CPA Review: Advanced Accounting Topics
Chapter Exam Questions
Course Introduction
This course provides an in-depth review of advanced accounting topics essential for the CPA exam, focusing on complex areas such as business combinations, consolidations, foreign currency transactions, partnerships, governmental and not-for-profit accounting, and advanced financial reporting issues. Students will engage with practical problems and real-world scenarios to develop a thorough understanding of how to apply advanced accounting principles, analyze financial statements, and address ethical considerations within the framework of the latest CPA exam blueprints. The course prepares students to confidently approach challenging subjects and reinforces key concepts through practice questions and simulated exam exercises.
Recommended Textbook
Advanced Accounting 9th Edition by Joe Ben Hoyle
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19 Chapters
1679 Verified Questions
1679 Flashcards
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Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) A company has been using the equity method to account for its investment.The company sells shares and does not continue to have significant control.Which of the following statements is true?
A)A cumulative effect change in accounting principle must occur.
B)A prospective change in accounting principle must occur.
C)A retrospective change in accounting principle must occur.
D)The investor will not receive future dividends from the investee.
E)Future dividends will continue to reduce the investment account.
Answer: B
Q2) What is the amount of unrealized intercompany inventory profit to be deferred on December 31,2009?
A)$1,600.
B)$8,000.
C)$15,000.
D)$20,000.
E)$40,000 Answer: B
Q3) What amount of unrealized intercompany inventory profit should be deferred by Steven at December 31,2008?
Answer: [($50,000 - $35,000)x .25 x .40] = $1,500
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Chapter 2: Consolidation of Financial Information
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Q1) Which one of the following is a characteristic of a business combination that should be accounted for as an acquisition?
A)The combination must involve the exchange of equity securities only.
B)The transaction establishes an acquisition fair value basis for the company being acquired.
C)The two companies may be about the same size,and it is difficult to determine the acquired company and the acquiring company.
D)The transaction may be considered to be the uniting of the ownership interests of the companies involved.
E)The acquired subsidiary must be smaller in size than the acquiring parent.
Answer: B
Q2) At the date of pooling,by how much does Riley's retained earnings increase or decrease?
A)$200,000 increase.
B)$200,000 decrease.
C)$700,000 increase.
D)$300,000 increase.
E)$300,000 decrease.
Answer: A
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4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) What is the balance in Cale's investment in subsidiary account at the end of 2009?
A)$1,099,000.
B)$1,020,000.
C)$1,096,200.
D)$1,098,000.
E)$1,144,400.
Answer: A
Q2) 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.
Q3) If this combination is viewed as an acquisition,what was consolidated equipment as of December 31,2010?
Answer: 11ea88ab_df38_5f01_bb89_e962428616ff_TB4174_00
Q4) If the parent's net income reflected use of the initial value method,what were the consolidated retained earnings on December 31,2010?
Answer: SHAPE \* MERGEFORMAT 11ea88ab_df38_37ed_bb89_2149c314f39d_TB4174_00
Page 5
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) What is the total amount of goodwill recognized per SFAS 141 (R)using the acquisition method?
A)$150,000
B)$250,000
C)$0
D)$120,000
E)$170,000
Q2) In consolidation at December 31,2009,what net adjustment is necessary for Hogan's Patent account?
A)$5,600
B)$8,800
C)$0
D)$7,700
E)$7,000
Q3) What is consolidated noncurrent assets as of January 2,2009?
A)$182,000
B)$190,400
C)$187,600
D)$191,333
E)$189,000
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Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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Q1) Compute income from Stiller on Leo's books for 2010.
A)$140,000.
B)$97,000.
C)$125,000.
D)$100,000.
E)$112,000.
Q2) Compute Stark's reported gain or loss relating to the land for 2011.
A)$5,000 loss.
B)$5,000 gain.
C)$7,000 loss.
D)$7,000 gain.
E)$0.
Q3) With regard to the intercompany sale,which of the following choices would be a credit entry in the consolidated worksheet for 2009?
A)Retained earnings.
