Financial Reporting
Midterm Exam
Course Introduction
Financial Reporting is a comprehensive course that introduces students to the principles, standards, and practices involved in preparing and interpreting financial statements for external users. The course covers fundamental topics such as the conceptual framework of accounting, the accounting cycle, and the preparation of key reports like the balance sheet, income statement, and statement of cash flows. Emphasis is placed on understanding International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), recognizing revenue, accounting for assets and liabilities, and ensuring transparency and accuracy in financial disclosures. Students also explore ethical considerations and the role of financial reporting in decision-making processes for investors, regulators, and other stakeholders.
Recommended Textbook
Fundamentals of Advanced Accounting 7th Edition by Joe Ben Hoyle
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12 Chapters
1194 Verified Questions
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) What argument could be made against the equity method?
Answer: An argument could be made against the recognition of income under the equity method.The investor is required to recognize its share of the investee's income even when it is unlikely that the investor will ever receive the entire amount in cash dividends.
Q2) What is the Equity in Maya Income that should be reported by Cayman in 2018?
A)$17,100.
B)$18,000.
C)$25,500.
D)$29,100.
E)$30,900.
Answer: D
Q3) What is the Equity in Howell Income that should be reported by Acker in 2018?
A)$32,000.
B)$41,600.
C)$48,000.
D)$49,600.
E)$50,600.
Answer: B
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3
Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) Compute the consolidated revenues for 2018.
A)$2,700.
B)$ 720.
C)$ 920.
D)$3,300.
E)$1,540.
Answer: A
Q2) A statutory merger is a(n)
A)Business combination in which only one of the two companies continues to exist as a legal corporation.
B)Business combination in which both companies continue to exist.
C)Acquisition of a competitor.
D)Acquisition of a supplier or a customer.
E)Legal proposal to acquire outstanding shares of the target's stock.
Answer: A
Q3) How are direct combination costs accounted for in an acquisition transaction?
Answer: In an acquisition,direct combination costs are expensed in the period of the acquisition.
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4
Chapter 3:
Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) Assuming Rhine generates cash flow from operations of $27,200 in 2017,how will Harrison record the $16,500 payment of cash on April 15,2018 in satisfaction of its contingent obligation?
A)Debit Contingent performance obligation $16,500,and Credit Cash $16,500.
B)Debit Contingent performance obligation $3,142,debit Loss from revaluation of contingent performance obligation $13,358,and Credit Cash $16,500.
C)Debit Investment in Subsidiary and Credit Cash,$16,500.
D)Debit Goodwill and Credit Cash,$16,500.
E)No entry.
Answer: B
Q2) Compute the amount of Hurley's long-term liabilities that would be reported in a December 31,2018,consolidated balance sheet.
A)$1,700.
B)$1,800.
C)$1,650.
D)$1,750.
E)$3,500.
Answer: D
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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115 Verified Questions
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Sample Questions
Q1) When a parent uses the partial equity method throughout the year to account for its 80% investment in an acquired subsidiary,which of the following statements is true at the date immediately preceding the date on which adjustments are made on the consolidated worksheet?
A)Parent company net income equals consolidated net income.
B)Parent company retained earnings equals consolidated retained earnings.
C)Parent company total assets equals consolidated total assets.
D)Parent company dividends equal consolidated dividends.
E)Goodwill is recorded on the parent's books.
Q2) How much does Pell record as income from Demers for the year ended December 31,2020?
A)$90,400.
B)$89,000.
C)$50,400.
D)$96,000.
E)$56,000.
Q3) Prepare a proper presentation of consolidated net income and its allocation for 2019.
Q4) Prepare a proper presentation of consolidated net income and its allocation for 2020.
Page 6
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Sample Questions
Q1) What amount of gain should be reported by Smeder Company relating to the equipment for 2017 prior to making consolidating entries?
A)$36,000.
B)$34,000.
C)$12,000.
D)$10,000.
E)$ 0.
Q2) What is the gain or loss on equipment recognized by Devin on its internal accounting records for 2017?
A)$54,000 gain.
B)$21,000 loss.
C)$21,000 gain.
D)$ 9,000 loss.
E)$ 9,000 gain.
Q3) What is the impact on the noncontrolling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies?
Q4) When is the gain on an intra-entity transfer of land recognized in consolidated net income?
7
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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) Rojas Co.owned 7,000 shares (70%)of the outstanding 10%,$100 par,preferred stock and 60% of the outstanding common stock of Brett Co.Assuming there are no excess amortizations or intra-entity transactions,and Brett reports net income of $780,000,what is the noncontrolling interest in the subsidiary's income?
A)$234,000.
B)$273,000.
C)$302,000.
D)$312,000.
E)$284,000.
Q2) What is the amount of goodwill resulting from this acquisition?
Q3) 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.
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) Compute the fair value of the foreign currency option at February 1,2019.
A)$6,000.
B)$4,500.
C)$3,000.
D)$7,500.
E)$1,500.
