Advanced Accounting Practice Exam
Course Introduction
Advanced Accounting delves into complex concepts and practices beyond the fundamentals of financial accounting. The course covers topics such as business combinations, consolidations, foreign currency transactions, partnerships, and segment reporting. Students explore the preparation and analysis of consolidated financial statements, intercompany transactions, and the accounting implications of mergers and acquisitions. The curriculum also addresses international accounting standards and special reporting issues. By the end of the course, students will develop the analytical skills and technical expertise necessary to tackle advanced financial reporting challenges in a global context.
Recommended Textbook
Advanced Accounting 9th Edition by Joe Ben Hoyle
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19 Chapters
1679 Verified Questions
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) What was the balance in the Investment in Ticker Co.account at the end of 2008?
A)$401,136.
B)$413,872.
C)$418,840.
D)$412,432.
E)$410,148.
Answer: B
Q2) The equity in income of Sacco for 2008,is
A)$9,000.
B)$13,500.
C)$15,000.
D)$7,500.
E)$50,000.
Answer: B
Q3) What is the primary objective of the fair value method of accounting for an investment?
Answer: The investor possesses only a small percentage of an investee and cannot expect to have a significant impact on the operations or decision making of the investee.Therefore,the shares are bought in anticipation of cash dividends or in appreciation of stock market values.
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Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) Assuming the combination is accounted for as a purchase,compute consolidated retained earnings at the date of the combination.
A)$1,170.
B)$1,650.
C)$1,290.
D)$1,810.
E)$3,870.
Answer: C
Q2) If the transaction is accounted for as a purchase,what amount was recorded as the investment in Osorio?
A)$930.
B)$820.
C)$800.
D)$835.
E)$815.
Answer: B
Q3) What term is used to refer to a business combination in which only one of the original companies continues to exist?
Answer: The appropriate term is statutory merger.
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Page 4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) In accounting for an acquisition using the pooling of interests method,which of the following statements is true?
A)In subsequent periods,the subsidiary's retained earnings is always eliminated by the amount at date of acquisition.
B)The investment account will always equal the book value of the subsidiary at any date.
C)Any goodwill will have an indefinite life.
D)Any goodwill must be amortized over 20 years.
E)The excess of fair value over book value of the net assets of a subsidiary is amortized over their useful lives.
Answer: B
Q2) Compute the consideration transferred in excess of book value at January 1,2009.
A)$150.
B)$700.
C)$2,200.
D)$550.
E)$2,900.
Answer: B
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) In consolidation at December 31,2009,what net adjustment is necessary for Hogan's Patent account?
A)$5,600
B)$8,800
C)$0
D)$7,700
E)$7,000
Q2) In consolidation at December 31,2009,what adjustment is necessary for Hogan's Land account?
A)$0
B)$7,000 increase
C)$6,300 increase
D)$6,300 decrease
E)$8,000 decrease
Q3) What is consolidated current liabilities as of January 2,2009?
A)$70,000
B)$56,000
C)$64,400
D)$42,000
E)$58,100
6
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Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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Q1) When comparing the difference between an upstream and downstream transfer of inventory,and using the initial value method,which of the following statements is true?
A)Income from subsidiary will be lower by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers.
B)Income from subsidiary will be higher by the amount of the ending inventory profit multiplied by the noncontrolling interest percentage for downstream transfers.
C)Income from subsidiary will be reduced for downstream ending inventory profit but not for upstream profit,before the effect of the noncontrolling interest.
D)Income from subsidiary will be reduced for upstream ending inventory profit but not for downstream profit,before the effect of the noncontrolling interest.
E)Income from subsidiary will be the same for upstream and downstream profit.
Q2) Why do intercompany transfers between the component companies of a business combination occur so frequently?
Q3) How is the gain on an intercompany transfer of a depreciable asset realized?
Q4) Prepare the consolidation entries that should be made at the end of 2009.
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Chapter 6: Variable Interest Entities,
Statement of Cash Flows, and Other Issues
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Sample Questions
Q1) Prepare all consolidation entries for 2009.