B)Cost of goods sold.
C)Inventory.
D)Investment Strickland Company.
E)Additional paid-in capital.
Q4) How is the gain on an intercompany transfer of land realized?
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Chapter 6: Variable Interest Entities,
intercompany
Debt,
Statement of Cash Flows, and Other Issues
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Q1) How will dividends be reported on consolidated statement of cash flows?
A)$15,000 decrease as a financing activity.
B)$25,000 decrease as a financing activity.
C)$10,000 decrease as a financing activity.
D)$23,000 decrease as a financing activity.
E)$17,000 decrease as a financing activity.
Q2) Assuming Involved's accounts are correctly valued within the company's financial statements,what amount of goodwill should be recognized for the Investment in Involved ?
A)$(100,000).
B)$0.
C)$200,000.
D)$812,500.
E)$2,112,500.
Q3) Danbers Co.owned seventy-five percent of the common stock of Renz Corp.How does the issuance of a five percent stock dividend by Renz affect Danbers and the consolidation process?
Q4) Parent Corporation loaned money to its subsidiary on a five-year note at the market interest rate.How would the note be accounted for in the consolidation process?
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) Compute Chase's attributed ownership in Ross.
A)40%.
B)64%.
C)24%.
D)32%.
E)12.8%.
Q2) On January 1,2009,a subsidiary buys 8 percent of the outstanding voting stock of its parent corporation.The payment of $350,000 exceeded book value of the acquired shares by $50,000,attributable to a copyright with a 10-year useful life.During the year,the parent reported operating income of $675,000 (excluding investment income from the subsidiary),and paid $100,000 in dividends.If the treasury stock approach is used,how is the Investment in Parent Stock reported on the consolidated balance sheet at December 31,2009?
A)Included in current assets.
B)Included in noncurrent assets.
C)Consolidated stockholders' equity is reduced by $350,000.
D)Consolidated stockholders' equity is reduced by $345,000.
E)There is no effect on the consolidated balance sheet,because the effects have been eliminated.
Q3) What are the benefits or advantages of filing a consolidated income tax return?
Page 9
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Chapter 8: Segment and Interim Reporting
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Q1) What is the appropriate treatment in an interim financial report for a LIFO liquidation?
A)The LIFO liquidation is always ignored for interim reporting.
B)The LIFO liquidation should always be reflected in gross profit on an interim income statement.
C)The LIFO liquidation should always result in replacement cost valuation of ending inventory on the interim balance sheet and the interim income statement.
D)The LIFO liquidation should always result in replacement cost valuation of ending inventory on the interim income statement but not the interim balance sheet.
E)The LIFO liquidation should only be reflected in gross profit on an interim income statement if it is determined that it will not be replaced by year-end.
Q2) According to the revenue test,which segments would require disaggregation?
A)A,B,D,and E.
B)A and B.
C)B and C.
D)A,B,and D.
E)C,D,and E.
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) A U.S.company sells merchandise to a foreign company denominated in the foreign currency.Which of the following statements is true?
A)If the foreign currency appreciates,a foreign exchange gain will result.
B)If the foreign currency depreciates,a foreign exchange gain will result.
C)No foreign exchange gain or loss will result.
D)If the foreign currency appreciates,a foreign exchange loss will result.
E)Any gain or loss will be included in comprehensive income.
Q2) Larson Company,a U.S.company,has an India rupee account receivable resulting from an export sale on September 7 to a customer in India.Larson signed a forward contract on September 7 to sell rupees and designated it as a cash flow hedge of a recognized receivable.The spot rate was $.023,and the forward rate was $.021.Which of the following did the U.S.exporter report in net income?
A)Discount revenue.
B)Premium revenue.
C)Discount expense.
D)Premium expense.
E)Both a discount revenue and a premium expense.
Q3) What amount will Coyote Corp.report on its 2009 financial statements for Sales?
Q4) How is the fair value of a Forward Contract determined under SFAS 133?
