Advanced Accounting Test Questions
Course Introduction
Advanced Accounting explores complex accounting topics beyond the foundational principles, focusing on specialized areas such as business combinations, consolidated financial statements, partnerships, foreign currency transactions, and segment reporting. The course delves into issues related to mergers and acquisitions, accounting for international operations, governmental and nonprofit accounting, and current developments in accounting standards. Students will develop analytical skills to address intricate financial reporting challenges, interpret advanced transactions, and gain proficiency in applying professional accounting standards to real-world scenarios.
Recommended Textbook
Advanced Accounting 9th Edition by Joe Ben Hoyle
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19 Chapters
1679 Verified Questions
1679 Flashcards
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Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) How would a change be made from the fair value method to the equity method?
Answer: According to APB 18,the investment account and retained earnings of the investor should be adjusted to retrospectively restate results of operations of prior periods.
Q2) What is the Equity in Howell Income that should be reported by Acker in 2009?
A)$32,000.
B)$41,600.
C)$48,000.
D)$49,600.
E)$50,600.
Answer: B
Q3) What is the gain/loss on the sale of the 10,000 shares?
A)$20,000 gain.
B)$10,000 gain.
C)$1,000 gain.
D)$1,000 loss.
E)$10,000 loss.
Answer: D
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3
Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $42 fair value for all of the outstanding shares of Vicker.What will be the consolidated Additional Paid-In Capital and Retained Earnings (January 1,20X1 balances)as a result of this transaction (which is not a pooling of interests)?
A)$20,000 and $160,000.
B)$20,000 and $260,000.
C)$380,000 and $160,000.
D)$464,000 and $160,000.
E)$380,000 and $260,000.
Answer: D
Q2) Assuming Atwood accounts for the combination as an acquisition,compute consolidated goodwill at the date of the combination.
A)$360.
B)$450.
C)$460.
D)$440.
E)$475.
Answer: B
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Page 4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) Consolidations subsequent to the date of combination are generally considered to be easier for a pooling of interests than for an acquisition.Why is this so?
Answer: A pooling of interests does not involve fair value allocations because assets and liabilities are recorded at book value.For future periods,there will be no amortization of excess fair value allocations.Therefore,subsequent consolidations are simpler because consolidation entries are not required for fair value allocations or their amortization.
Q2) Determine the amortization expense related to the consolidation at the year-end date of 12/31/19.
Answer: By 2019,all of the fair value adjustments and the patent will have been fully amortized.The amortization expense for 2019 related to the combination will be $0.
Q3) From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?
Answer: The parent can choose from among the initial value method,equity method,and partial equity method.
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Page 5
Chapter 4: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) For each of the following situations,select the best answer concerning consolidating financial information where there is a non-controlling interest in the subsidiary:
(A)Acquisition method.
(B)Purchase method.
(C)Acquisition method and Purchase method.
_____ 1.Reflects the cost principle,but also assigns a value to the non-controlling interest shares at book value.
_____ 2.Recognizes the non-controlling interest has a value to be reported,but since it is not a part of the exchange transaction,no new basis of accountability arises.
_____ 3.Recognizes that management effectively controls 100% of the net assets acquired and is thus accountable for the entire fair value.
_____ 4.Requires the computation of an implied value.
_____ 5.Recognizes the full fair value of partially owned acquisitions.
_____ 6.Non-controlling interest is reported at an implied fair value.
_____ 7.Non-controlling interest is reported at book value.
_____ 8.Required by SFAS 141(R)Business Combinations.
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Page 6
Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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Sample Questions
Q1) With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 2010?
A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Strickland Company.
E)Additional paid-in capital.
Q2) Gibson Corp.owned a 90% interest in Sparis Co.Sparis frequently made sales of inventory to Gibson.The sales,which include a markup over cost of 25%,were $420,000 in 2009 and $500,000 in 2010.At the end of each year,Gibson still owned 30% of the goods.Net income for Sparis was $912,000 during 2010.What was the noncontrolling interest's share of Sparis' net income for 2010?
