Advanced Financial Accounting Solved Exam Questions - 1263 Verified Questions

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Advanced Financial Accounting

Solved Exam Questions

Course Introduction

Advanced Financial Accounting delves into the complex concepts and practices underlying the preparation and analysis of financial statements for business entities engaged in sophisticated transactions. The course covers topics such as business combinations, consolidated financial statements, foreign currency transactions, partnerships, segment and interim reporting, and accounting for governmental and not-for-profit organizations. Students will explore contemporary accounting issues, relevant standards, and ethical considerations, developing a deep understanding of application, problem-solving, and the interpretation of financial information in advanced contexts.

Recommended Textbook

Advanced Financial Accounting 12th Edition by Theodore E. Christensen

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21 Chapters

1263 Verified Questions

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Page 2

Chapter 1: Intercorporate Acquisitions and Investments in Other Entities

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Sample Questions

Q1) In which of the following situations do accounting standards not require that the financial statements of the parent and subsidiary be consolidated?

A)A corporation creates a new 100 percent owned subsidiary

B)A corporation purchases 90 percent of the voting stock of another company

C)A corporation has both control and majority ownership of an unincorporated company

D)A corporation owns less-than a controlling interest in an unincorporated company

Answer: D

Q2) Based on the information provided,what amount would be reported by Peacock Company as investment in Selvick Company common stock?

A)$125,000

B)$250,000

C)$301,000

D)$345,000

Answer: C

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Chapter 2: Reporting Intercorporate Investments and

Consolidation of Wholly Owned Subsidiaries With No Differential

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Sample Questions

Q1) Based on the information provided,what amount of total assets will be reported in the consolidated balance sheet prepared on December 31,20X4?

A)$425,000

B)$525,000

C)$650,000

D)$630,000

Answer: B

Q2) Based on the preceding information,what amount would Pony Company receive as dividends from Stallion for the year?

A)$23,000

B)$35,000

C)$37,500

D)$92,000

Answer: A

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4

Chapter 3: The Reporting Entity and the Consolidation of

Less-Than-Wholly- Owned Subsidiaries With No Differential

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Sample Questions

Q1) Based on the preceding information,what amount would be reported as total assets in the consolidated balance sheet at December 31,20X9?

A)$805,000

B)$712,000

C)$742,000

D)$1,102,000

Answer: C

Q2) Pluto Company owns 80 percent of the common stock of Star Corporation.During the year,Pluto reported sales of $1,000,000,and Star reported sales of $500,000,including sales to Pluto of $80,000.The amount of sales that should be reported in the consolidated income statement for the year is:

A)$500,000.

B)$1,300,000.

C)$1,420,000.

D)$1,500,000.

Answer: C

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Chapter 4: Consolidation of Wholly Owned Subsidiaries

Acquired at More Than Book Value

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Sample Questions

Q1) Based on the information provided,what amount of net income will be reported in the consolidated financial statements for the year?

A)$226,000

B)$55,000

C)$230,000

D)$171,000

Q2) Based on the information provided,the beginning differential assigned to buildings and equipment is:

A)$50,000.

B)$40,000.

C)$10,000.

D)$36,000.

Q3) Based on the preceding information,what amount of differential will arise in the consolidation process?

A)$0

B)$5,000

C)$15,000

D)$65,000

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Chapter 5: Consolidation of Less-Than-Wholly- Owned

Subsidiaries Acquired at More Than Book Value

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Sample Questions

Q1) Based on the preceding information,what is the amount of comprehensive income attributable to the controlling interest for 20X9?

A)$138,750

B)$131,000

C)$128,750

D)$135,000

Q2) Based on the preceding information,what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination?

A)$20,000

B)$30,000

C)$50,000

D)$60,000

Q3) Based on the preceding information,what amount of Stamp's land will be included in the consolidated balance sheet immediately following the acquisition?

A)$0

B)$10,000

C)$90,000

D)$100,000

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Chapter 6: Intercompany Inventory Transactions

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Sample Questions

Q1) Based on the information given above,what amount of cost of goods sold did Pink record in 20X4?