Q2) If a subsidiary reacquires its outstanding shares from outside ownership for more than book value,which of the following statements is true?
A)Additional paid-in capital on the parent company's books will decrease.
B)Investment in subsidiary will increase.
C)Treasury stock on the parent's books will increase.
D)Treasury stock on the parent's books will decrease.
E)No adjustment is necessary.
Q3) On January 1,2009,Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share.None of these shares belonged to Popper.How would this transaction have affected the additional paid-in capital of the parent company?
A)$0.
B)decrease it by $32,900.
C)decrease it by $45,700.
D)decrease it by $49,400.
E)decrease it by $50,500.
Q4) Parent Corporation had just purchased some of its subsidiary's outstanding bonds.What items related to these bonds will have to be accounted for in the consolidation process?
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) Horse Corporation acquires all of Pony,Inc.for $300,000 cash.On that date,Pony has net assets with fair value of $250,000 but a book value and tax basis of $200,000.The tax rate is 40 percent.Prior to this date,neither Horse nor Pony has reported any deferred income tax assets or liabilities.What amount of goodwill should be recognized on the date of the acquisition?
A)$0.
B)$50,000.
C)$70,000.
D)$100,000.
E)$150,000.
Q2) Which of the following statements is true?
A)Delta and Sigma must file a consolidated income tax return,but must exclude Pi from the consolidated return.
B)Delta,Sigma,and Pi must file a consolidated income tax return.
C)Delta,Sigma,and Pi must file separate income tax returns because the ownership of Sigma and Pi is less than 100%.
D)Delta,Sigma,and Pi will probably not file a consolidated income tax return.
E)Delta,Sigma,and Pi may file separate income tax returns or a consolidated income tax return.
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Chapter 8: Segment and Interim Reporting
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Sample Questions
Q1) Which two items of information must be reported for (1)the domestic country, (2)all foreign countries in which the enterprise derives revenues or holds assets,and (3)each foreign country in which a material amount of revenues is derived or assets are held?
Q2) Which of the following is reported for interim financial reports using the discrete approach?
A)Income tax expense.
B)Seasonal items.
C)Change in accounting principle.
D)Property tax expense.
E)Extraordinary gains.
Q3) Compute the after-tax effect of Harrison's change in inventory method.
Q4) What is the purpose of the FASB's seventy-five percent requirement for industry segments?
Q5) Crookman Co.had several operating segments,including Segment O.Segment O had never met the requirements to be separately reported.During 2008,Segment O's revenue and operating profit were higher than the ten percent threshold due to a labor strike against its primary competitor.The strike ended early in 2009.How should Crookman Co.have reported Segment O for 2008?
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) Belsen purchased inventory on December 1,2008.Payment of 200,000 stickles was to be made in sixty days.Also on December 1,Belsen signed a contract to purchase §200,000 in sixty days.The spot rate was $1 = §2.80,and the 60-day forward rate was $1 = §2.60.On December 31,the spot rate was $1 = §2.90 and the 30-day forward rate was $1 = §2.62.Assume an annual interest rate of 12% and a fair value hedge.The present value for one month at 12% is .9901.
In the journal entry to record the establishment of a forward exchange contract,at what amount should the Forward Contract account be recorded on December 1?
A)$71,428.57.
B)$76,923.08.
C)$5,549.51.
D)$587.20.
E)$ 0,since there is no cost,there is no value for the contract at this date.
Q2) How much US $ will it cost Brisco to finally pay the payable on June 7?
A)$1,666,667.
B)$2,440,000.
C)$2,520,000.
D)$2,500,000.
E)$2,400,000.
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Chapter 10: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Under the current rate method,how would cost of goods sold be restated?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.
Q2) A foreign subsidiary of a U.S.corporation purchased equipment on January 4,2005.
(A. )How would depreciation expense on the equipment be translated for 2008?
(B. )How would depreciation expense on the equipment be remeasured for 2008?
Q3) Assuming the functional currency of the subsidiary is the local currency,what total should be included in Parker's consolidated balance sheet at December 31,2008,for the above items?
A)$407,500.
B)$418,000.
C)$396,000.
D)$403,500.