Q2) Gaw Produce Company purchased inventory from a Japanese company on December 18,2018.Payment of 4,000,000 yen (¥)was due on January 18,2019.Exchange rates between the dollar and the yen were as follows: \(\begin{array}{ll}
&\text { Exchange }\\
\text { Date } & \text { Rate }\\
\text { December } 18,2018 & ¥ 1=\$ .0080 \\
\text { December } 31,2018 & ¥ 1=\$ .0082 \\
\text { January } 18,2019 & ¥ 1=\$ .0083 \end{array}\)
Required:
Prepare all journal entries for Gaw Produce Co.in connection with the purchase and payment.
Page 9
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Chapter 8: Translation of Foreign Currency Financial
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Sample Questions
Q1) Under what circumstances would the remeasurement of a foreign subsidiary's financial statements be required?
Q2) On December 31,2018,Westmore had accounts receivable of £280,000.What amount (rounded)would have been included for this subsidiary in calculating consolidated accounts receivable?
A)$173,913.
B)$176,100.
C)$445,200.
D)$448,000.
E)$450,800.
Q3) Assume the functional currency is the Euro;compute the U.S.balance sheet amount for equipment for 2018.
A)$81,900.
B)$90,900.
C)$83,700.
D)$88,200.
E)$85,500.
Q4) Prepare an income statement for this subsidiary in stickles and then translate these amounts into U.S.dollars.
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Chapter 9: Partnerships: Formation and Operation
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Sample Questions
Q1) What was Wasser's capital balance at the end of 2018?
A)$201,000.
B)$263,520.
C)$264,540.
D)$304,040.
E)$313,780.
Q2) Eden contributed $124,000 in cash to the business to receive a 20% interest in the partnership.Goodwill was to be recorded.The four original partners shared all profits and losses equally.After Eden made his investment,what were the individual capital balances?
Q3) Partnerships have alternative legal forms including all of the following except:
A)General Partnership.
B)Limited Partnership.
C)Subchapter S Partnership.
D)Limited Liability Partnership.
E)Limited Liability Company.
Q4) Determine the amount of net income allocated to each partner for 2018.(Round all calculations to the nearest whole dollar).
Q5) Determine the amount of net income allocated to each partner for 2017.
Q6) How is accounting for a partnership different from accounting for a corporation?
Page 11
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Chapter 10: Partnerships: Termination and Liquidation
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Sample Questions
Q1) How would $90,000 be distributed?
\(\begin{array}{ccc}
& \text { White } &&& \text { Sands } & \text { Luke } \\\end{array}\)
A) \(\begin{array}{ccc} & \$ 15,000 & \$ 25,000 & \$ 50,000 \\\end{array}\)
B) \(\begin{array}{ccc} & \$ 0&&&&\$ 18,947 & \$ 71,053 \\\end{array}\)
C) \(\begin{array}{ccc} & \$0&&&& \$ 40,000 & \$ 50,000 \\\end{array}\)
D) \(\begin{array}{ccc} & \$0&&& & \$ 10,588 & \$ 79,412 \\\end{array}\)
E)\(\begin{array}{ccc} & \$ 27,000 && \$ 18,000 & \$ 45,000 \\ \end{array}\)
Q2) Record the journal entry for the sale of the noncash assets.
Q3) If the building is sold for $50,000,what amount should Waters receive in the final settlement?
A)$ 5,000.
B)$ 9,000.
C)$18,000.
D)$28,000.
E)$55,000.
Q4) How much of the existing cash balance could be distributed safely to partners at this time?
Q5) Why is a preliminary distribution of partnership assets prepared?
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Chapter 11: Accounting for State and Local Governments,
part I
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Sample Questions
Q1) The board of commissioners of the city of Jarmaine adopted a General fund budget for the year ending June 30,2018,which indicated tax levy revenues of $1,300,000,bond proceeds of $520,000,appropriations for government operations of $1,170,000,and operating transfers out of $390,000.
Required:
If this budget was formally integrated into the accounting records used to produce the governmental fund financial statements,what was the required journal entry at the beginning of the year?
Q2) On January 1,2018,Wakefield City purchased office supplies for $40,000.During the year,$35,000 of these supplies were used.
Required:
Record the journal entries for these transactions using the purchases method.(Disregard the encumbrance entries. )
Q3) Which of the following is not a classification of non-exchange transactions?
A)Derived tax expenditures.
B)Voluntary non-exchange transactions.
C)Government-mandated non-exchange transactions.
D)Derived tax revenues.
E)Imposed non-exchange revenues.
Page 13
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Chapter 12: Accounting for State and Local Governments, part II
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Sample Questions
Q1) The modified approach to accounting for infrastructure assets may be utilized by a state or local government if:
i.The government accumulates information about all infrastructure assets within either a network or subsystem of a network.
ii.The government capitalizes infrastructure assets.
iii.The government expenses costs of maintaining the infrastructure assets.
iv.The government chooses to depreciate its infrastructure assets.
A)i and ii.
B)i,ii,and iv.
C)ii and iii.
D)i,ii,and iii.
E)i,ii,iii,and iv.
Q2) What information is required in the financial section of a state or local government's CAFR?
Q3) Assuming the landfill is recorded within the General fund,how would the landfill information be represented in the governmental fund financial statements at December 31,2018?
Q4) What is meant by the term legally independent?
Q5) What is meant by the term fiscally independent?
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