A)$1,612,000

B)$2,418,000

C)$2,790,000

D)$3,596,000

Q2) Based on the information given above,what amount of cost of goods sold must be reported in the consolidated income statement for 20X4?

A)$1,612,000

B)$2,418,000

C)$2,790,000

D)$3,596,000

Q3) Based on the information given above,what amount of consolidated net income will be assigned to the controlling interest for 20X8?

A)$51,490

B)$53,100

C)$37,000

D)$20,100

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8

Chapter 7: Intercompany Transfers of Services and

Noncurrent Assets

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Sample Questions

Q1) Based on the information provided,in the preparation of the 20X8 consolidated financial statements,building will be ________ in the consolidating entries.

A)debited for $33,000

B)debited for $36,000

C)credited for $36,000

D)debited for $3,000

Q2) Based on the preceding information,in the preparation of the 20X9 consolidated balance sheet,machine will be:

A)debited for $1,000.

B)debited for $15,000.

C)credited for $45,000.

D)debited for $25,000.

Q3) Based on the preceding information,the amount to be reported as consolidated net income for 20X8 will be:

A)$190,000.

B)$170,000.

C)$175,000.

D)$150,000.

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Chapter 8: Intercompany Indebtedness

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Sample Questions

Q1) Based on the information given above,what amount of gain or loss on constructive bond retirement will be reported in the December 31,20X8 consolidated financial statements?

A)$8,892 loss

B)$81,108 loss

C)$19,276 gain

D)$81,108 gain

Q2) Based on the information given above,what amount of interest income will be eliminated in the preparation of the December 31,20X9 consolidated financial statements?

A)$8,184

B)$16,296

C)$12,704

D)$18,988

Q3) Based on the information given above,what amount of interest expense should be reported in the 20X8 consolidated income statement?

A)$0

B)$6,548

C)$6,511

D)$19,643

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Chapter 9: Consolidation Ownership Issues

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Sample Questions

Q1) Based on the information provided,what amount of income will be assigned to the controlling interest in the 20X8 consolidated income statement?

A)$130,750

B)$150,000

C)$141,250

D)$157,000

Q2) Based on the information provided,what amount will be reported as the noncontrolling interest in the consolidated balance sheet on January 1,20X6?

A)$133,800

B)$191,400

C)$204,600

D)$210,000

Q3) Based on the preceding information,what amount is reported as preferred stock outstanding reported in the consolidated balance sheet as of January 1,20X8?

A)$0

B)$40,000

C)$50,000

D)$44,000

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11

Chapter 10: Additional Consolidation Reporting Issues

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Sample Questions

Q1) Based on the preceding information,what amount will be reported by the company as cash flows from operating activities for 20X8?

A)$175,000

B)$133,000

C)$167,000

D)$207,000

Q2) Based on the preceding information,what amount will be reported by the company as cash received from customers during the year?

A)$455,000

B)$475,000

C)$450,000

D)$425,000

Q3) Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

A)$32,000

B)$38,000

C)$42,000

D)$70,000

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Chapter 11: Multinational Accounting: Foreign Currency

Transactions and Financial Instruments

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Sample Questions

Q1) Based on the preceding information,had Myway not used the forward exchange contract,net income for the year would have:

A)increased by $1,000.

B)increased by $500.

C)decreased by $1,000.

D)decreased by $1,500.

Q2) Based on the preceding information,what is the net gain or loss on the British pound speculative contract?

A)$8,000 gain

B)$6,000 gain

C)$3,000 loss

D)$10,000 gain

Q3) Based on the preceding information,had Robert not used the forward exchange contract,what would have been the foreign currency transaction gain or loss for the year?

A)Gain of $200

B)Gain of $150

C)Loss of $350

D)Loss of $200

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Chapter 12: Multinational Accounting: Issues in Financial

Reporting and Translation of Foreign Entity Statements

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Sample Questions

Q1) Based on the information provided,in Newsprint's 20X8 consolidated income statement,what amount should be included as foreign exchange loss in computing net income,if the supplier's foreign currency is the functional currency and the translation method is appropriate?

