Consolidated Financial Reporting
Mock Exam
Course Introduction
Consolidated Financial Reporting focuses on the principles and procedures involved in preparing consolidated financial statements for a group of companies under common control. The course explores the requirements for parent and subsidiary relationships, the treatment of minority interests, and the elimination of intercompany transactions. Students will learn how to apply relevant accounting standards, such as IFRS and local GAAP, to consolidate financial information, address issues like business combinations, goodwill, and foreign operations, and analyze the impact of consolidation on financial ratios and performance evaluation. The course aims to equip students with the skills necessary to prepare, interpret, and analyze consolidated financial reports for complex business structures.
Recommended Textbook
Advanced Financial Accounting 12th Edition by Theodore E. Christensen
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Page 2
Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Q1) The fair value of net identifiable assets of a reporting unit of X Company is $300,000.On X Company's books,the carrying value of this reporting unit's net assets is $350,000,which includes $60,000 of goodwill.If the fair value of the reporting unit as a whole is $335,000,what amount of goodwill impairment will be recognized for this unit?
A)$0
B)$15,000
C)$25,000
D)$35,000
Answer: B
Q2) Based on the preceding information,what amount did Conservative report as its investment in Spin after the transfer of assets and liabilities?
A)$181,000
B)$221,000
C)$263,000
D)$243,000
Answer: A
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Chapter 2: Reporting Intercorporate Investments and
Consolidation of Wholly Owned Subsidiaries With No Differential
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Q1) Based on the preceding information,what is the consolidated retained earnings balance on December 31,20X1?
A)$470,000
B)$585,000
C)$600,000
D)$759,000
Answer: C
Q2) Based on the preceding information,what is Parent's post-closing retained earnings balance on December 31,20X1?
A)$485,000
B)$505,000
C)$525,000
D)$600,000
Answer: D
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Chapter 3:
The Reporting Entity and the Consolidation of
Less-Than-Wholly- Owned Subsidiaries With No Differential
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Q1) Based on the preceding information,what amount will Pine Company report as common stock outstanding in its consolidated balance sheet at December 31,20X9?
A)$120,000
B)$180,000
C)$156,000
D)$264,000
Answer: A
Q2) Which of the following usually does not represent a variable interest?
A)Common stock,with no special features or provisions
B)Senior debt
C)Subordinated debt
D)Loan or asset guarantees
Answer: B
Q3) Consolidated financial statements tend to be most useful for:
A)Creditors of a consolidated subsidiary.
B)Investors and long-term creditors of the parent company.
C)Short-term creditors of the parent company.
D)Stockholders of a consolidated subsidiary.
Answer: B
5
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
Acquired at More Than Book Value
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Q1) Based on the preceding information,what amount will be reported as total assets in the consolidated balance sheet for 20X8?
A)$666,000
B)$747,000
C)$651,000
D)$946,000
Q2) Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$37,000
B)$22,000
C)$15,000
D)$0
Q3) Based on the preceding information,what amount of liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$300,000
B)$320,000
C)$417,000
D)$745,000
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Chapter 5: Consolidation of Less-Than-Wholly- Owned
Subsidiaries Acquired at More Than Book Value
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Q1) Based on the preceding information,what amount of Stamp's buildings and equipment (net)will be included in the consolidated balance sheet immediately following the acquisition?
A)$0
B)$50,000
C)$250,000
D)$300,000
Q2) Based on the preceding information,what amount of differential would Paris amortize during 20X6 in its equity method journal entries?
A)$13,200
B)$15,000
C)$22,000
D)$30,000
Q3) 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
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Chapter 6: Intercompany Inventory Transactions
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Q1) Based on the information given above,what inventory balance will be reported by the consolidated entity on December 31,20X8?
A)$51,490
B)$53,100
C)$37,000
D)$20,100
Q2) Based on the information given above,what amount of cost of goods sold should be eliminated in the consolidation worksheet for 20X8?
A)$82,000
B)$70,000
C)$95,000
D)$60,000
Q3) Based on the information given above,by what amount was unadjusted revenue overstated in the combined income statement for 20X8?
A)$25,000
B)$56,892
C)$31,250
D)$6,250
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Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) Based on the preceding information,at what amount should the land be reported in the consolidated balance sheet as of December 31,20X8?
A)$145,000
B)$220,000
C)$197,000
D)$160,000
Q2) Based on the preceding information,in the preparation of the 20X9 consolidated financial statements,equipment will be:
A)debited for $1,000.
