Advanced Financial Accounting Exam Preparation Guide
Course Introduction
Advanced Financial Accounting delves into the complex standards, principles, and procedures surrounding accounting for business combinations, consolidations, partnerships, foreign currency transactions, and international operations. Emphasizing both theoretical frameworks and practical applications, the course explores the preparation and interpretation of consolidated financial statements, accounting for mergers and acquisitions, and strategies for handling non-controlling interests. Students will also study the unique accounting issues related to multinational corporations, including foreign currency translation, hedging, and reporting in accordance with International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). The course is designed to equip students with the advanced analytical skills necessary for navigating the challenges of modern financial reporting in a global business environment.
Recommended Textbook
Fundamentals of Advanced Accounting 7th Edition by Joe Ben Hoyle
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12 Chapters
1194 Verified Questions
1194 Flashcards
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) When an investor sells shares of its investee company,which of the following statements is true?
A)A recognized gain or loss is reported as the difference between selling price and original cost.
B)An recognized gain or loss is reported as the difference between selling price and original cost.
C)A recognized gain or loss is reported as the difference between selling price and carrying value.
D)An unrealized gain or loss is reported as the difference between selling price and carrying value.
E)Any gain or loss is reported as part of comprehensive income.
Answer: C
Q2) What is the gain/loss on the sale of the 15,000 shares?
A)$ 0
B)$10,000 gain.
C)$12,000 loss.
D)$15,000 loss.
E)$20,000 gain.
Answer: E
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3
Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) Compute the consolidated cash upon completion of the acquisition.
A)$1,350.
B)$1,110.
C)$1,080.
D)$1,085.
E)$ 635.
Answer: D
Q2) How is contingent consideration accounted for in an acquisition business combination transaction?
Answer: The fair value approach of the acquisition method views contingent payments as part of the consideration transferred.Under this view,contingencies have a value to those who receive the consideration and represent measurable obligations of the acquirer.The amount of the contingent consideration is measured as the expected present value of a potential payment and increases the investment value recorded.
Q3) Determine the balance for Goodwill that would be included in a December 1,2017,consolidation.
Answer: 11ee3f35_34d2_a2a2_a6ca_fb8a80252481_TB4173_00
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Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Q1) What should an entity evaluate when making an initial impairment assessment of an intangible asset (other than goodwill)?
Answer: An entity may perform qualitative assessments for its indefinite-lived intangible assets.If an entity elects to perform a qualitative assessment,it must examine relevant events and circumstances to determine whether it is more likely than not that the asset is impaired.Factors to consider include costs of using the intangible asset,legal and regulatory factors,as well as industry and market considerations.If the assessment indicates impairment is not likely,no further tests are required.
Q2) At the end of 2017,the consolidation entry to eliminate Cale's accrual of Kaltop's earnings would include a credit to Investment in Kaltop Co.for
A)$124,400.
B)$126,000.
C)$127,000.
D)$ 76,400.
E)$ 0.
Answer: C
Q3) What was consolidated net income for the year ended December 31,2018?
Answer: 11ea86f8_4aa6_8616_8084_993cdf66b9a1_TB4173_00
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) What amount of consolidated net income for 2019 should be allocated to Femur's controlling interest in Harbor?
A)$ 582,000
B)$1,050,000
C)$1,358,000
D)$1,808,000
E)$2,140,000
Q2) When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year,which of the following statements is true of the subsidiary with respect to the presentation of consolidated financial statement information?
A)Pre-acquisition earnings are deducted from consolidated revenues and expenses.
B)Pre-acquisition earnings are added to consolidated revenues and expenses.
C)Pre-acquisition earnings are deducted from the beginning consolidated stockholders' equity.
D)Pre-acquisition earnings are added to the beginning consolidated stockholders' equity.
E)Pre-acquisition earnings are ignored in the consolidated income statement.
Q3) How is a noncontrolling interest in the net income of an entity reported in the income statement?
Page 6
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Sample Questions
Q1) Compute Stark's reported gain or loss relating to the land for 2019.
A)$5,000 loss.
B)$5,000 gain.
C)$7,000 loss.
D)$7,000 gain.
E)$ 0.
Q2) Prepare a schedule of consolidated net income and the share to controlling and noncontrolling interests for 2018,assuming that Musial owned only 90% of Matin and the equipment transfer had been downstream.
Q3) Assuming there are no excess amortizations or other intra-entity transactions,compute the net income attributable to the noncontrolling interest of Devin for 2018.
A)$126,800.
B)$130,000.
C)$122,000.
D)$130,800.
E)$129,600.
Q4) On April 7,2018,Pate Corp.sold land to Shannahan Co. ,its subsidiary.From a consolidated financial statement point of view,when will the gain on this transfer actually be recognized?
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Q1) How is the loss on sale of land reported on the consolidated statement of cash flows?
A)$20,000 added to net income as an operating activity.