E)$398,500.
Q4) Prepare a statement of retained earnings for this subsidiary in stickles and then translate these amounts into U.S.dollars.
Q5) Contrast the purpose of remeasurement with the purpose of translation.
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) Which of the following statements is false regarding a country's legal system?
A)The two major types of legal systems are common law and codified Roman law.
B)Common law originated in the Roman jus civile.
C)Code law countries tend to have more statute governing a wider range of human activity.
D)Accounting law is rather general in code law countries.
E)A nongovernmental organization is more likely to develop in a common law country than in a code law country.
Q2) As a result of the sale and leaseback transaction in 2008,what is the difference between income between reporting using US GAAP and IFRSs in 2008?
A)US GAAP income is $80,000 higher.
B)US GAAP income is $100,000 higher.
C)IFRSs income is $50,000 lower.
D)IFRSs income is $100,000 lower.
E)IFRSs income is $80,000 higher.
Q3) What are the arguments against accounting harmonization?
Q4) What are the different ways IFRSs can be used?
Q5) Which two EU directives have helped harmonize accounting standards?
Q6) What are the two major types of legal systems used around the world?
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) Which statement is false regarding the Sarbanes-Oxley Act of 2002?
A)Regulates independent auditing and auditing standards.
B)Has five members appointed by the SEC.
C)Allows all members to be accountants,past or present.
D)is under the oversight and enforcement of the SEC.
E)is funded by fees levied on all publicly traded companies.
Q2) Which one of the following forms is used by small business issuers in connection with registration of securities to be sold for cash?
A)S-8.
B)S-11.
C)S-4.
D)SB-1.
E)SB-2.
Q3) The SEC's operations are supported through
A)tax revenues of the federal government.
B)registration fees charged to companies offering securities to the public.
C)fees paid by stock exchanges.
D)fees paid by stock brokers.
E)fees paid by accounting firms that practice before the SEC.
Q4) What is blue sky legislation?
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) What information is conveyed by the Statement of Realization and Liquidation?
A)Account balances reported by the company at the date of the filing of the bankruptcy petition.
B)Cash receipts generated by the sale of the debtor's property.
C)Write up of assets.
D)Recognition of recorded liabilities.
E)Assets and liabilities but not stockholders' equity.
Q2) How should the fresh start reorganization value normally be determined?
A)as the sum of current replacement cost of the company's assets.
B)by discounting future cash flows for the entity that will emerge.
C)as the sum of the historical cost of net assets.
D)as the sum of the net realizable value of identifiable assets.
E)by adjusting current cash flows for the entity as it emerges from reorganization.
Q3) What official accounting pronouncement provides guidance for the preparation of financial statements during a reorganization?
Q4) To what does the term Chapter 11 bankruptcy refer?
Q5) Total free assets available for all unsecured liabilities are calculated to be what amount?
Q6) What is the meaning of the phrase debtor in possession?
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Chapter 14: Partnerships: Formation and Operation
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Sample Questions
Q1) By what methods can a person gain admittance to a partnership?
Q2) Max,Jones and Waters shared profits and losses 20%,40%,and 40% respectively and their partnership capital balance is $10,000,$30,000 and $50,000 respectively.Max has decided to withdraw from the partnership.An appraisal of the business and its property estimates the fair value to be $ 200,000.Land with a book value of $30,000 has a fair value of $45,000.Max has agreed to receive $20,000 in exchange for her partnership interest.What amount should land be recorded on the partnership books?
A)$20,000.
B)$30,000.
C)$45,000.
D)$50,000.
E)$200,000.
Q3) What was Nolan's capital balance at the end of 2008?
A)$139,420.
B)$246,000.
C)$276,540.
D)$279,440.
E)$304,040.
Q4) What is the dissolution of a partnership?
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) Under the marshaling of assets doctrine,personal creditors can claim a partner's share of partnership assets under which condition?
A)When payment of all partnership debts is assured.
B)When the insolvent partner has a positive capital balance.
C)When payment of all partnership debts is assured and the insolvent partner has a positive capital balance.
D)When the other partner's agree to the claim..
