Financial Accounting II
Exam Questions
Course Introduction
Financial Accounting II builds upon the foundational concepts introduced in Financial Accounting I by exploring more advanced accounting principles and practices. This course delves into complex topics such as accounting for liabilities, equity, investments, revenue recognition, and the preparation of comprehensive financial statements. Students will also examine accounting standards related to leases, pensions, income taxes, and the effects of changes in accounting policies. Emphasis is placed on understanding and applying the relevant financial reporting requirements under International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). Through problem-solving exercises and case studies, students develop analytical skills critical for interpreting financial information and making informed business decisions.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard Baker
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20 Chapters
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Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Q1) 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
Q2) Which of the following observations is (are)consistent with the acquisition method of accounting for business combinations? I.Expenses related to the business combination are expensed.
II)Stock issue costs are treated as a reduction in the issue price.
III)All merger and stock issue costs are expensed.
IV)No goodwill is ever recorded.
A)III
B)IV
C)I and II
D)I,II,and IV
Answer: C
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Chapter 2: Reporting Intercorporate Interests
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Q1) Based on the preceding information,had Rotor Corporation used the cost method,what would have been the balance in the investment account on Dec 31,2008?
A)$150,000
B)$157,500
C)$153,400
D)$153,500
Answer: A
Q2) Based on the preceding information,what amount would be reported by William Company as the balance in its investment account on December 31,2008?
A)$100,000
B)$123,400
C)$120,400
D)$142,000
Answer: B
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4
Chapter 3: The Reporting Entity and Consolidated Financial Statements
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Q1) Based on the preceding information,what is the amount of net income to be reported in the consolidated income statement for the year under the parent company theory approach?
A)$220,000
B)$202,000
C)$160,000
D)$200,000
Answer: B
Q2) Based on the preceding information,what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the current accounting practice?
A)$350,000
B)$340,000
C)$280,000
D)$300,000
Answer: A
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5
Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Sample Questions
Q1) Required:
Prepare the eliminating entries needed as of December 31, 2009, to complete a consolidation workpaper.
Prepare a three-part consolidation workpaper as of December 31, 2009.
Q2) Based on the preceding information,what amount of total assets will appear in the consolidated balance sheet prepared immediately after the business combination?
A)$756,000
B)$735,000
C)$750,000
D)$642,000
Q3) Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$0
B)$21,000
C)$6,000
D)$15,000
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6
Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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Sample Questions
Q1) Based on the preceding information,in the entry to eliminate the investment balance,
A)retained earnings will be credited for $20,000.
B)additional paid-in-capital will be credited for $20,000.
C)differential will be credited for $10,000.
D)noncontrolling interest will be debited for 30,000.
Q2) Based on the information given,what balance in accounts receivable did Y Company report at December 31,2008?
A)$28,000
B)$48,000
C)$40,000
D)$38,000
Q3) Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$0
B)$40,000
C)$20,000
D)$15,000
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Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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Sample Questions
Q1) Based on the preceding information,what amount of receivable/payable should be eliminated in the 2008 consolidated financial statements?
A)$125,432
B)$7,900
C)$5,560
D)$140,000
Q2) Based on the preceding information,in the preparation of the 2009 consolidated balance sheet,accumulated depreciation will be:
A)debited for $160,000 in the eliminating entries.
B)credited for $160,000 in the eliminating entries.
C)credited for $135,000 in the eliminating entries.
D)debited for $135,000 in the eliminating entries.
Q3) Based on the preceding information,what amount of consolidated net income should be reported in 2008?
A)$3,262,000
B)$4,050,000
C)$3,254,100
D)$3,122,000
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Chapter 7: Intercompany Inventory Transactions
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Sample Questions
Q1) The consolidation treatment of profits on inventory transfers that occurred before the business combination depends on whether: I.the companies were independent at that time.
II)the sale transaction was the result of arm's-length bargaining.
A)I
B)II
C)Both I and II
D)Neither I nor II
Q2) Based on the information given above,what will be the income to noncontrolling interest for 2008?
A)$39,750
B)$37,875
C)$71,275
D)$70,875
Q3) Based on the information given above,what will be the income to controlling interest for 2008?
A)$615,375
B)$686,250
C)$690,000
D)$694,000
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Chapter 8: Intercompany Indebtedness
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Sample Questions
Q1) Culver owns 80 percent of the common stock of Fowler Company.Culver also purchases some of Fowler's bonds directly from Fowler and holds the bonds as a long-term investment.How is the acquisition of the bonds treated for consolidated reporting purposes?