A)$28,000

B)$13,000

C)$25,000

D)$8,000

Q2) Park Co.'s wholly-owned subsidiary,Schnell Corp. ,maintains its accounting records in German marks.Because all of Schnell's branch offices are in Switzerland,its functional currency is the Swiss franc.Remeasurement of Schnell's 20X1 financial statements resulted in a $7,600 gain,and translation of its financial statements resulted in an $8,100 gain.What amount should Park report as a foreign exchange gain in its income statement for the year ended December 31,20X1?

A)$15,700

B)$0

C)$8,100

D)$7,600

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Chapter 13: Segment and Interim Reporting

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Sample Questions

Q1) Missoula Corporation disposed of one of its segments in the second quarter and incurred a gain from disposal of discontinued segment of $600,000,net of taxes.What is the effect of this gain from disposal of discontinued segment?

A)Increase net income from operations for the year by $600,000.

B)Increase second quarter net income by $600,000.

C)Increase each quarter's net income by $150,000.

D)Increase each of the last three quarters' net income by $200,000.

Q2) Five of eight internally reported operating segments of Rollins Company qualify under the standards set by ASC 280 for segment reporting.However,the five identified segments do not meet the 75 percent revenue test.ASC 280 prescribes that management:

A)subdivide segments until there are at least 10 reportable segments.

B)consolidate the remaining operating segments and include them under an "all other" category.

C)select additional operating segments until the 75% threshold is met.

D)include the heading "corporate headquarters" as an operating segment.

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Page 15

Chapter 14: Sec Reporting

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Sample Questions

Q1) "Tombstone ad"

A)Provides preliminary information to investors about an upcoming issue.

B)Informs investors of an upcoming offering.

C)Required annual filing to the SEC.

D)Discloses unscheduled material events.

E)Includes amendments to the Securities Act,additional disclosure requirements,and other current issues regarding accounting and auditing principles and standards.

F)Results in a thorough examination by the SEC of a registration statement.

G)Issued by the staff of the SEC and contains differences that must be corrected in a registration statement before the securities may be offered or sale.

H)Quarterly report to SEC.

I)Includes new or revised administrative practices and interpretations used in reviewing financial statements.

J)Includes the results of actions taken against accountants or other participants because false or misleading statements were filed.

K)Includes Regulations S-X and S-K.

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16

Chapter 15: Partnerships: Formation,operation,and

Changes in Membership

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Sample Questions

Q1) When a new partner is admitted into a partnership and the capital of the old partners decreases,which of the following explains the reason for the decrease?

I.Undervalued liabilities were written up to their fair values.

II.Undervalued assets were written up to their fair values.

A)I only

B)II only

C)Both I and II

D)Neither I nor II

Q2) Refer to the above information.Which statement below is correct if goodwill of the old partners is recognized upon the contribution of assets into the partnership by a new partner?

A)B = A and D < C + A

B)B = A and D > C + A

C)B < A and D = C + A

D)B > A and D < C + A

Q3) The ABC partnership had net income of $100,000 for 20X9.They allocate profits and losses in the ratio 5:3:2.After closing the 12/31/20X9 books they discovered that $30,000 was spent on a piece of land in December 20X9 and was expensed.What should happen?

Page 17

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Chapter 16: Partnerships: Liquidation

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Sample Questions

Q1) Which of the following items are important in the determination of safe installment payments to partners?

I.Deficits created in capital accounts are distributed to the remaining partners.

II.All unsold noncash assets are assumed to be worthless.

A)I only

B)II only

C)Both I and II

D)Neither I nor II

Q2) Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Dennis at the end of the second month?

A)$18,000

B)$27,000

C)$36,000

D)$60,000

Q3) Listen and Hear are thinking of dissolving their partnership.Listen has a friend who told him to complete a "lump-sum" liquidation.Hear wants to complete an "installment" liquidation.They have come to you for advice.What do you recommend and Why?

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Chapter 17: Governmental Entities: Introduction and General Fund Accounting

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Sample Questions

Q1) Which of the following describes how a governmental fund (e.g.general fund)accounts for a capital lease?

A)As a noncurrent liability

B)In a manner similar to how the fund accounts for bonds.

C)As an asset and a lease liability

D)None of the choices identifies the appropriate way to account for a capital lease.

Q2) Which of the following observations concerning encumbrances is NOT true?

