Financial Accounting II
Exam Preparation Guide
Course Introduction
Financial Accounting II builds upon the foundational principles introduced in Financial Accounting I, delving deeper into complex accounting concepts and practices. This course covers major topics such as the accounting for long-term liabilities, shareholders equity, intercorporate investments, and the preparation and analysis of cash flow statements. Students will also explore revenue recognition, accounting for income taxes, and the intricacies of financial reporting under various accounting standards. Emphasis is placed on the interpretation and application of accounting rules to real-world business scenarios, enabling students to enhance their analytical skills and make informed financial decisions.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard Baker
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20 Chapters
1041 Verified Questions
1041 Flashcards
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Page 2
Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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42 Verified Questions
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Sample Questions
Q1) Based on the information provided,what amount will be reported for Common Stock in the combined company's balance sheet immediately following the business combination?
A)$200,000
B)$250,000
C)$300,000
D)$210,000
Answer: A
Q2) Based on the preceding information,what amount of goodwill will be reported for Beta at year-end?
A)$0
B)$14,000
C)$34,000
D)$50,000
Answer: C
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Chapter 2: Reporting Intercorporate Interests
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Sample Questions
Q1) Based on the information provided,what amount of differential assigned to buildings and equipment will be amortized for the year?
A)$0
B)$4,800
C)$2,000
D)$3,800
Answer: D
Q2) Based on the preceding information,what amount would William Company receive as dividends from eGate for the year?
A)$62,000
B)$21,600
C)$18,600
D)$54,000
Answer: C
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Chapter 3: The Reporting Entity and Consolidated Financial Statements
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Sample Questions
Q1) FASB issued Interpretation No.46 R related to the Consolidation of Variable Interest Entities.Why does FASB have difficulty in prescribing when these entities are consolidated?
Answer: A Variable Interest Entity (VIE)is a legal structure used for business purposes that either:
1.Does not have equity investors that: a.have voting rights or b.doesn't share in all of the entity's profits or losses.
2.Has equity investors that do not provide sufficient financial resources to support the entity's activities.
Therefore,FASB has been trying to define the Primary Beneficiary and from this lead to consolidation not just control as presumed under FASB 141.
Q2) 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
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Sample Questions
Q1) Based on the information provided,the consolidated balance sheet of Enya and Celtic will reflect goodwill in the amount of:
A)$0.
B)$58,000.
C)$22,000.
D)$36,000.
Q2) Based on the preceding information,all of the following are eliminating entries required on December 31,2008,to prepare consolidated financial statements,except:
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Based on the preceding information,what amount of retained earnings will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$300,000
B)$409,000
C)$259,000
D)$191,000
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Page 6
Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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Sample Questions
Q1) Based on the preceding information,what amount of consolidated retained earnings will be reported?
A)$205,000
B)$120,000
C)$325,000
D)$310,000
Q2) Based on the preceding information,what amount would be reported as noncontrolling interest in the consolidated balance sheet at December 31,2009?
A)$27,000
B)$4,000
C)$15,000
D)$18,000
Q3) Based on the preceding information,the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is:
A)$0
B)$32,500
C)$26,000
D)$20,000
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Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) Phobos Company holds 80 percent of Deimos Company's voting shares.During the preparation of consolidated financial statements for 2009,the following eliminating entry was made: Which of the following statements is correct?
A)Phobos Company purchased land from Deimos Company during 2009.
B)Phobos Company purchased land from Deimos Company before January 1,2009.
C)Deimos Company purchased land from Phobos Company during 2009.
D)Deimos Company purchased land from Phobos Company before January 1,2009.
Q2) Based on the preceding information,in the preparation of the 2009 consolidated balance sheet,accumulated depreciation will be:
A)debited for $110,000 in the eliminating entries.
B)credited for $110,000 in the eliminating entries.
C)credited for $100,000 in the eliminating entries.
D)debited for $100,000 in the eliminating entries.
Q3) Based on the preceding information,in the preparation of the 2009 consolidated income statement,depreciation expense will be:
A)debited for $25,000 in the eliminating entries.
B)credited for $15,000 in the eliminating entries.
C)debited for $15,000 in the eliminating entries.
D)credited for $25,000 in the eliminating entries.
