Advanced Accounting
Exam Materials
Course Introduction
Advanced Accounting explores complex financial accounting topics beyond the fundamentals introduced in introductory courses. This course covers areas such as business combinations, consolidations, partnership accounting, foreign currency transactions, segment reporting, and the accounting for governmental and nonprofit entities. Students will develop analytical skills to interpret and apply accounting standards for intricate business transactions, understand regulatory and ethical considerations, and prepare advanced financial statements. Emphasis is placed on problem-solving, critical thinking, and the use of current accounting software and tools to address real-world accounting challenges.
Recommended Textbook
Fundamentals of Advanced Accounting 5th Edition by Joe Ben Hoyle
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12 Chapters
1192 Verified Questions
1192 Flashcards
Source URL: https://quizplus.com/study-set/3824
Page 2
Chapter 1: The Equity Method of Accounting for Investments
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119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/76310
Sample Questions
Q1) Steven Company owns 40% of the outstanding voting common stock of Nicole Corp. and has the ability to significantly influence the investee's operations. On January 3, 2011, the balance in the Investment in Nicole Corp. account was $503,000. Amortization associated with this acquisition is $12,000 per year. During 2011, Nicole earned net income of $120,000 and paid cash dividends of $40,000. Previously in 2010, Nicole had sold inventory costing $35,000 to Steven for $50,000. All but 25% of that inventory had been sold to outsiders by Steven during 2010. Additional sales were made to Steven in 2011 at a transfer price of $75,000 that had cost Nicole $54,000. Only 10% of the 2011 purchases had not been sold to outsiders by the end of 2011. What amount of unrealized intra-entity inventory profit should be deferred by Steven at December 31, 2010?
Answer: [($50,000 - $35,000) x .25 x .40] = $1,500
Q2) What argument could be made against the equity method?
Answer: An argument could be made against the recognition of income under the equity method. The investor is required to recognize its share of the investee's income even when it is unlikely that the investor will ever receive the entire amount in cash dividends.
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Chapter 2: Consolidation of Financial Information
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) Bale Co. acquired Silo Inc. on December 31, 20X1, in an acquisition business combination transaction. Bale's net income for the year was $1,400,000, while Silo had net income of $400,000 earned evenly during the year. Bale paid $100,000 in direct combination costs, $50,000 in indirect costs, and $30,000 in stock issue costs to effect the combination.
Required:
What is consolidated net income for 20X1?
Answer: 11ea8df8_a850_ba88_b636_9f4b47aa48c7_TB4172_00
Note: Silo's net income does not affect consolidated net income until after the date of acquisition. The combination costs belong to Bale only.
Q2) For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?
Answer: The acquisition transaction is assumed to occur through an orderly transaction between market participants at the measurement date of the acquisition. Thus identified assets and liabilities acquired have been assigned fair value for the transfer to the acquirer and this is a relevant and faithful representation for consolidation.
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Chapter 3: Consolidationssubsequent to the Date of Acquisition
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) Yules Co. acquired Noel Co. in an acquisition transaction. Yules decided to use the partial equity method to account for the investment. The current balance in the investment account is $416,000. Describe in words how this balance was derived.
Answer: The initial balance in the investment account would be the acquisition value implied by the fair value of consideration transferred. This would not include consideration paid for costs to effect the combination. After the acquisition, the balance in the account is increased by the parent's accrual of the subsidiary's income and decreased by the dividends paid by the subsidiary.
Q2) When is a goodwill impairment loss recognized?
A) Annually on a systematic and rational basis.
B) Never.
C) If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying values.
D) If the fair value of a reporting unit falls below its original acquisition price.
E) Whenever the fair value of the entity declines significantly.
Answer: C
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Denber Co. acquired 60% of the common stock of Kailey Corp. on September 1, 2010. For 2010, Kailey reported revenues of $810,000 and expenses of $630,000, all reflected evenly throughout the year. The annual amount of amortization related to this acquisition was $15,000.
What is the effect of including Kailey in consolidated net income for 2010?
A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.
Q2) When a parent uses the initial value method throughout the year to account for its investment in an acquired subsidiary, which of the following statements is true before making adjustments on the consolidated worksheet?
A) Parent company net income equals consolidated net income.
B) Parent company retained earnings equals consolidated retained earnings.
C) Parent company total assets equals consolidated total assets.
D) Parent company dividends equal consolidated dividends.
E) Goodwill needs to be recognized on the parent's books.
Q3) Where should a non-controlling interest appear on a consolidated balance sheet?
Page 6
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Chapter 5: Consolidated Financial Statementsintra-Entity
Asset Transactions
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127 Verified Questions
127 Flashcards
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Sample Questions
Q1) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2010, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2010 and 2011, respectively. Leo uses the equity method to account for its investment.
Compute income from Stiller on Leo's books for 2010.
A) $110,000
B) $100,000.
C) $125,000.
D) $85,000.
E) $88,000.
Q2) During 2011, Edwards Co. sold inventory to its parent company, Forsyth Corp. Forsyth still owned the entire inventory purchased at the end of 2011. Why must the gross profit on the sale be deferred when consolidated financial statements are prepared at the end of 2011?
Q3) What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset?
Q4) How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation?
Page 7
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Chapter 6:
Variable Interest Entities, Intra-Entity Debt, Consolidated Cash Flows, and Other Issues
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Rojas Co. owned 7,000 shares (70%) of the outstanding 10%, $100 par preferred stock and 60% of the outstanding common stock of Brett Co. When Brett reported net income of $780,000, what was the non-controlling interest in the subsidiary's income?