A)As a retirement of bonds.
B)As an increase in the Bonds Payable account on Fowler's books.
C)Everything related to the bonds is eliminated in the consolidation workpaper,and nothing related to the bonds appears in the consolidated financial statements.
D)As an increase in noncurrent assets.
Q2) Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 2009 consolidated financial statements?
A)$3,500
B)$2,800
C)$5,000
D)$2,500
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10
Chapter 9: Consolidation Ownership Issues
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Sample Questions
Q1) Based on the information provided,what amount will be reported as consolidated net income for 2009 under the treasury stock method?
A)$150,000
B)$100,000
C)$75,000
D)$175,000
Q2) Based on the preceding information,what is the total noncontrolling interest reported in the consolidated balance sheet as of January 1,2008?
A)$80,000
B)$40,000
C)$50,000
D)$60,000
Q3) Based on the preceding information,the eliminating entry needed in preparing a consolidated balance sheet immediately following the acquisition of shares will include:
A)a credit to Noncontrolling Interest for $19,375.
B)a credit to Additional Paid-In Capital for $75,000.
C)a debit to Treasury Shares for $30,000.
D)a credit to Investment in Movie stock for $6,125.
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11
Chapter 10: Additional Consolidation Reporting Issues
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Q1) Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in investing activities for 2009?
A)$180,000
B)$100,000
C)$255,000
D)$110,000
Q2) Based on the information given,which eliminating entry relating to the intercorporate sale of land is to be entered in the consolidation workpaper prepared at the end of 2008?
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Based on the preceding information,what amount will be reported by the company as cash received from customers during the year?
A)$455,000
B)$475,000
C)$450,000
D)$425,000
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Page 12
Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Sample Questions
Q1) Based on the preceding information,what is the overall effect of speculation on 2009 net income?
A)$1,000 loss
B)$6,000 gain
C)$3,000 loss
D)$8,000 gain
Q2) Based on the preceding information,what is the market price of Linked Corporation stock on February 20,2009?
A)$35
B)$37
C)$36
D)$40
Q3) Based on the preceding information,which of the following entries will be required on February 1,2009?
A)Option A
B)Option B
C)Option C
D)Option D
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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 the U.S.dollar is the functional currency,what is the amount of Perth's cost of goods sold remeasured in U.S.dollars?
A)$811,500
B)$843,500
C)$884,500
D)$799,500
Q2) Refer to the above information.Assuming the U.S.dollar is the functional currency,what is Perth's net income for 2008 in U.S.dollars (include the remeasurement gain or loss in Perth's net income)?
A)$238,000
B)$228,000
C)$219,500
D)$202,000
Q3) Dividends of a foreign subsidiary are translated at:
A)the average exchange rate for the year.
B)the exchange rate on the date of declaration.
C)the current exchange rate on the date of preparation of the financial statement.
D)the exchange rate on the record date.
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Chapter 13: Segment and Interim Reporting
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Sample
Questions
Q1) Derby Company pays its executives a bonus of 6 percent of income before deducting the bonus and income taxes.For the quarter ended March 31,2008,Derby had income before the bonus and income tax of $12,000,000.For the year ended December 31,2008,Derby estimates that its income before bonus and income taxes will be $70,000,000.For the quarter ended March 31,2008,what is the amount of the bonus that Derby should deduct on its income statement?
A)$4,200,000
B)$720,000
C)$1,050,000
D)$180,000
Q2) Estimated gross profit rates may be used to estimate a company's cost of goods sold and its ending inventory for:
A)quarterly but not for annual financial statements.
B)both quarterly and annual financial statements.
C)neither quarterly nor annual financial statements.
D)annual but not for quarterly financial statements.
Q3) FASB has specified a "75% percent consolidated revenue test".
Required:
a)What is the 75% test?
b)How is the 75% test impacted by the "10% Significance Rule"?
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Chapter 14: Sec Reporting
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Questions
Q1) Which of the following best describes a "red herring" prospectus?
A)A shortened version of registration Form S-1 available to those companies that already have publicly traded securities.
B)A prospectus containing material irregularities and deficiencies.
C)Preliminary information provided to investors about an upcoming issue,and issued between the time a registration statement is presented to the SEC and its effective date.
D)Disclosure in the business press,outlined in red,informing investors of an upcoming offering.
Q2) 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
Q3) Form 10-Q
Q4) Form 10-K
Q5) Form 8-K
Q6) Comment Letter
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Sample Questions
Q1) When the old partners receive a bonus upon admission of a new partner into a partnership,the bonus is allocated to: I.all the partners in their profit and loss sharing ratio.
