Consolidated Financial Statements
Test Bank
Course Introduction
This course explores the principles and practices involved in preparing consolidated financial statements for corporate groups in accordance with international accounting standards. Key topics include the concepts of group control, acquisition accounting, treatment of non-controlling interests, intra-group transactions and balances, and changes in ownership interests. Students will learn how to combine the financial statements of parent and subsidiary entities, address complexities such as goodwill, and eliminate unrealized profits to present a clear and accurate picture of a groups financial position and results. The course combines theoretical frameworks with practical exercises to ensure a thorough understanding of consolidations in real-world scenarios.
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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Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) What is the Equity in Howell Income that should be reported by Acker in 2017?
A)$10,000.
B)$24,000.
C)$36,000.
D)$38,400.
E)$40,000.
Answer: D
Q2) What is the balance in Acker's Investment in Howell account at December 31,2017?
A)$576,000.
B)$598,400.
C)$614,400.
D)$606,000.
E)$616,000.
Answer: B
Q3) Idler Co.has an investment in Cowl Corp.for which it uses the equity method.Cowl has suffered large losses for several years,and the balance in the investment account has been reduced to zero.How should Idler account for this investment?
Answer: Idler should discontinue the use of the equity method.The investment would have a zero balance until investee profits eliminate unrecognized losses.
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Page 3
Chapter 2: Consolidation of Financial Information
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116 Flashcards
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Sample Questions
Q1) With respect to recognizing and measuring the fair value of a business combination in accordance with the acquisition method of accounting,which of the following should the acquirer consider when determining fair value?
A)Only assets received by the acquirer.
B)Only consideration transferred by the acquirer.
C)The consideration transferred by the acquirer plus the fair value of assets received less liabilities assumed.
D)The par value of stock transferred by the acquirer,and the book value of identifiable assets transferred by the entity acquired.
E)The book value of identifiable assets transferred to the acquirer as part of the business combination less any liabilities assumed.
Answer: C
Q2) What term is used to refer to a business combination in which only one of the original companies continues to exist?
Answer: The appropriate term is statutory merger.
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4
Chapter 3: Consolidations -
Subsequent to the Date of Acquisition
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) Compute the amount of Hurley's buildings that would be reported in a December 31,2017,consolidated balance sheet.
A)$1,560.
B)$1,260.
C)$1,440.
D)$1,160.
E)$1,140.
Answer: B
Q2) Compute goodwill,if any,at January 1,2017.
A)$ 150.
B)$ 250.
C)$ 700.
D)$1,200.
E)$ 550.
Answer: B
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.
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) In consolidation at January 1,2019,what adjustment is necessary for Hogan's Patent account?
A)$7,000.
B)$6,300.
C)$11,000.
D)$9,900.
E)No adjustment is necessary.
Q2) Compute the noncontrolling interest in the net income of Demers at December 31,2019.
A)$20,000.
B)$12,000.
C)$18,600.
D)$10,600.
E)$14,400.
Q3) Alonzo Co.acquired 60% of Beazley Corp.by paying $240,000 cash.There is no active trading market for Beazley Corp.At the time of the acquisition,the book value of Beazley's net assets was $300,000.
Required:
What amount should have been assigned to the noncontrolling interest immediately after the combination?
Page 6
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Sample Questions
Q1) Compute the gain or loss relating to the land that will be reported in consolidated net income for 2019.
A)$ 5,000 loss.
B)$ 7,000 gain.
C)$12,000 gain.
D)$ 7,000 loss.
E)$12,000 loss.
Q2) What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset?
Q3) Assuming there are no excess amortizations or other intra-entity transactions,compute income from Stiller on Leo's books for 2017.
A)$110,000
B)$100,000.
C)$125,000.
D)$ 85,000.
E)$ 88,000.
Q4) When is the gain on an intra-entity transfer of land recognized in consolidated net income?
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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) What would differ between a statement of cash flows for a consolidated company and an unconsolidated company using the indirect method?
A)Parent's dividends would be subtracted as a financing activity.
B)Gain on sale of land would be deducted from net income.
C)Noncontrolling interest in net income of subsidiary would be added to net income.
D)Proceeds from the sale of long-term investments would be added to investing activities.
E)Loss on sale of equipment would be added to net income.
Q2) On January 1,2018,Parent Corporation acquired a controlling interest in the voting common stock of Foxboro Co.At the same time,Parent purchased sixty percent of Foxboro's outstanding preferred stock.In preparing consolidated financial statements,how should the acquisition of the preferred stock be accounted for?
Q3) What is the new percent ownership Ryan owns in Chase?
A)80.0%.
B)87.5%.
C)90.0%.
D)75.0%.
E)82.5%.
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) Which of the following approaches is used in the United States in accounting for foreign currency transactions?
