Business Combinations and Consolidations Practice Exam
Course Introduction
This course explores the accounting principles and procedures for business combinations, including mergers, acquisitions, and consolidations. Students will learn how to prepare consolidated financial statements, account for investments in subsidiaries, and apply relevant reporting standards such as IFRS and US GAAP. Key topics include the identification and measurement of goodwill, elimination of intercompany transactions, non-controlling interests, and the latest developments in accounting for group structures. The course emphasizes both theoretical concepts and practical applications through case studies and real-world examples.
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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121 Verified Questions
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Sample Questions
Q1) Aqua Corp.purchased 30% of the common stock of Marcus Co.by paying $500,000.Of this amount,$50,000 is associated with goodwill.
Required:
Prepare the journal entry to record Aqua's investment.
Answer: 11ea86f8_4af0_87ec_8084_4956b4fe4790_TB4173_00
Q2) When an investor appropriately applies the equity method,how should it account for any investee Other Comprehensive Income (OCI)?
A)Under the equity method,the investor only recognizes its share of investee's income from continuing operations.
B)The OCI would reduce the investment.
C)The OCI would increase the investment.
D)The OCI would not appear on the investor's income statement but would be a component of comprehensive income.
E)The OCI would be ignored but shown in the investor's notes to the financial statements. Answer: C
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3
Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) Compute the amount of consolidated cash after recording the acquisition transaction.
A)$220.
B)$185.
C)$200.
D)$205.
E)$215.
Answer: B
Q2) Compute the amount of consolidated equipment at date of acquisition.
A)$480.
B)$580.
C)$559.
D)$570.
E)$560.
Answer: B
Q3) How are direct combination costs accounted for in an acquisition transaction?
Answer: In an acquisition,direct combination costs are expensed in the period of the acquisition.
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Chapter 3:
Consolidations - Subsequent to the Date of Acquisition
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120 Verified Questions
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Sample Questions
Q1) If the parent's net income reflected use of the partial equity method,what were the consolidated retained earnings on December 31,2018?
Answer: \(\begin{array}{lr}
\text { Partial Equity Method}\\
\text { Fesler (parent) balance }-1 / 1 / 17 & 520,000 \\
\text { Fesler income }-2017 & 100,000 \\
\text { Amortization }-2017 & (22,000) \\
\text { Fesler dividends }-2017 & (25,000) \\
\text { Fesler income }-2018 & (68,000 \\
\text { Amortization }-2018 & (22,000) \\
\text { Fesler dividends }-2018 & (25,000) \\
\text { Consolidated retained earnings, December 31, 2018 } & \$ 594,000 \end{array}\)
Q2) What is the amount of consolidated net income for the year 2017?
A)$3,180,000.
B)$3,612,000.
C)$3,300,000.
D)$3,588,000.
E)$3,420,000.
Answer: D
Page 5
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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) How does a parent company account for the sale of a portion of an investment in a subsidiary?
Q2) When a subsidiary is acquired sometime after the first day of the fiscal year,which of the following statements is true?
A)Income from subsidiary is not recognized until there is an entire year of consolidated operations.
B)Income from subsidiary is recognized from date of acquisition to year-end.
C)Excess cost over acquisition value is recognized at the beginning of the fiscal year.
D)No goodwill can be recognized.
E)Income from subsidiary is recognized for the entire year.
Q3) How is a noncontrolling interest in the net income of an entity reported in the income statement?
Q4) What is the amount of Kailey's net income to the controlling interest for 2019?
A)$31,000.
B)$33,000.
C)$55,000.
D)$60,000.
E)$39,000.
Page 6
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Sample Questions
Q1) An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year after the year of transfer?
A)A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B)A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C)A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E)No worksheet entry is necessary.
Q2) In the consolidation worksheet for 2017,which of the following accounts would be debited to eliminate the intra-entity transfer of inventory?
A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment in Strickland Company.
E)Sales.
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Sample Questions
Q1) Wolff Corporation owns 70 percent of the outstanding stock of Donald,Inc.During the current year,Donald made $75,000 in sales to Wolff.How does this transfer affect the consolidated statement of cash flows?
A)Included as a decrease in the investing section.
B)Included as an increase in the operating section.
C)Included as a decrease in the operating section.
D)Included as an increase in the investing section.