A) $234,000.
B) $273,000.
C) $302,000.
D) $312,000.
E) $284,000.
Q2) Fargus Corporation owned 51% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price.
On January 1, 2010, Sanatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on January 1, 2012, for 95% of the face value. Both companies utilized the straight-line method of amortization.
What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2012?
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/76304
Sample Questions
Q1) A spot rate may be defined as
A) The price a foreign currency can be purchased or sold today.
B) The price today at which a foreign currency can be purchased or sold in the future.
C) The forecasted future value of a foreign currency.
D) The U.S. dollar value of a foreign currency.
E) The Euro value of a foreign currency.
Q2) U.S. GAAP provides guidance for hedges of all the following sources of foreign exchange risk except
A) Recognized foreign currency denominated assets and liabilities.
B) Unrecognized foreign currency firm commitments.
C) Forecasted foreign currency denominated transactions.
D) Net investment in foreign operations.
E) Deferred foreign currency gains and losses.
Q3) What is meant by the spot rate?
Q4) What is the major assumption underlying the one-transaction perspective?
Q5) Yelton Co. just sold inventory for 80,000 euros, which Yelton will collect in sixty days. Briefly describe a hedging transaction Yelton could engage in to reduce its risk of unfavorable exchange rates.
Q6) What is the purpose of a hedge of foreign exchange risk?
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Chapter 8: Translation of Foreign Currency Financial Statements
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97 Verified Questions
97 Flashcards
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Sample Questions
Q1) When consolidating a foreign subsidiary, which of the following statements is true?
A) Parent reports a cumulative translation adjustment from adjusting its investment account under the equity method.
B) Parent reports a gain or loss in net income from adjusting its investment account under the equity method.
C) Subsidiary's cumulative translation adjustment is carried forward to the consolidated balance sheet.
D) Subsidiary's income/loss is carried forward to the consolidated balance sheet.
E) All foreign currency gains/losses are eliminated in the consolidated income statement and balance sheet.
Q2) A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2008. (A.) How would depreciation expense on the equipment be translated for 2011? (B.) How would depreciation expense on the equipment be remeasured for 2011?
Q3) What exchange rate should be used to translate (a) revenues and expenses that occur throughout the year and (b) a gain or loss that occurs on a specific day?
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Chapter 9: Partnerships: Formation and Operation
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/76302
Sample Questions
Q1) Norr and Caylor established a partnership on January 1, 2010. Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000. For both partners, the beginning capital balance was to equal the initial investment. Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2010, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2011, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively. Each partner withdrew $1,000 per month throughout 2010 and 2011.
Determine the balance in both capital accounts at the end of 2010.
Q2) Brown and Green are forming a business as partners. If they do not create a formal written partnership agreement, what risks are they exposing themselves to?
Q3) How is accounting for a partnership different from accounting for a corporation?
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Chapter 10: Partnerships: Termination and Liquidation
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69 Verified Questions
69 Flashcards
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Sample Questions
Q1) What should occur when a solvent partner has a deficit balance?
Q2) What is the preferred method of resolving a partner's deficit balance, according to the Uniform Partnership Act?
A) Partners never have a deficit balance.
B) The other partners must contribute personal assets to cover the deficit balance.
C) The partnership must sell assets in order to cover the deficit balance.
D) The partner with a deficit balance must contribute personal assets to cover the deficit balance.
E) The partner with a deficit balance contributes personal assets only if those personal assets exceed personal liabilities.
Q3) The partnership of Rayne, Marin, and Fulton was being liquidated by the partners. Rayne was insolvent and did not have enough assets to pay all his personal creditors. Under what conditions might Rayne's personal creditors have claimed some of the partnership assets?
Q4) What events or circumstances might force the termination of a partnership and liquidation of its assets?
Q5) What is a safe cash payment?
Q6) What is the role of the accountant during the liquidation process?
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Chapter 11: Accounting for State and Local Governments
Part 1
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78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/76300
Sample Questions
Q1) A $910,000 bond was issued on October 1, 2011 to build a new road. The bonds carried a 6% interest rate and are due in 10 years.
Required:
(A.) Prepare the required journal entry in the Capital Projects Fund on October 1 for the Fund Financial Statements.
(B.) Prepare the required journal entry for the Government-Wide Financial Statements.
Q2) Proprietary funds are
A) Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.
B) Funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations.
C) Funds used to account for monies held by the government in a trustee capacity.
D) Funds used to account for all financial resources except those required to be accounted for in another fund.
E) Funds used to account for revenues that have been legally restricted as to expenditure.
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Chapter 12: Accounting for State and Local Governments
Part 2
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51 Verified Questions
51 Flashcards
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Sample Questions
Q1) Marie Todd works for the City of Rochester and volunteered to work the New Years Eve holiday in December, 2010. In exchange for working the holiday, the city will grant her 2 vacation days compensated at $500 per day. Marie decided to take these vacation days during January, 2011.
For Government-wide financial statements, what are the journal entries to record these events in 2010 and in 2011?
Q2) A method of depreciation for infrastructure assets that allows the expensing of all maintenance costs each year instead of computing depreciation is called
A) Government-wide depreciation.
B) Proprietary depreciation.
C) GASB depreciation.
D) Modified approach.
E) Alternative depreciation.
Q3) What are the three broad sections of a state or local government's CAFR?
A) Introductory, financial, and statistical.
B) Financial statements, notes to the financial statements, and component units.
C) Introductory, statistical, and component units.
D) Component units, financial, and statistical.
E) Financial statements, notes to the financial statements, and statistical.
Page 14
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