B)debited for $10,000.
C)credited for $15,000.
D)debited for $25,000.
Q3) Based on the preceding information,the gain on sale of equipment recorded by Plesco for 20X8 is:
A)$70,000.
B)$65,000.
C)$50,000.
D)$40,000.
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of interest expense will be eliminated in the preparation of the 20X8 consolidated financial statements?
A)$13,096
B)$13,023
C)$8,730
D)$8,682
Q2) Based on the information given above,in the preparation of the 20X8 consolidated financial statements,premium on bonds payable will be:
A)debited for $46,767 in the consolidating entries.
B)credited for $43,060 in the consolidating entries.
C)debited for $43,060 in the consolidating entries.
D)credited for $46,767 in the consolidating entries.
Q3) Based on the information given above,what amount of interest income does Scissor record on its individual books for 20X8?
A)$10,950
B)$8,002
C)$9,410
D)$10,002
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Chapter 9: Consolidation Ownership Issues
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Q1) Begin with the information provided,but assume instead that Saucy declared a stock dividend of 3,000 shares on its $5 par value common stock.The investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Retained Earnings for:
A)$185,000.
B)$65,000.
C)$155,000.
D)$200,000.
Q2) Based on the preceding information,what is the portion of Shovel's retained earnings assignable to its preferred shareholders on January 1,20X9?
A)$40,000
B)$50,000
C)$60,000
D)$70,000
Q3) Based on the preceding information,what is Pisa's new ownership interest?
A)84 percent
B)55 percent
C)70 percent
D)64 percent
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Chapter 10: Additional Consolidation Reporting Issues
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Q1) Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 20X8?
A)$292,000
B)$305,000
C)$262,000
D)$258,000
Q2) Based on the preceding information,what amount would Putter report as net income (after taxes)for the year?
A)$49,240
B)$68,000
C)$64,000
D)$67,500
Q3) Based on the information provided,what is the consolidated income to the controlling interest reported for the year 20X8?
A)$192,000
B)$138,000
C)$140,000
D)$120,000
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) Based on the preceding information,in the entry made on December 2<sup>nd</sup> to revalue foreign currency receivable to current equivalent U.S.dollar value,
A)Accounts Payable will be debited for $18,350.
B)Foreign Currency Units will be debited for $18,500.
C)Foreign Currency Transaction Gain will be credited for $150.
D)Other Comprehensive Income will be credited for $300.
Q2) Based on the information given above,how many U.S.dollars must be paid for a purchase of citrus fruits costing 10,000 Cyprus pounds?
A)$25,132
B)$15,132
C)$3,979
D)$35,775
Q3) Based on the preceding information,what is the effect of the British pound speculative contract on 20X8 net income?
A)$10,000 gain
B)$6,000 gain
C)$8,000 gain
D)$2,000 loss
Page 13
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Q1) Refer to the above information.Assuming Ski's FCU is the functional currency,what is the balance in Polaris's investment in foreign subsidiary account at December 31,2008?
A)$3,216,500
B)$3,560,000
C)$3,568,300
D)$3,577,694
Q2) Based on the preceding information,the receipt of the dividend will result in a credit to the investment account for:
A)$16,800
B)$17,680
C)$18,000
D)$17,600
Q3) Based on the preceding information,what amount of translation adjustment is required for increase in differential?
A)$3,000
B)$5,500
C)$4,500
D)$5,000
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Chapter 13: Segment and Interim Reporting
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Q1) Refer to the above information.Which of the operating segments above meet the operating profit (loss)test?
A)B and E
B)A and B
C)A,B,and E
D)A,B,C,and E
Q2) Zeus Corporation has determined that it has 15 reportable operating segments.In order to comply with the standard for segment disclosures,Zeus Corporation should do which of the following?
A)Report 10 reportable segments and disclose the remaining 5 segments as other operating segments.
B)Report 10 reportable segments by combining the most closely related segments.
C)Report 15 reportable segments as long as the 75 percent revenue test has been satisfied.
D)Report 12 reportable segments and show all other operating segments in a column labeled "Other Operating Segments."
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Chapter 14: Sec Reporting
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Q1) Which of the following presents the results of actions taken against accountants,brokers,and other participants for filing false or misleading statements?
A)Financial Reporting Releases
B)Financial Reporting Interpretations
C)Accounting and Auditing Enforcement Releases
D)Staff Accounting Bulletins
Q2) Regulation S-X presents the rules for preparing all of the following except:
A)financial statements.
