Forensic Accounting Final Exam
Course Introduction
Forensic Accounting is a specialized area of accounting that focuses on the application of accounting principles, investigative skills, and legal knowledge to detect, investigate, and prevent financial fraud and white-collar crime. This course covers topics such as financial statement fraud, asset misappropriation, corruption schemes, litigation support, and the use of data analytics in forensic investigations. Students will learn how forensic accountants collect and analyze evidence, prepare expert reports, and testify in legal proceedings. The course also explores ethical considerations, regulatory requirements, and the role of forensic accountants in both criminal and civil cases.
Recommended Textbook
Advanced Financial Accounting 12th Edition by Theodore E. Christensen
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Page 2
Chapter 1: Intercorporate Acquisitions and Investments in
Other Entities
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Q1) The length of the measurement period allowed to value the assets and liabilities in an acquired business combination starts on the date of acquisition and lasts until:
A)All necessary information about the facts of the acquisition is obtained
B)All necessary information about the facts of the acquisition is obtained,not to exceed one month
C)All necessary information about the facts of the acquisition is obtained,not to exceed one reporting period
D)All necessary information about the facts of the acquisition is obtained,not to exceed one year
Answer: D
Q2) Based on the preceding information,what number of shares was issued at the time of the exchange?
A)5,000
B)17,500
C)12,500
D)10,000
Answer: C
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Chapter 2: Reporting Intercorporate Investments and
Consolidation of Wholly Owned Subsidiaries With No Differential
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Q1) The Salmon Corporation (Salmon)reported net income for the current year of $200,000 and paid cash dividends of $30,000.The Pond Company (Pond)holds 22 percent of the outstanding voting stock of Salmon.However,another corporation holds the other 78 percent ownership and does not take Pond's input into consideration when making financing and operating decisions for Salmon.What investment income should Pond recognize for the current year?
A)$6,600
B)$0
C)$44,000
D)$50,600
Answer: A
Q2) Based on the preceding information,what amount of total liabilities was reported in the consolidated balance sheet immediately after the acquisition?
A)$370,000
B)$670,000
C)$820,000
D)$870,000
Answer: C
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Chapter 3: The Reporting Entity and the Consolidation of
Less-Than-Wholly- Owned Subsidiaries With No Differential
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Q1) Primo Corporation acquired 60 percent of Secondo Corporation's voting common stock.On the date of acquisition,Primo had equipment with a book value of $50,000 and a fair value of $150,000.Secondo's buildings and equipment had a book value of $200,000 and a fair value of $200,000 at the time of the acquisition.What will be the amount at which buildings and equipment will be reported in consolidated statements immediately following the acquisition?
A)$150,000
B)$200,000
C)$230,000
D)$250,000
Answer: D
Q2) Based on the preceding information,what amount would be reported as noncontrolling interest in the consolidated balance sheet at December 31,20X9?
A)$27,000
B)$4,000
C)$15,000
D)$18,000
Answer: D
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
Acquired at More Than Book Value
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Q1) Based on the information provided,what amount of total assets will be reported in the consolidated balance sheet for the year?
A)$895,000
B)$801,000
C)$723,000
D)$1,111,000
Q2) Based on the preceding information,what amount of liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$615,000
B)$406,000
C)$300,000
D)$265,000
Q3) Based on the preceding information,what amount of total stockholders' equity will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$300,000
B)$479,000
C)$315,000
D)$350,000
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Chapter 5: Consolidation of Less-Than-Wholly- Owned
Subsidiaries Acquired at More Than Book Value
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Q1) Based on the preceding information,the increase in the fair value of patents held by Side is:
A)$20,000
B)$25,000
C)$15,000
D)$5,000
Q2) Based on the preceding information,what amount of consolidated retained earnings will be reported immediately after the business combination?
A)$205,000
B)$120,000
C)$325,000
D)$310,000
Q3) Based on the preceding information,what amount will be reported as noncontrolling interest in the consolidated balance sheet immediately following the acquisition?
A)$0
B)$70,000
C)$83,750
D)$100,000
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Chapter 6: Intercompany Inventory Transactions
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Q1) Based on the information given above,what balance will be reported for inventory in the consolidated balance sheet for December 31,20X3?
A)$8,800
B)$44,286
C)$53,086
D)$73,000
Q2) A newly created subsidiary sold all of its inventory to its parent at a profit in its first year of existence.The parent,in turn,sold all but 20 percent of the inventory to unaffiliated companies,recognizing a profit.The parent had no other sales during the year.The amount that should be reported as cost of goods sold in this year's consolidated income statement should be:
A)80 percent of the amount reported as intercompany sales by the subsidiary.
B)80 percent of the amount reported as cost of goods sold by the subsidiary.
C)the amount reported as cost of goods sold by the parent minus unrealized profit in the ending inventory of the parent.
D)80 percent of the amount reported as cost of goods sold by the parent.
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Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) PeopleMag sells a plot of land for $100,000 to Seven Star Company,its 100 percent owned subsidiary,on January 1,20X7.The cost of the land was $75,000,when it was purchased in 20X6.In 20X9,Seven Star sells the land to Hot Properties Inc. ,an unrelated entity,for $120,000.How is the land reported in the consolidated financial statements for 20X7,20X8 and 20X9?