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Chapter 10: Translation of Foreign Currency Financial Statements
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Q1) If a foreign currency is the functional currency of this subsidiary,what total should have been included in Tulip's balance sheet for the preceding items?
A)$609,000.
B)$658,000.
C)$602,000.
D)$630,000.
E)$616,000.
Q2) What exchange rate should have been used in translating Darron's revenues and expenses for 2009?
A)$1 = §.48.
B)$1 = §.44.
C)$1 = §.46.
D)$1 = §.42.
E)$1 = §.45.
Q3) Farley Brothers,a U.S.company,had a subsidiary in Italy.Under what conditions would the U.S.dollar be the functional currency for this subsidiary?
Q4) What is the justification for the remeasurement of foreign currency transactions?
Q5) Contrast the purpose of remeasurement with the purpose of translation.
Page 12
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) What amount should be recognized as research and development expense in 2008 using IFRSs?
A)$50,000.
B)$150,000.
C)$200,000.
D)$0.
E)$250,000.
Q2) Which one of the following countries is in the macro class of accounting systems?
A)Canada.
B)Ireland.
C)United Kingdom.
D)Australia.
E)Japan.
Q3) What are the topics covered under the short-term convergence project?
Q4) What are measurement differences in international reporting and what would be an example of a difference?
Q5) How did the early IASs obtain support from a sufficient number of board members?
13
Q6) What were the major objectives of the Treaty of Rome?
Q7) What are the different ways IFRSs can be used?
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) What is private placement of securities?
A)a procedure that allows a company to register securities and then sell them over a period of two years without reregistering.
B)a procedure that allows the sale of securities to a small group of knowledgeable investors without any general solicitation.
C)a method of filing Form 10-K with the SEC.
D)the registration of mutual funds that engage in investing and trading securities.
E)a sale of securities to 35 or fewer accredited investors.
Q2) What is shelf registration?
Q3) Who has the responsibility for the evaluation of the quality of an investment?
Q4) Which one of the following forms is used in connection with registration of securities of real estate companies?
A)S-8.
B)S-6.
C)S-4.
D)SB-1.
E)S-11.
Q5) Why was the Public Utility Holding Company Act of 1935 created?
Page 14
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) Compute the amount of total liabilities with priority.
Q2) Total unsecured liabilities are calculated to be what amount?
Q3) On its balance sheet,a company undergoing reorganization should
A)report its assets at fair market value,so that financial statement users can estimate whether creditors' claims will be met.
B)report its assets at net realizable value because there is reason to doubt that the organization is a going concern.
C)report its assets as pledged or free.
D)report its assets at current replacement cost.
E)continue to report its assets at book value.
Q4) On a statement of financial affairs,what amount would have been shown as free assets available to pay liabilities with priority and unsecured creditors?
A)$390,000.
B)$445,000.
C)$495,000.
D)$660,000.
E)$795,000.
Q5) What is an order for relief?
Q6) To what does the term Chapter 11 bankruptcy refer?
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Chapter 14: Partnerships: Formation and Operation
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Q1) Determine the amount of income allocated to each partner for 2007.
Q2) Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership?
1)allocation of salaries.
2)the number of years with the partnership.
3)the amount of time each partner works.
4)the average capital invested.
A)1 and 2.
B)1 and 3.
C)1,2,and 3.
D)1,3,and 4.
E)1,2,3,and 4.
Q3) Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the goodwill method is used,what is the capital of the remaining partners?
A)Donald,$55,000;Todd,$60,000
B)Donald,$40,000;Todd,$30,000
C)Donald,$65,000;Todd,$55,000
D)Donald,$15,000;Todd,$30,000
Q4) By what methods can a person gain admittance to a partnership?
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) Which of the following statements is false concerning the Schedule of Liquidation?
A)Liquidations may take a considerable length of time to complete.
B)Frequent reporting by the accountant is rarely necessary.
C)The Schedule of Liquidation provides a listing of transactions to date,current cash,and capital balances.
D)The Schedule of Liquidation provides a listing of property still being held by the partnership and liabilities remaining unpaid.