B)footnotes.
C)auditor's report.
D)management's discussion.
Q3) The preparation of which of the following items is covered by Regulation S-K?
A)Descriptions of business
B)Pro forma disclosures
C)Schedules
D)Reports of accountants
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) Which of the following accounts could be found in the PQ partnership's general ledger?
I.Due from P
II.P,Drawing
III.Loan Payable to Q
A)I,II
B)I,III
C)II,III
D)I,II,and III
Q2) Refer to the above information.Which statement below is correct if the old partners receive a bonus 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?
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Chapter 16: Partnerships: Liquidation
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Q1) Refer to the above information.If the other assets are sold for $200,000,how much should J receive upon liquidation?
A)$50,000
B)$30,000
C)$20,000
D)$15,000
Q2) Partner A has a smaller capital balance than Partner L.Partner A,however,has a higher profit-and-loss-sharing percentage than Partner L.The LA partnership has decided to liquidate.As a result of the information given,
A)Partner L will have a smaller loss absorption potential than A.
B)Partner L will receive cash only after A has received cash.
C)Partner A will have a smaller loss absorption potential than L.
D)Partner A will never receive any cash from partnership liquidation.
Q3) 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
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) The general fund of Hatteras acquired a fire truck during the fiscal year ended June 30,20X9.The purchase order for the fire truck was recorded on February 15,20X9.Hatteras' acquisition of the fire truck required which of the following sequences of accounting activities?
I.Appropriation
II.Encumbrance
III.Expenditure
A)II,I,III.
B)I,III,II.
C)III,II,I.
D)I,II,III.
Q2) At the end of the fiscal year,uncollected property taxes in the general fund should be:
A)reclassified from current to delinquent.
B)written off as uncollectible.
C)charged against unassigned fund balance.
D)reclassified from current to noncurrent.
Q3) Briefly discuss the various types of governmental funds and proprietary funds.
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Chapter 18: Governmental Entities: Special Funds and Governmentwide Financial Statements
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Q1) On the statement of revenues,expenditures,and changes in fund balance for a capital projects fund,proceeds of general obligation bonds should be reported:
A)in the revenue section of the statement.
B)as a direct addition to the beginning balance of unreserved fund balance.
C)in the other financing sources (uses)section of the statement.
D)as a subtraction from construction expenditures.
Q2) Upon completion of construction and full payment of all construction costs in a capital projects fund,the entry to record the transfer of any remaining cash should include a debit to:
I.Contract Payable-Retained Percentage.
II.Transfer Out to Debt Service Fund.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
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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Q1) Refer to the above information.On the statement of activities for the year ended June 30,20X9,reclassifications would be reported at:
A)$190,000.
B)$100,000.
C)$90,000.
D)$230,000.
Q2) The restricted funds of a not-for-profit hospital are often termed "______" funds because they must hold the restricted assets and transfer expendable resources to the general fund for expenditure.
A)specific
B)controlled
C)limited
D)holding
Q3) All restricted funds of private,not-for-profit hospitals account for resources:
A)whose use is restricted by the donor.
B)received and expended in the hospital's primary health care mission.
C)that are only temporarily restricted.
D)received or pledged by donors for use in future periods.
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Chapter 20: Corporations in Financial Difficulty
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Q1) Under which nonjudicial action do creditors agree to assist the debtor in managing the most efficient payment of creditors' claims?
A)Debt restructuring arrangement
B)Creditors' committee management
C)Transfer of assets
D)Composition agreement
Q2) Typically,the plan of reorganization must be approved by at least ________ of all creditors,who must hold at least ________ of the dollar amount of the outstanding debt.
A)one-third;half
B)two-thirds;half
C)half;one-third
D)half;two-thirds
Q3) On a debtor-in-possession income statement,which of the following items should be reported under the heading "Reorganization Items"?
A)Sales
B)Selling expenses
C)Income tax benefit
D)Loss on disposal of assets
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Chapter 21: Intercompany Indebtednessfully Adjusted
Equity Method Using Straight-Line Interest Amortization
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Q1) Based on the information given above,what price did Peanut pay to purchase the Snoopy bonds?
A)$530,000
B)$516,875
C)$533,750
D)$550,625
Q2) Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 20X9 consolidated financial statements?
A)$3,500
B)$2,800
C)$5,000
D)$2,500
Q3) 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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