Q2) Based on the preceding information,at what amount should the land be reported in the consolidated balance sheet as of December 31,20X8?
A)$145,000
B)$220,000
C)$197,000
D)$160,000
Q3) Peter Architectural Services owns 100 percent of Smith Manufacturing.During the course of 20X8 Peter provides $100,000 of architectural services associated with Smith's new manufacturing facility,which will open January 4,20X9,and has a 5 year useful life.Explain the impact providing this service has on Peter Architectural Services' 20X8 and 20X9 consolidated financial statements.
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of interest income will be eliminated in the preparation of the 20X9 consolidated financial statements?
A)$16,420
B)$11,494
C)$16,103
D)$11,291
Q2) Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 year-end consolidated financial statements?
A)$4,276
B)$4,923
C)$6,108
D)$7,033
Q3) Based on the information given above,in the preparation of the 20X8 consolidated financial statements,interest income will be:
A)debited for $12,293 in the consolidating entries.
B)credited for $12,293 in the consolidating entries.
C)debited for $16,000 in the consolidating entries.
D)credited for $16,000 in the consolidating entries.
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Chapter 9: Consolidation Ownership Issues
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Q1) Based on the information provided,what amount of income will be assigned to the controlling interest in the 20X8 consolidated income statement?
A)$130,750
B)$150,000
C)$141,250
D)$157,000
Q2) Based on the preceding information,in the consolidating entries to complete a full consolidation worksheet,Investment in Silver Stock at January 1,20X9,will be credited for:
A)$255,000.
B)$240,000.
C)$204,000.
D)$136,000.
Q3) Based on the information provided,what amount will be reported as consolidated net income for 20X9 under the treasury stock method?
A)$150,000
B)$100,000
C)$75,000
D)$175,000
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Chapter 10: Additional Consolidation Reporting Issues
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Q1) Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 20X5?
A)$325,000
B)$333,000
C)$358,000
D)$367,000
Q2) Use the information given,but also assume that Company P holds the land at the end of 20X9.The consolidating entry relating to the intercorporate sale of land to be entered in the consolidation worksheet prepared at the end of 20X9 will include a debit to Investment in Company S for:
A)$4,500.
B)$7,500.
C)$15,000.
D)$10,500.
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) On November 6,20X7,Zucor Corp.purchased merchandise from an unaffiliated foreign company for 50,000 units of the foreign company's local currency.On that date,the spot rate was $1.259.Zucor paid the bill in full three months later when the spot rate was $1.258.The spot rate was $1.255 on December 31,20X7.What amount should Zucor report as a foreign currency transaction gain in its income statement for the year ended December 31,20X7?
A)$0
B)$50
C)$150
D)$200
Q2) Based on the preceding information,the entries on January 30,20X9 related to the forward contract include a:
A)Debit to Dollars Payable to Exchange Broker,$180,000.
B)Credit to Cash,$184,000.
C)Credit to Premium on Forward Contract,$4,000.
D)Credit to Foreign Currency Receivable from Exchange Broker,$180,000.
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Page 13
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 Ski'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 the balance in Polaris's investment in foreign subsidiary account at December 31,2008?
A)$3,303,400
B)$3,294,500
C)$3,323,400
D)$3,314,500
Q3) Based on the preceding information,in the journal entry to record parent's share of subsidiary's translation adjustment:
A)Other Comprehensive Income-Translation Adjustment will be debited for $8,000.
B)Other Comprehensive Income-Translation Adjustment will be credited for $6,000.
C)Investment in Steamship Company will be credited for $6,000.
D)Investment in Steamship Company will be debited for $8,000.
Page 14
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Chapter 13: Segment and Interim Reporting
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Q1) If a company changes the method it uses to compute the allowance for uncollectible accounts receivable because more recent information has become available,how is this change in method accounted for?
A)The change is only reported in the current period in which the change is made
B)The change is reported in all future periods affected by the change
C)Previously issued financial statements are not adjusted by the change
D)All of the other answers are correct ways to account for the change
Q2) ASC 280 requires certain disclosures about major customers.All of the following statements about those disclosures are true with the exception of which statement?
A)The identity of the segment reporting the revenue from a significant customer must be disclosed a footnote.
B)The amount of revenue from a significant customer must be disclosed in a footnote.
C)For applying the disclosure test,there is no specific threshold (percent of total revenues)that is defined as "significant".
D)A local,state,or foreign government can be considered a major customer.
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15
Chapter 14: Sec Reporting
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Questions
Q1) What does an underwriter typically require from an accountant which indicates that the company has fulfilled all the accounting requirements in the registration process?
A)A comment letter
B)An audit opinion
C)A "red herring" prospectus
D)A comfort letter
Q2) Which of the following is defined as directly or indirectly having the power to vote the shares or investment power to sell the security?
A)Proxy
B)Significant influence
C)Control
D)Beneficial ownership
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 for the quarter presented.
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) Refer to the above information.Which statement below is correct if a new partner's goodwill is recognized upon contributing assets into the partnership?