A)$85,680.
B)$90,600.
C)$90,720.
D)$91,680.
E)$91,800.
Q3) How do upstream and downstream inventory transfers differ in their effect on a year-end consolidation?
Page 7
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Chapter 6: Variable Interest Entities,
intercompany
Debt,
Statement of Cash Flows, and Other Issues
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Sample Questions
Q1) Describe how this transaction would affect Panton's books.
Q2) Parent Corporation acquired some of its subsidiary's outstanding bonds.Why might Parent purchase the bonds,rather than the subsidiary buying its own bonds?
Q3) What documents or other sources of information would be used to prepare a consolidated statement of cash flows?
Q4) Prepare all consolidation entries for 2009.
Q5) Describe how this transaction would affect Panton's books.
Q6) What is Ryan's percent ownership in Chase after the acquisition of the treasury shares (rounded)?
A)80%.
B)95%.
C)64%.
D)76%.
E)69%.
Q7) 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?
8
Q8) What was Kuried's balance in the Investment in Thomas Inc.account as of December 31,2009?
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Page 9
Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) What method is used in consolidation to account for a subsidiary's ownership of shares of its parent corporation?
Q2) Dice Inc.owns 40% of the outstanding shares of Spalding Corp. ,an investment accounted for by the equity method.During 2009,Dice earned operating income (not any income accrued from its investment in Spalding)of $370,000.For this same period,Spalding reported earnings of $160,000 and paid cash dividends of $60,000.Dice has an effective income tax rate of 35% and anticipates holding its investment in Spalding for an indefinite period.
Required:
(A. )What income tax expense journal entry would Dice Inc.record at the end of 2009?
(B. )If Dice expects to sell its interest in Spalding in the near future,how does that decision change the 2009 income tax expense journal entry?
Q3) Compute Chase's accrual-based income for 2009.
A)$746,000.
B)$719,000.
C)$779,600.
D)$774,200.
E)$758,100.
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Chapter 8: Segment and Interim Reporting
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Sample Questions
Q1) Which operating segments are reportable under the asset test?
A)None.
B)Pails.
C)Rakes,Pails,and Shovels.
D)Rakes,and Hardware.
E)Rakes,Pails,and Hardware.
Q2) Betsy Kirkland,Inc.incurred a flood loss during the first quarter of 2009 that is deemed both unusual and infrequent.The loss is considered immaterial to the twelve-month period,but is material in amount relative to the first quarter.The proper accounting treatment in the first quarterly interim statement is to:
A)Ignore the loss.
B)Record the loss in the first quarter as an extraordinary loss,net of income taxes.
C)Record one-fourth of the loss in the first quarter as an extraordinary loss,net of income taxes.
D)Ignore the loss in the first quarter,and record it in the annual statement only.
E)Record the loss in the first quarter,as an extraordinary loss,and disclose the loss in a separate note or on the income statement.
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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90 Verified Questions
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Sample Questions
Q1) Mills Inc.had a receivable from a foreign customer that is due in the local currency of the customer (stickles).On December 31,2008,this receivable for §200,000 was correctly included in Mills' balance sheet at $132,000.When the receivable was collected on February 15,2009,the U.S.dollar equivalent was $144,000.In Mills' 2009 consolidated income statement,how much should have been reported as a foreign exchange gain?
A)$0.
B)$36,000.
C)$48,000.
D)$10,000.
E)$12,000.
Q2) A speculative derivative would be similar to which type of hedge?
A)An option designated as a cash flow hedge.
B)An option designated as a fair value hedge.
C)A forward contract designated as a cash flow hedge.
D)A forward contract designated as a fair value hedge.
E)A speculative option not designated..
Q3) What amount will Coyote Corp.report on its 2009 financial statements for Sales?
Q4) What factors create a foreign exchange gain?
Q5) What is the major assumption underlying the one-transaction perspective?