E)Not reported in the consolidated statement of cash flows.
Q2) 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.Assuming there are no excess amortizations or intra-entity transactions,and Brett reports net income of $780,000,what is the noncontrolling interest in the subsidiary's income?
A)$234,000.
B)$273,000.
C)$302,000.
D)$312,000.
E)$284,000.
Q3) How does the existence of a noncontrolling interest affect the preparation of a consolidated statement of cash flows?
Page 8
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) (A. )Assume this hedge is designated as a cash flow hedge.Prepare the journal entries relating to the transaction and the forward contract. (B. )Compute the effect on 2018 net income. (C. )Compute the effect on 2019 net income.
Q2) Assuming this is a cash flow hedge;prepare journal entries for this sales transaction and forward contract.
Q3) Assuming a forward contract was entered into,the foreign currency was originally sold in the foreign currency market on December 16,2018 at a
A)Forward contract discount $ 600.
B)Forward contract premium $ 600.
C)Forward contract discount $ 980.
D)Forward discount premium $ 980.
E)There is no premium or discount because the fair value of the contract is zero.
Q4) The beginning balance of cash was 50,000 pesos on January 1,2018,translated at 1 peso = $.18.What amount will Coyote Corp.report in its 2018 balance sheet for Cash?
Q5) Where can you find exchange rates between the U.S.dollar and most foreign currencies?
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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.income statement amount for depreciation expense for 2018.
A)$8,190.
B)$8,370.
C)$8,820.
D)$9,090.
E)$8,550.
Q2) Under the temporal method,inventory at net realizable value would be remeasured for the balance sheet at what rate?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.
Q3) Under the temporal method,common stock would be remeasured 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 9: Partnerships: Formation and Operation
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Sample Questions
Q1) What was the balance in Thurman's Capital account at the end of the second year?
A)$133,380.
B)$ 84,760.
C)$105,690.
D)$132,860.
E)$ 71,760.
Q2) What was Wasser's total share of net income for 2017?
A)$63,000.
B)$53,000.
C)$58,000.
D)$29,000.
E)$51,000.
Q3) What was Thurman's total share of net loss for the first year?
A)$ 3,900 loss.
B)$11,700 loss.
C)$10,400 loss.
D)$24,700 loss.
E)$ 9,100 loss.
Q4) Why are the terms of the Articles of Partnership important to partners?
Q5) Record the journal entry to allocate the salary of Noris.
11
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Chapter 10: Partnerships: Termination and Liquidation
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Sample Questions
Q1) Assuming that the noncash assets were sold for $134,000,which partner(s)would have been required to contribute assets to the partnership to cover a deficit in his or her capital account,prior to considering the liquidation expenses incurred?
A)Abrams.
B)Bartle.
C)Creighton.
D)Abrams and Creighton.
E)Abrams and Bartle.
Q2) For what amount would the noncash assets need to be sold in order for Quincy to receive some cash from the liquidation?
A)Any amount in excess of $170,000.
B)Any amount in excess of $190,000.
C)Any amount in excess of $260,000.
D)Any amount in excess of $280,000.
E)Any amount in excess of $300,000.
Q3) Prepare a schedule to calculate the safe payments to be made to the partners at the end of March.
Q4) Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.
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Chapter 11: Accounting for State and Local Governments,
part I
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Sample Questions
Q1) In May of 2018,the Town of Anthrop receives a $60,000 grant restricted for transporting all senior citizens to polling locations on Election Day in November of 2018.
Required:
Prepare the journal entry,and identify the fund in which it is recorded,to record the receipt of the grant.
Q2) Fiduciary 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 or agency 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 resources that are restricted or committed for a specific purpose other than debt payments or capital projects.
Q3) What are the two proprietary fund types?
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Page 13
Chapter 12: Accounting for State and Local Governments, part II
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Sample Questions
Q1) Prepare the journal entry that should be recorded on December 31,2018 for government-wide financial statements.
.
Q2) A method of accounting 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?
Q4) Jones College,a public institution of higher education,must prepare financial statements
A)As if the college was an enterprise fund.
B)Following the same rules as state and local governments.
C)According to GAAP.
D)As if the college was a fiduciary fund.
E)In the same manner as private colleges and universities.
Q5) What is meant by the term legally independent?
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