Page 8
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Chapter 7: Intercompany Inventory Transactions
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Sample Questions
Q1) Based on the information given above,what will be the income assigned to controlling interest for 2007?
A)$448,375
B)$495,000
C)$486,250
D)$615,375
Q2) Based on the information given above,what amount should be eliminated from cost of goods sold in the combined income statement for 2008?
A)$31,250
B)$25,000
C)$56,892
D)$6,250
Q3) Based on the information given above,by what amount should Graceland write down inventory in its books?
A)$14,000
B)$15,000
C)$13,000
D)$16,000
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9
Chapter 8: Intercompany Indebtedness
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Sample Questions
Q1) Based on the information given above,what amount of interest expense will be eliminated in the preparation of the 2008 consolidated financial statements?
A)$13,000
B)$13,500
C)$10,000
D)$15,000
Q2) Based on the information given above,what percentage of the subsidiary's ownership does the parent company hold?
A)75 percent
B)65 percent
C)80 percent
D)95 percent
Q3) Based on the information given above,what amount of investment in bonds will be eliminated in the preparation of the 2008 consolidated financial statements?
A)$240,500
B)$200,000
C)$245,000
D)$211,500
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10
Chapter 9: Consolidation Ownership Issues
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Sample Questions
Q1) Based on the preceding information,in the journal entry recorded by Vision for sale of shares:
A)Cash will be credited for $60,000.
B)Investment in Meta Stock will be credited for $51,000.
C)Investment in Meta Stock will be credited for $60,000.
D)Additional Paid-in Capital will be credited for $45,000.
Q2) Based on the information provided,what is the book value of the common stock on January 1,2009?
A)$410,000
B)$360,000
C)$390,000
D)$350,000
Q3) Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the consolidated income statement for 2009?
A)$55,000
B)$25,000
C)$30,000
D)$43,750
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Chapter 10: Additional Consolidation Reporting Issues
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Sample Questions
Q1) Based on the preceding information,what is the amount of earnings available to common shareholders reported in the consolidated financial statements for the year?
A)$89,200
B)$87,000
C)$91,000
D)$82,800
Q2) Assume that New Life uses the direct method of computing cash flows from operating activities.Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 2009?
A)$350,000
B)$348,000
C)$312,000
D)$352,000
Q3) Based on the information provided,what was the consolidated cash balance at January 1,2008?
A)$60,000
B)$85,000
C)$15,000
D)$380,000
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Page 12
Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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55 Verified Questions
55 Flashcards
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Sample Questions
Q1) Which of the following observations is true of forwards contracts?
A)Substantial margin is required to initiate a contract.
B)Must be completed either with the underlying's future delivery or net
C)cash settlement.
D)Cannot be customized;for a specific amount at a specific date.
E)Usually settled with a net cash amount prior to maturity date.
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) An investor purchases a put option with a strike price of $100 for $3.This option is considered "in the money" if the underlying is trading:
A)below $100.
B)at $100.
C)above $100.
D)above $103.
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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56 Verified Questions
56 Flashcards
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Sample Questions
Q1) Under the temporal method,which of the following is usually used to translate monetary amounts to the functional currency? I.The current exchange rate
II The historical exchange rate
III)Average exchange rate
A)I
B)III
C)II
D)Either I or II
Q2) Refer to the information in question 52.Assume the U.S.dollar is the functional currency,not the pound.Prepare a schedule providing a proof of the remeasurement gain or loss.Assume that the British subsidiary had the following monetary assets and liabilities at January 1,2008:
Q3) Based on the preceding information,what amount should Leo record as "income from subsidiary" based on the British subsidiary's reported net income?
A)$72,930
B)$52,500
C)$72,600
D)$69,300
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Chapter 13: Segment and Interim Reporting
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Sample Questions
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) Trevor Company discloses supplementary operating segment information for its three reportable segments.Data for 2008 are available as follows: Allocable costs for the year was $180,000.Allocable costs are assigned based on the ratio of a segment's income before allocable costs to total income before allocable costs.The 2008 operating profit for Segment B was:
A)$110,000
B)$180,000
C)$126,000
D)$120,000
Q3) APB Opinion 28 uses which view of interim reporting?