A)Their purpose is to ensure that the expenditures within a period do not exceed the budgeted appropriations.

B)They provide a control system and safeguard for governmental unit administrators.

C)They are an unique element of governmental accounting.

D)They are recognized only at the time disbursements are made.

Q3) Which of the following funds are classified as proprietary funds?

A)Agency and special revenue funds.

B)Enterprise and internal service funds.

C)Debt service and capital projects funds.

D)Agency and pension trust funds.

Q4) Briefly discuss the various types of governmental funds and proprietary funds.

Page 19

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Chapter 18: Governmental Entities: Special Funds and Governmentwide Financial Statements

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Sample Questions

Q1) A trust fund of Bruge City received $100,000 from a donor during the year ended June 30,20X9.During the year ended June 30,20X9,$94,000 of the cash received was used to provide food and clothing to the city's poor.How should the trust fund report these resource flows on its statement of changes in fiduciary net assets for the year ended June 30,20X9?

A)As revenues of $100,000 and as expenditures of $94,000.

B)As contributions for $100,000 and as deductions for benefits for $94,000.

C)As revenues of $100,000 and as an operating transfer out for $94,000.

D)As a transfer in from trust fund for $100,000 and as a transfer out for $94,000.

Q2) Ponca City issued general obligation bonds to finance construction of a new city hall.In the city hall capital projects fund,the proceeds of the general obligation bonds should be credited to:

A)Revenue-General Obligation Bonds.

B)General Obligation Bonds Payable.

C)Deferred Revenue-General Obligation Bonds.

D)Other Financing Sources-Bond Issue Proceeds.

Q3) GASB 34 requires a reconciliation schedule for the Statement of Net Assets.What does this schedule document?

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Chapter 19: Not-For-Profit Entities

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Sample Questions

Q1) Expended 75 percent of the contributions previously received from donors for research.

A)Increases net assets with donor restrictions.

B)Decreases net assets with donor restrictions.

C)Increases net assets without donor restrictions.

D)Decreases net assets without donor restrictions.

E)Transaction is not reported on the statement of activities.

Q2) Transaction: Received contributions restricted by donors for research activities. Effect on Statement of Operations:

A)Increases operating income.

B)Decreases operating income.

C)The transaction is reported on the statement of operations,but there is no effect on operating income.

D)The transaction is not reported on the statement of operations.

Q3) The CFO of a "Not-for-Profit" hospital is making a presentation at your college.The presentation is for Business and Health-Science majors.During the presentation the CFO mentions assets being reported "above the line." On the way out your roommate a health-science major asks,you,an accounting major,to explain what the CFO was referring to.What do you respond?

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Page 21

Chapter 20: Corporations in Financial Difficulty

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Sample Questions

Q1) Briefly explain the three classes of creditors specified in the Bankruptcy Code.

Q2) Based on the preceding information,what is the total amount of unsecured claims?

A)$113,000

B)$126,000

C)$93,000

D)$121,000

Q3) Based on the preceding information,what estimated amount will be available for general unsecured creditors upon liquidation?

A)$28,000

B)$93,000

C)$113,000

D)$121,000

Q4) In which of the following ways can debt be restructured?

I.Assets can be transferred to the creditor.

II.An equity interest can be granted to the creditor.

III.The terms of the debt can be modified.

A)I and II only

B)I and III only

C)II and III only

D)I,II,and III

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Chapter 21: Intercompany Indebtednessfully Adjusted

Equity Method Using Straight-Line Interest Amortization

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Sample Questions

Q1) A subsidiary issues bonds.The parent can then acquire the bonds either directly from the subsidiary or from a nonaffiliate that had originally acquired the subsidiary's bonds.

Required:

a)Discuss the parent's accounting as it relates to the preparation of consolidated financial statements,for their acquisition of the bonds:

1.from the nonaffiliate.

2.directly from the subsidiary.

b)Why does it matter who the bonds are acquired from?

Q2) Based on the information given above,what gain or loss on the retirement of bonds should be reported in the 20X8 consolidated income statement?

A)$6,250 gain

B)$7,500 gain

C)$7,500 loss

D)$6,250 loss

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