A)B = A and D > C + A
B)B < A and D < C + A
C)B > A and D = C + A
D)B > A and D > C + A
Q2) The terms of a partnership agreement provide that one of the partners is to receive a salary allowance of $30,000,plus a bonus of 20 percent of income after deduction of the bonus and the salary allowance.If income is $150,000,the bonus should be:
A)$18,000
B)$20,000
C)$24,000
D)$30,000
Q3) Apple and Betty are planning on beginning a new business.They plan on forming a partnership.Apple will contribute $300,000 and will not be working.Betty will be working full time.They plan on splitting profits equally.They approach you,as an accounting major,to confirm their thoughts.What do you recommend?
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Chapter 16: Partnerships: Liquidation
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Q1) Refer to the information provided above.Using a safe payment schedule,how much cash will be distributed to Goliath at the end of the first month?
A)$7,500
B)$25,000
C)$47,500
D)$72,500
Q2) In order to avoid inequalities in the liquidation process the legal doctrine of setoff effectively treats loans from partners to the partnership as:
A)outside debt that can offset a deficit capital account balance.
B)inside debt that can offset a deficit capital account balance.
C)additional capital investments that can offset a deficit capital account balance.
D)additional capital investments that can offset a partnership loss.
Q3) A partnership may be involved in "Dissociation" or "Dissolution."
Required:
Describe "Dissociation" and "Dissolution."
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) The Town of Pasco has no supplies inventory in its general fund on January 1,20X8.During 20X8,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,20X8,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,20X8,the general fund of Pasco should credit:
A)Expenditures for $170,000.
B)Fund Balance-Unassigned for $170,000.
C)Fund Balance-Nonspendable for $30,000.
D)Expenditures for $30,000.
Q2) GASB 31 "Accounting for Financial Reporting for Certain Investments and for External Reporting Investment Pools," establishes a general rule that government entities value investments in option contracts,open-ended mutual funds,and debt securities for balance sheet presentation at:
A)lower of cost or market.
B)fair value.
C)cost.
D)amortized cost.
Q3) Briefly discuss the various types of governmental funds and proprietary funds.
Page 19
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Chapter 18: Governmental Entities: Special Funds and Governmentwide Financial Statements
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Q1) Refer to the above information.For the year ended June 30,20X9,what amount should the trust fund report as investment earnings on the statement of revenues,expenses,and changes in fund balance?
A)$60,000
B)$68,000
C)$70,000
D)$78,000
Q2) Ponca City issued general obligation bonds to finance construction of a new city hall.In the city hall capital projects fund,the proceeds of the general obligation bonds should be credited to:
A)Revenue-General Obligation Bonds.
B)General Obligation Bonds Payable.
C)Deferred Revenue-General Obligation Bonds.
D)Other Financing Sources-Bond Issue Proceeds.
Q3) Agency funds report:
A)only assets and liabilities.
B)assets,liabilities,fund balance,revenues,and expenditures.
C)assets,liabilities,and fund balance.
D)only revenues and expenditures.
Page 20
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Chapter 19: Not-For-Profit Entities
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Q1) According to ASC 958,not-for-profit entities should recognize depreciation/amortization:
I.on all long-lived tangible assets.
II.on all long-lived intangible assets.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q2) Transaction: Endowment income was earned.The donor placed no restrictions on the investment earnings.
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.
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Chapter 20: Corporations in Financial Difficulty
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Q1) Which of the following observations concerning claims by general unsecured creditors is NOT true?
A)They are paid only after secured creditors and unsecured creditors with priority are satisfied to the extent of any legal limits.
B)They often receive less than the full amount of their claim.
C)They are entitled to "preference payments" at the discretion of the debtor's management.
D)The amounts to be paid to them are usually stated as a percentage of the total claim.
Q2) The payment to general unsecured creditors is often termed:
A)a "preference payment."
B)a "dividend."
C)a "write-off."
D)a "bonus."
Q3) To obtain cash quickly,DebCo.sold $750,000 of its receivables to Finco. ,with recourse.As the accountant for DebCo. ,what issues do you need to resolve in order to determine the appropriate accounting treatment?
Q4) What are the conditions necessary for using fresh start reporting in reorganization?
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Chapter 21: Intercompany Indebtednessfully Adjusted
Equity Method Using Straight-Line Interest Amortization
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Q1) Poodle Company owns 80 percent of the common stock of Shepherd Inc.Poodle acquires some of Shepherd's bonds from an unrelated party for less than the carrying value on Shepherd's books and holds them as a long-term investment.For consolidated reporting purposes,how is the acquisition of Shepherd's bonds treated?
A)As a decrease in the Bonds Payable account on Shepherd's books.
B)As an increase in noncurrent assets.
C)Everything related to the bonds is eliminated in the consolidation worksheet,and nothing related to the bonds appears in the consolidated financial statements.
D)As a retirement of bonds.
Q2) Based on the information given above,what amount of gain or loss on bond retirement was recorded?
A)No gain or loss
B)$85,000 gain
C)$85,000 loss
D)$35,000 loss
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