E)Personal creditors can not claim a partner's share of partnership assets.
Q2) What accounting transactions are not recorded by an accountant during liquidation?
A)The conversion of partnership assets into cash.
B)The allocation of the resulting gains and losses.
C)The payment of liabilities and expenses.
D)Remaining unpaid debts settled,and the distribution of any remaining assets to the partners based on their profit and loss ratio.
Q3) Prepare the journal entry for Donald,Chief & Berry LLP on August 1,2009,to record payment of liabilities.
Q4) Prepare journal entries to record the actual liquidation transactions.
Q5) What should occur when a solvent partner has a deficit balance?
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Chapter 16: Accounting for State and Local Governments,
Part I
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Q1) A city enacted a special tax levy to provide medical services at the municipal hospital.What kind of fund should have been used to record the revenues generated by the tax?
Q2) On August 21,2008,Fred City transferred $100,000 to the School System to cover repairs to a school building.
Required:
Prepare all the required journal entries and identify the fund in which each entry was recorded for the Fund-Based Financial Statements.
Q3) Which group of governmental financial statements reports all revenues and all costs of providing services each year?
A)GAAP-Based Financial Statements
B)Fund-Based Financial Statements.
C)Cost-Based Financial Statements.
D)Government-Wide Financial Statements.
E)General Fund Financial Statements.
Q4) For a government,what kind of operations are accounted for using a proprietary fund? Give three examples.
Q5) What is the purpose of government-wide financial statements?
Q6) What are the four fiduciary fund types?
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Chapter 17: Accounting for State and Local Governments,part II
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Q1) 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.
Q2) GASB No.34 makes which of the following statements regarding Management's Discussion and Analysis?
A)MD&A is required only for Proprietary Fund Financial Statements.
B)MD&A is required for all state and local government financial statements.
C)MD&A is only required for comprehensive annual financial reports.
D)MD&A for state and local government financial statements must include an analysis of potential,untapped revenue sources.
E)MD&A is an optional inclusion for state and local government financial statements.
Q3) Prepare a Statement of Activities
Q4) What three criteria must be met to identify a governmental unit as a primary government?
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Chapter 18: Accounting for Not-For-Profit Organizations
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Q1) What are third party payors? Why are their interests important in accounting for health care entities?
Q2) Unconditional transfers of cash or other resources to an entity in a voluntary nonreciprocal transaction is the SFAS 116 definition for A)miscellaneous revenues.
B)contributions.
C)unconditional promises to give.
D)exchange transactions.
E)pledges.
Q3) Which entry would be the correct entry on the donor's books to record a gift to a not-for-profit organization when control of the assets is retained by the donor?
A)debit expense-charitable contribution,credit cash.
B)debit refundable advance to charity,credit cash.
C)debit charitable pledge,creditcash.
D)debit cash,creditliability to beneficiary. Edebit cash,credit refundable advance.
Q4) According to FASB Statement 117,how are not-for-profits to utilize separate funds?
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Chapter 19: Accounting for Estates and Trusts
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Q1) Prepare the journal entry to record payment of $20,000 in funeral expenses.
Q2) Prepare the journal entry to record the property of the estate.
Q3) Additional debts of $78,000 were discovered.Debts totaling $130,000 were paid. Prepare the journal entry to record the transaction.
Q4) During the current year,an estate generates the following income amounts: Rental income $10,000,Interest income 4,000,Dividend income 6,000.The rental income is conveyed immediately to the beneficiary stated in the decedent's will.Dividends of $2,000 are donated to the decedent's church.What amount of federal income tax must be paid by the estate?
Q5) What are the three goals of probate laws?
Q6) What would be the taxable income?
Q7) What amount of federal income tax must be paid?
Q8) Cash of $195,000 was conveyed to the appropriate beneficiary. Prepare the journal entry to record the transaction.
Q9) What are the four levels of claims in the order of priority of the Uniform Probate Code?
Q10) The shares of Kodak were sold for $145,600. Prepare the journal entry to record the transaction.
Q11) Administrative expenses of $13,000 were paid. Prepare the journal entry to record the transaction. Page 21
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