E)The Schedule of Liquidation keeps creditors and partners apprised of the results of the process of dissolution.
Q2) The partnership of Rayne,Marin,and Fulton was being liquidated by the partners.Rayne was insolvent and did not have enough assets to pay all of his personal creditors.Under what conditions might Rayne's personal creditors have claimed some of the partnership assets?
Q3) Prepare the journal entry for Donald,Chief & Berry LLP on August 1,2009,to record the realization of the other assets.
Q4) Prepare the schedule to compute the cash payments to the partners.
Q5) What is a safe cash payment?
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Page 17
Chapter 16: Accounting for State and Local Governments,
Part I
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Q1) What is a special revenue fund used to account for?
Q2) Under modified accrual accounting,revenues should be recognized when they are A)collected.
B)realizable.
C)reasonably estimable.
D)measurable and available.
E)earned.
Q3) What organization is responsible for establishing accounting principles for governmental entities? By whom was this organization established?
Q4) What assets would be included in the accounting records of a city's general fund?
Q5) What is the purpose of fund-based financial statements?
Q6) The Town of Anthrop receives a $10,000 grant to make the Town Hall handicapped-accessible.
Required:
Prepare the journal entry,and identify the fund in which it is recorded,to record the receipt of the grant.
Q7) What is the purpose of government-wide financial statements?
Page 18
Q8) What are the two proprietary fund types?
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Chapter 17: Accounting for State and Local
II
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Q1) For fund-based financial statements,what account is credited when a piece of equipment is leased on a capital lease?
A)Equipment - Capital Lease.
B)Encumbrances - Long Term.
C)Encumbrances - Lease Obligations.
D)Capital Lease Obligation.
E)Other Financing Sources - Capital Lease.
Q2) Which of the following is a section of the general purpose external financial statements of a state or local government?
(1)Management's discussion and analysis (MD&A).
(2)Required supplementary information (other than MD&A).
(3) )Basic financial statements and notes to financial statements.
A)1 and 2.
B)2 and 3.
C)1 and 3.
D)3 only.
E)1,2,and 3.
Q3) What are the three broad sections of a state or local government's CAFR?
Q4) What is meant by the term legally independent?
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Q5) Prepare a Statement of Revenues,Expenditures and Changes in Fund Balances
Chapter 18: Accounting for Not-For-Profit Organizations
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Q1) What is the basis used in reporting the Statement of Activities and Changes in Net Assets?
A)Cash basis.
B)Modified accrual basis.
C)Accrual basis.
D)Either cash basis or accrual basis,depending on the type of revenue.
E)Either modified accrual basis or accrual basis,depending on the type of revenue.
Q2) The Home incurred the following liabilities: $110,000 salaries,$30,000 medical equipment,$10,000 utilities expense.
Prepare the journal entries for these transactions.
Q3) Record the journal entries that reflect all of this information.
Q4) How are equity securities with determinable market values and their related unrealized gains and losses reported,according to SFAS 124?
A)Lower of cost or market,with unrealized losses in the Statement of Activities.
B)Fair value,with unrealized gains and losses in the Statement of Activities.
C)Lower of cost or market,with unrealized losses in Temporarily Restricted Net Assets.
D)Cost,with unrealized gains and losses in the Statement of Activities.
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Chapter 19: Accounting for Estates and Trusts
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Q1) During the current year,an estate generates the following income amounts: Rental income $10,000,Interest income 4,000,Dividend income 6,000.The rental income is conveyed immediately to the beneficiary stated in the decedent's will.Dividends of $2,000 are donated to the decedent's church.What amount of federal income tax must be paid by the estate?
Q2) A gift that is specified in a will as "I leave $5,000 in cash to my son" is a A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.
Q3) The gift to David is a A)general legacy. B)specific legacy.
C)demonstrative legacy.
D)residual legacy. E)devise.
Q4) Funeral expenses of $26,000 were paid. Prepare the journal entry to record the transaction.
Q5) Prepare a Charge and Discharge Statement for the estate.
Page 21
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