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Chapter 10: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Kennedy's share of Hastie's net income for 2009 would be
A)$18,000.
B)$15,000.
C)$18,200.
D)$16,000.
E)$18,500.
Q2) Under what circumstances would the translation of a foreign subsidiary's financial statements not be required?
Q3) Compute ending inventory for 2009 under the current rate method.
A)$13,950.
B)$14,100.
C)$14,400.
D)$14,850.
E)$15,150.
Q4) Under the temporal method,inventory at market would be restated at what rate?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Sample Questions
Q1) For Japanese companies,what is the primary source of financing?
A)large banks.
B)the United States stock markets.
C)international stock markets in London.
D)the Tokyo Stock Exchange.
E)governmental loans and subsidies.
Q2) Which authoritative pronouncement does not make up the International Financial Reporting Standards (IFRSs)?
1)International Financial Reporting Standards issued by the IASB
2)International Accounting standards issued by the IASC adopted by the IASB
3)Intrepretations originated by the International Financial Reporting Interpretations Committee (IFRIC)
4)US Generally Accepted Accounting Principles
A)1 and 4.
B)3 and 4.
C)1,3,and 4.
D)2,3,and 4.
E)1,2,3,and 4.
Q3) Why does each country have its own unique set of financial reporting practices?
Q4) What were the major objectives of the Treaty of Rome?
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Sample Questions
Q1) Name the two broad categories of filings with the SEC.
Q2) What are the responsibilities of the SEC's Division of Corporation Finance?
Q3) What are the four interconnected goals that the SEC has tried to achieve?
Q4) 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.
Q5) Which one of the following forms is used in connection with employee stock plans?
A)S-8.
B)S-6.
C)S-4.
D)SB-1.
E)S-11.
Q6) What was the purpose of the Securities Act of 1933?
Q7) What is a private placement of securities?
Q8) Briefly describe Regulation S-K.What is its purpose? Page 15
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Page 16
Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Sample Questions
Q1) What are the three categories of assets in a Statement of Financial Affairs?
Q2) What is the payout percentage to unsecured creditors? (Round the percentage to a whole number and two decimal places. )
Q3) What are the four categories of debts in a Statement of Financial Affairs?
Q4) What is meant by a "partially secured liability"?
Q5) Free assets after payment of liabilities with priority are calculated to be what amount?
Q6) On its balance sheet,a company undergoing reorganization should
A)report its assets at fair market value,so that financial statement users can estimate whether creditors' claims will be met.
B)report its assets at net realizable value because there is reason to doubt that the organization is a going concern.
C)report its assets as pledged or free.
D)report its assets at current replacement cost.
E)continue to report its assets at book value.
Q7) How is the presentation of an income statement during a reorganization different from a normal income statement?
Page 17
Q8) What information is included on the statement of realization and liquidation?
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Chapter 14: Partnerships: Formation and Operation
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Sample Questions
Q1) Record the journal entry for the admission of Noris.Goodwill is not to be recorded.
Q2) Which of the following type of organization is classified as a partnership,or similar to a partnership,for tax purposes? (I) )Limited Liability Company (II) )Limited Liability Partnership (III. )Subchapter S Corporation
A)II only.
B)II and III.
C)I and II.
D)I and III.
E)I,II,and III.
Q3) Withdrawals from the partnership accounts are typically not used
A)to record compensation for work performed in the business.
B)to reduce the partners' capital account balances at the end of an accounting period.
C)to record interest earned on a partner's capital balance.
D)to reduce the basic investment that has been made in the business.to record a reward for ownership in the partnership.
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) Gonda,Herron,and Morse is considering possible liquidation because Morse is insolvent.The partners have the following capital balances: $60,000,$70,000,and $40,000,respectively,and share profits and losses 30%,45%,and 25%,respectively.The partnership has $200,000 in assets that can be sold for $150,000.What is the minimum that Morse's creditors would receive if they have filed a claim for $50,000?
A)$0.