B)$20,000 deducted from net income as an operating activity.
C)$15,000 deducted from net income as an operating activity.
D)$5,000 added to net income as an operating activity.
E)$5,000 deducted from net income as an operating activity.
Q2) What is the amount of goodwill resulting from this acquisition?
Q3) All of the following are examples of variable interests except:
A)Guarantees of debt.
B)Stock options.
C)Lease residual value guarantees.
D)Participation rights.
E)Asset purchase options.
Q4) What is the new percent ownership of Webb in Jones after the stock issuance?
A)75%.
B)90%.
C)80%.
D)64%.
E)60%.
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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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) Which of the following is not a condition of accounting for hedge derivatives?
A)The derivative is minimally effective in offsetting changes in the cash flows or fair value related to the hedged item.
B)The derivative is properly documented as a hedge.
C)The derivative is used to hedge a cash flow exposure to foreign exchange risk.
D)The derivative is highly effective in offsetting changes in the cash flows or fair value related to the hedged item.
E)The derivative is used to hedge a fair value exposure to foreign exchange risk.
Q3) What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency depreciates?
Q4) What is meant by the spot rate?
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Chapter 8: Translation of Foreign Currency Financial
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Sample Questions
Q1) Assume the functional currency is the U.S.Dollar;compute the U.S.balance sheet amount for equipment for 2018.
A)$81,900.
B)$90,900.
C)$83,700.
D)$88,200.
E)$85,500.
Q2) Under the temporal method,how would cost of goods sold be remeasured?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)A single historical rate.
E)Historical rates.
Q3) Assume Boerkian was a foreign subsidiary of a U.S.multinational company and the U.S.dollar was the functional currency of the subsidiary.Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2018 and properly label the resulting gain or loss.
Q4) Under what circumstances would the remeasurement of a foreign subsidiary's financial statements be required?
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Chapter 9: Partnerships: Formation and Operation
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Sample Questions
Q1) What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?
A)$290,000.
B)$176,000.
C)$ 80,000.
D)$120,000.
E)$230,000.
Q2) What events cause the dissolution of a partnership?
Q3) Roberts retires and is paid $160,000 based on an independent appraisal of the business.If the goodwill method is used,what is the capital balance of Dana?
A)$ 20,000.
B)$ 60,000.
C)$110,000.
D)$120,000.
E)$230,000.
Q4) By what methods can a person gain admittance to a partnership?
Q5) Why are the terms of the Articles of Partnership important to partners?
Q6) For what events or conditions should the Articles of Partnership make provision?
Q7) Determine the balance in both capital accounts at the end of 2017.
Page 11
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Chapter 10: Partnerships: Termination and Liquidation
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Sample Questions
Q1) If the assets could be sold,for $228,000 and there are no liquidation expenses what is the amount that Tillman would receive from the liquidation?
A)$36,000.
B)$ 0.
C)$ 2,500.
D)$38,250.
E)$67,250.
Q2) Prepare a schedule to calculate the safe payments to be made to the partners at the end of March.
Q3) If the noncash assets were sold for $234,000,what amount of the loss would have been allocated to Bartle with respect to the noncash assets?
A)$43,200.
B)$46,800.
C)$40,000.
D)$42,400.
E)$43,100.
Q4) What events or circumstances might force the termination of a partnership and liquidation of its assets?
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12
Chapter 11: Accounting for State and Local Governments,
part I
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Sample Questions
Q1) Which of the following funds is most likely created with an endowed gift?
A)Enterprise Fund.
B)Internal Service Fund.
C)Debt Service Fund.
D)Capital Projects Fund.
E)Permanent Fund.
Q2) Which of the following would be considered a derived tax revenue?
A)Collection of property taxes.
B)FICA is withheld from the employee pay.
C)A grant is received from the federal government.
D)A private citizen willing sends money to buy books for the local library.
E)Fees are collected on overdue library books.
Q3) Which group of financial statements is prepared using the "modified accrual accounting" approach?
A)GAAP-based financial statements.
B)Governmental fund financial statements.
C)Cost-based financial statements.
D)Government-wide financial statements.
E)General-purpose financial statements.
Q4) What are the four fiduciary fund types?
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Chapter 12: Accounting for State and Local Governments, part II
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Sample Questions
Q1) If the landfill is judged to be a governmental fund,what liability is reported on the fund financial statements at the end of 2018?
A)$ 0.
B)$300,000.
C)$375,000.
D)$600,000.
E)$675,000.
Q2) Which of the following is not a step in reporting a pension liability?
A)The pension benefit payments that will ultimately be required are estimated by an actuary.
B)The portion of those payments that are attributable to past periods of employee service is calculated.
C)The present value of amounts attributable to past periods of employee service is determined in order to arrive at the government's obligation at the present time.
D)Excess liability balance is shown in the government-wide financial statements as a net pension asset.
E)Excess liability balance is shown in the government-wide financial statements as a net pension liability.
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