A)One-transaction perspective;defer foreign exchange gains and losses.
B)Two-transaction perspective;accrue foreign exchange gains and losses.
C)Three-transaction perspective;defer foreign exchange gains and losses.
D)One-transaction perspective;accrue foreign exchange gains and losses.
E)Two-transaction perspective;defer foreign exchange gains and losses.
Q2) Assuming a forward contract was entered into on December 16,what would be the net impact on Car Corp.'s 2018 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge.The present value for one half-month at 12% is .9950.
A)$ 700 (gain).
B)$ 700 (loss).
C)$ 995 (gain).
D)$ 300 (loss).
E)$ 298 (gain).
Q3) What amount will Coyote Corp.report in its 2018 balance sheet for Accounts payable?
Q4) How is the fair value of a Forward Contract determined by U.S.GAAP?
Q5) What amount will Coyote Corp.report in its 2018 balance sheet for Inventory?
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Chapter 8: Translation of Foreign Currency Financial
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Sample Questions
Q1) If the subsidiary's local currency is its functional currency,what total amount should be included in Tulip's balance sheet in U.S.dollars?
A)$609,000.
B)$658,000.
C)$602,000.
D)$630,000.
E)$616,000.
Q2) Amortization of the patent,translated,for 2018 would be
A)$ 7,000.
B)$10,000.
C)$ 6,800.
D)$ 9,000.
E)$ 6,500.
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) Prepare a statement of cash flows for this subsidiary in stickles and then translate the amounts into U.S.dollars.
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Chapter 9: Partnerships: Formation and Operation
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Sample Questions
Q1) C contributes $38,000 to the partnership and the bonus method is used.What amount will be credited for C's beginning capital balance?
A)$20,000
B)$25,000
C)$27,600
D)$32,600
E)$38,000
Q2) When the hybrid method is used to record the withdrawal of a partner,the partnership
A)Revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B)Revalues liabilities but not assets,and no goodwill is recorded.
C)Can recognize goodwill but does not revalue assets and liabilities.
D)Revalues assets but not liabilities,and records goodwill to the continuing partner but not to the withdrawing partner.
E)Revalues assets and liabilities but does not record goodwill.
Q3) How is accounting for a partnership different from accounting for a corporation?
Q4) By what methods can a person gain admittance to a partnership?
Q5) Record the journal entry to allocate the salary of Noris.
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Chapter 10: Partnerships: Termination and Liquidation
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Sample Questions
Q1) How much of this money should Zobart receive?
A)$15,467.
B)$14,467.
C)$17,333.
D)$15,633.
E)$15,867.
Q2) Which of the following statements is true concerning the distribution of safe payments?
A)The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership.
B)Safe payments are equal to the recorded capital account balances of those partners with capital account balances in excess of $0.
C)The distribution of safe payments may only be made after all liabilities have been paid.
D)In computing safe payments,partners with positive capital account balances are assumed to absorb an equal share of any deficit balance(s).
E)There are no safe payments until the liquidation is complete.
Q3) What is the role of the accountant during the liquidation process?
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Chapter 11: Accounting for State and Local Governments, part
I
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Sample Questions
Q1) What are the two proprietary fund types?
Q2) For what is a special revenue fund used to account?
Q3) Annual budgets must be recorded within:
A)The general fund and special revenue funds.
B)Capital projects funds and debt service funds.
C)Enterprise funds and internal service funds.
D)The general fund and pension trust Fund.
E)Agency funds and the general fund.
Q4) The government has just voted to repair the parking garages to all federal building and estimate the cost to be $750,000.The government discloses this decision by debiting which account?
A)Committed
B)Nonspendable
C)Assigned
D)Unassigned
E)Restricted
Q5) Prepare the journal entry and identify the fund to record Simple City's purchase order of two trucks for $100,000.Identify the fund in which the entry is recorded.
Q6) What are the four fiduciary fund types?
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Chapter
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Sample Questions
Q1) A local government's basic financial statements would include a statement of cash flows for all
A)proprietary fund types.
B)governmental fund types.
C)fund types.
D)fiduciary fund types.
E)A statement of cash flows is not required for any fund types.
Q2) On government-wide financial statements,which of the following are the appropriate amounts to present in the financial statements for 2018?
A)Both expense and liability will be zero.
B)Expense will be $300,000 and liability will be $600,000.
C)Expense will be $600,000 and liability will be $600,000.
D)Expense will be $675,000 and liability will be $600,000.
E)Expense will be $375,000 and liability will be $675,000.
Q3) What is meant by the term legally independent?
Q4) Prepare a Statement of Net Position at December 31,2018.
Q5) What are the three broad sections of a state or local government's CAFR?
Q6) What is meant by the term fiscally independent?
Q7) Prepare a Statement of Activities for the year ended December 31,2018.
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