II)the existing partners in their profit and loss sharing ratio.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q2) Paul and Ray sell musical instruments through their partnership.To bring in additional funds and expertise,they decide to admit Janet to the partnership.Paul's capital is $400,000,Ray's capital is $200,000,and they share income in a ratio of 7:3,respectively.
Required
Record Janet's admission for each of the following independent situations:
a)Janet invests $180,000 for a one-fourth interest.Goodwill is to be recorded.
b)Paul and Ray agree that some of the inventory is obsolete.The inventory account is decreased before Janet is admitted.Janet invests $190,000 for a one-fourth interest.
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Chapter 16: Partnerships: Liquidation
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Q1) Refer to the information given above.What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 65,000 dollars?
A)Option A
B)Option B
C)Option C
D)Option D
Q2) The balance sheet given below is presented for the partnership of Janet,Anton,and Millet: The partners share profits and losses in the ratio of 5:3:2,respectively.The partners agreed to dissolve the partnership after selling the other assets for $50,000.On dissolution of the partnership,Janet should receive:
A)$0.
B)$80,000.
C)$10,000.
D)$30,000.
Q3) A partnership may be involved in "Dissociation" or "Dissolution".
Required:
Describe "Dissociation" and "Dissolution."
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18
Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Sample Questions
Q1) What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method?
A)Option A
B)Option B
C)Option C
D)Option D
Q2) The general fund of Wold Township ordered office furniture for the mayor's office on August 1,2008.The office furniture was estimated to cost $12,000.The office furniture was received on September 1,2008,with the actual cost being $11,800.Which of the following accounts decreased on September 1,2008?
A)Encumbrances only.
B)Expenditures only.
C)Encumbrances and Budgetary Fund Balance-Reserved for Encumbrances.
D)Expenditures and Budgetary Fund Balance-Reserved for Encumbrances.
Q3) Which of the following funds are classified as governmental funds?
A)Internal service and capital projects funds.
B)Internal service and debt service funds.
C)Enterprise and agency funds.
D)The general and special revenue funds.
Page 19
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Chapter 18: Governmental Entities: Special Funds and
Government-Wide Financial Statements
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Q1) A special revenue fund should be used in which of the following situations for a state government?
A)For sales taxes which are to be distributed to towns,cities,villages,etc.of the state.
B)For the proceeds of general obligation bonds which are to be used to construct major long-lived fixed assets.
C)For gasoline taxes which are to be used exclusively to repair state roads and bridges.
D)For investments donated by a prominent citizen which are to be invested permanently,with income being used to support homeless people.
Q2) At June 30,2009,total assets for the various funds of a local municipality were as follows: Applying GASB 34 criteria,which of the above are major funds for reporting purposes?
A)GF,CPF,EF
B)CPF,EF
C)CPF,ISF,EF
D)GF,CPF,ISF,EF
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Chapter 19: Not-For-Profit Entities
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Q1) Transaction: A gain was realized from the sale of endowment investments.The gain is not expendable. Effect on Statement of Operations:
A)Increases operating income.
B)Decreases operating income.
C)The transaction is reported on the statement of operations,but there is no effect on operating income.
D)The transaction is not reported on the statement of operations.
Q2) Received cash contributions restricted by donors for equipment.
Q3) Refer to the above information.On the statement of activities for the year ended June 30,2009,reclassifications would be reported at
A)$190,000.
B)$100,000.
C)$90,000.
D)$230,000.
Q4) "Classification of investment income from endowment investments if there are no donor restrictions as to income" describes which term listed above?
Q5) Expended 75 percent of the contributions previously received from donors for research.
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Chapter 20: Corporations in Financial Difficulty
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Sample Questions
Q1) Based on the preceding information,what estimated amount will be available for general unsecured creditors upon liquidation?
A)$28,000
B)$93,000
C)$113,000
D)$121,000
Q2) Which of the following could be true of the proceedings under Chapter 11 of the Bankruptcy Code?
A)Always administered by the bankruptcy courts.
B)The debtor's assets are sold and its liabilities extinguished.
C)The company does not operate during this period.
D)The debtor continues as a business after the reorganization.
Q3) Based on the preceding information,what is the total amount of unsecured claims?
A)$113,000
B)$126,000
C)$93,000
D)$121,000
Q4) What are the conditions necessary for using fresh start reporting in reorganization?
Q5) Briefly explain the three classes of creditors specified in the Bankruptcy Code.
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