B)$27,500.
C)$45,000.
D)47,500.
E)50,000.
Q2) What is a safe cash payment?
Q3) What events or circumstances might force the termination of a partnership and liquidation of its assets?
Q4) Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.
Q5) Prepare journal entries to record the actual liquidation transactions.
Q6) What is the purpose of a predistribution plan?
Q7) Prepare a schedule to calculate the safe installment payments to be made to the partners at the end of February.
Page 19
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Chapter 16: Accounting for State and Local Governments,
Part I
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Sample Questions
Q1) A $5,000,000 bond is issued by Northern City to build a new hospital.
Required:
Prepare the journal entry and identify the fund in which it is recorded to reflect the bond issue.
Q2) Property taxes of 1,500,000 are levied for Miner County.The county expects that 5% will be uncollectible.
Required:
Prepare the required journal entry and identify the fund in which it is recorded.
Q3) Which of the following is a governmental fund?
A)Enterprise fund.
B)Internal service fund.
C)Permanent fund.
D)Investment trust fund.
E)Agency fund.
Q4) What is a special revenue fund used to account for?
Q5) What assets would be included in the accounting records of a city's general fund?
Q6) What are the five types of governmental funds?
Q7) What is the definition of the term fund?
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Chapter 17: Accounting for State and Local
Governments,part II
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Sample Questions
Q1) The employees of the City of Raymond earn vacation compensation that totals $1,500 per week.During 2008,$30,000 in vacation time was taken and $48,000 is expected to be used during the latter part of next year.On fund-based financial statements,what liability should be reported at the end of 2008?
A)$0.
B)$1,500.
C)$30,000.
D)$48,000.
E)$78,000.
Q2) Which statement is false regarding the government-wide Statement of Net Assets?
A)the purpose of the Statement of Net Assets is to report the economic resources of the government as a whole.
B)assets are reported excluding capital assets.
C)capital assets are reported net of depreciation.
D)investments are reported at fair value rather than historical cost.
E)Business-type activities include Enterprise Funds.
Q3) What three criteria must be met before a governmental unit can elect to not capitalize and therefore report a work of art or historical treasure as an asset?
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Chapter 18: Accounting for Not-For-Profit Organizations
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Sample Questions
Q1) The Home incurred the following liabilities: $110,000 salaries,$30,000 medical equipment,$10,000 utilities expense.
Prepare the journal entries for these transactions.
Q2) A not-for-profit organization receives a computer as a donation (valued at $2,000).Prepare the journal entry for the transaction.
Q3) Give several examples of voluntary health and welfare organizations.
Q4) In this month,there were several patients that had no health insurance and due to their low income level,the hospital decided that $85,000 of receivables would not be collectible
Required:
Prepare the necessary journal entry to reflect the decision to consider the $85,000 as charity care.
Q5) When is recognition of contributions of artworks and historical treasures not required?
Q6) For May 2008,Carlington Hospital's charges for patient services were $608,000,of which 80% was billed to third-party payors.
Required:
Prepare the journal entry to accrue patient charges for the month.
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Chapter 19: Accounting for Estates and Trusts
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Q1) Prepare the journal entry to record interest of $5,000 that was earned on the bonds of the estate.Of this amount,$2,000 had been earned prior to death.
Q2) An additional savings account of $15,600 was located by the executor. Prepare the journal entry to record the transaction.
Q3) Prepare the journal entry to record the distribution of $4,000 to Anna Lee,an income beneficiary.
Q4) What are the four levels of claims in the order of priority of the Uniform Probate Code?
Q5) In an executor's accounting for an estate,debts and other obligations are recorded A)at book value.
B)at fair market value.
C)on the date of payment.
D)as soon as they are discovered.
E)only if they are past due.
Q6) Prepare the journal entry for claims of $100,000 made against the estate for various debts incurred before the decedent's death,and $20,000 for funeral expense bills.
Q7) Prepare the journal entry to record the collection of the life insurance policy.
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