A)Integral
B)Discrete
C)Segmental
D)Comprehensive
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Chapter 14: Sec Reporting
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52 Verified Questions
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Sample Questions
Q1) Regulation S-X and Regulation S-K:
A)govern the preparation of financial statements and associated disclosures.
B)govern the registration requirements for private placements.
C)outline responsibilities for audit committees of publicly held companies.
D)prohibit artificial pyramids of capital in public utilities.
Q2) Form 10-K
Q3) Which of the following statements concerning Form 10-Q is NOT true?
A)It is filed for all four quarters.
B)It is the quarterly report to the SEC.
C)It contains an update on significant matters occurring since the last quarter.
D)It includes comparative financial statements prepared in accordance with APB 28.
Q4) 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
Q5) Form 10-Q
Q6) "Tombstone ad"
Page 16
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Sample Questions
Q1) When a partner retires from a partnership and the retiring partner is paid more than the capital balance in her account,which of the following explains the difference? I.The retiring partner is receiving a bonus from the other partners.
II)The retiring partner's goodwill is being recognized.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q2) Refer to the information provided above.Allen and Daniel agree that some of the inventory is obsolete.The inventory account is decreased before David is admitted.David invests $40,000 for a one-fifth interest.What is the amount of inventory written down?
A)$4,000
B)$20,000
C)$15,000
D)$10,000
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Chapter 16: Partnerships: Liquidation
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Sample Questions
Q1) In the computation of a partner's Loss Absorption Power (LAP),which of the following statements is incorrect? I.The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid.
II)The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios.
A)I
B)II
C)Both I and II
D)Neither I nor II
Q2) When is a partnership considered to be insolvent? I.When the total of all partners' capital accounts results in a debit balance.
II)When at least one of the partners is personally insolvent.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
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18
Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Sample Questions
Q1) 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 a unique element of governmental accounting.
D)They are recognized only at the time disbursements are made.
Q2) Revenues from parking meters and parking fines should be reported in the general fund when:
A)received.
B)measurable and available.
C)measurable and earned.
D)available.
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 Government-Wide Financial Statements
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Sample Questions
Q1) Refer to the above information.On the internal service fund's balance sheet on June 30,2009,total net assets should be reported at:
A)$1,000,000.
B)$1,010,000.
C)$1,250,000.
D)$910,000.
Q2) Based on the preceding information,on the statement of net assets prepared at June 30,2009,what amount should be reported for net assets,unrestricted?
A)$425,000
B)$900,000
C)$525,000
D)$825,000
Q3) Enterprise and internal service funds should recognize revenues when they are A)received in cash.
B)available and earned.
C)measurable and earned.
D)measurable and available.
Q4) GASB 34 requires a Reconciliation schedule for the Statement of Net Assets.What does this schedule document?
Page 20
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Chapter 19: Not-For-Profit Entities
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Sample Questions
Q1) A private,not-for-profit hospital uses a fund structure which includes a general fund and donor restricted funds.The hospital's revenues from nursing programs and gift shops should be accounted for in the:
A)specific purpose fund.
B)restricted current fund.
C)general fund.
D)time-restricted fund.
Q2) Unrestricted gifts and endowment income of a private university are reported as A)increases in the unrestricted current fund balance on the statement of changes in fund balances.
B)unrestricted revenues on the statement of current funds revenues,expenditures,and other changes.
C)unrestricted revenues on the statement of activities.
D)increases in the unrestricted current fund balance on the statement of activities.
Q3) A gain was realized from the sale of securities which were permanently invested.The gain is restricted as to use.
Q4) The governing board designated assets for plant expansion.
Q5) Depreciation expense for the year was recorded.
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Chapter 20: Corporations in Financial Difficulty
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Sample Questions
Q1) Chapter 7 of the Bankruptcy Code provides for: I.Reorganization.
II)Liquidation.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q2) Under Chapter 11 proceedings,what represents the fair value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the entity's assets?
A)Reorganization value
B)Fire sale value
C)Fresh start value
D)Excess value
Q3) Creditors may file which type of petition when seeking remedy under the Bankruptcy Code? I.Voluntary
II)Involuntary
A)I only
B)II only
C)Either I or II
D)Neither I nor II
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