.S.to provide English translations.
Q2) While conducting trend analysis, financial statement amounts should be translated using:
A)current exchange rate to avoid translation adjustment.
B)historical exchange rate to ensure compliance with IFRS.
C)average exchange rate avoid translation adjustment.
D)current rate at the end of each year.
Q3) For which of the following purposes are cookie jar reserves primarily used?
A)Increasing reserves in less profitable years
B)Increasing profits in less profitable years
C)Decreasing expenses in profitable years
D)Decreasing the risk of non-payment of receivables
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Page 12
Chapter 11: International Taxation
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Sample Questions
Q1) Aco Ltd mined diamonds at a cost of FC 1,000,000 and sold them to Beako for FC 2,500,000.Beako distributed the diamonds to its customers and received FC 4,000,000.If the national VAT is 20%, how much tax did Beako pay?
A)FC 200,000
B)FC 500,000
C)FC 300,000
D)FC 800,000
Q2) To determine U.S.taxable income, foreign branch net income is grossed up by:
A)adding taxes paid to the foreign government translated at the exchange rate at the end of the year.
B)deducting taxes paid to the domestic government translated at the exchange rate at the date of payment.
C)adding taxes paid to the foreign government translated at the exchange rate at the date of payment.
D)deducting taxes paid to the foreign government translated at the exchange rate at the date of payment.
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Chapter 12: International Transfer Pricing
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Sample Questions
Q1) Subsidiary X, located in a country with a 25% corporate income tax rate, and Subsidiary Y, located in a country with a 35% corporate income tax rate are part of a decentralized organization.They have been engaged in trade with one another using a negotiated transfer price of $50 per unit for sales by Subsidiary X to Subsidiary Y.Pipko, the parent company of both Subsidiary X and Subsidiary Y recently set a discretionary transfer price of $80 per unit for the transfers between X and Y.What is advantage of this decision?
A)Net income for Subsidiary X will increase by $30 per unit.
B)Net income for the corporation as a whole will increase by $30 per unit.
C)Net income for the corporation as a whole will increase by $3 per unit.
D)Net income for Subsidiary Y will decrease by $30 per unit.
Q2) The "price" for using intangible property is called:
A)interest.
B)rent.
C)royalty.
D)service charge.
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Page 14
Chapter 13: Strategic Accounting Issues in Multinational Corporations
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Sample Questions
Q1) What term is used to describe the process involving revising existing goals and adopting new goals?
A)Strategy formulation
B)Strategic planning
C)Strategy implementation
D)Capital budgeting
Q2) Which of the following calculations will yield return on investment (ROI)?
A)Annual net income/book value of investment
B)Average annual net income/book value of investment
C)Average annual net income/present value of investment
D)Book value of investment/annual net income
Q3) Which of the following items are controlled by the parent company?
A)Lost production due to labor strikes
B)Foreign exchange losses
C)Sales revenue determined by discretionary transfer pricing
D)Restrictions on foreign exchange spending
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15
Chapter 14: Comparative International Auditing and Corporate Governance
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Sample Questions
Q1) Which of the following is NOT a factor influencing the probability that an auditor will detect an accounting error?
A)Competence of the auditor
B)Quality review and monitoring
C)Financial reporting requirements
D)Independence of the auditor
Q2) Which of the following is a factor influencing the probability that an auditor will report a detected error or irregularity?
A)Competence of the auditor.
B)Independence of the auditor.
C)Quality review and monitoring.
D)Financial reporting requirements.
Q3) Who oversees the work of the IFAC committees?
A)PIOB
B)PCAOB
C)IOSCO
D)OECD
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Page 16
Chapter 15: International Corporate Social Reporting
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Sample Questions
Q1) Carbon offsets are mostly taken at:
A)market value by the buyer.
B)a premium by the seller.
C)face value by the buyer.
D)market value by the seller.
Q2) What is the purpose of the IFAC's Sustainability Framework?
A)To target professional accountants who can influence integration of sustainability into organizations' objectives, strategies, management, and definition of success
B)To promote global adoption of GRI
C)To target elected officials who can influence integration of sustainability into organizations' objectives, strategies, management, and definition of success
D)To integrate the concept of sustainability into the Accounting Framework
Q3) How do Irish companies view annual corporate social reports (CSR)?
A)They greet CSR with skepticism and have ceased to engage in preparing CSR.
B)They embrace CSR as a way of maintaining or reestablishing legitimacy.
C)They are required to prepare CSR under Irish statute.
D)Irish culture demands CSR reports.
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