Global Accounting Practices
Final Exam
Course Introduction
Global Accounting Practices explores the principles, standards, and methods of accounting used around the world. The course examines how international financial reporting standards (IFRS) and generally accepted accounting principles (GAAP) are applied in different countries, highlighting their similarities and differences. Students analyze the implications of globalization for financial reporting, cross-border transactions, and multinational corporations, gaining practical insight into regulatory environments, cultural variations, and challenges in harmonizing accounting practices. The course prepares students to interpret and compare financial statements globally, fostering an understanding of how accounting information supports international business decision-making.
Recommended Textbook
Advanced Accounting International 11th edition by Floyd A. Beams
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Page 2
Chapter 1: Business Combinations
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Q1) According to FASB Statement No.141,liabilities assumed in an acquisition will be valued at the ________.
A)estimated fair value
B)historical book value
C)current replacement cost
D)present value using market interest rates
Answer: A
Q2) In reference to the FASB disclosure requirements about a business combination in the period in which the combination occurs,which of the following is correct?
A)Firms are not required to disclose the name of the acquired company.
B)Firms are not required to disclose the business purpose for a combination.
C)Firms are required to disclose the nature,terms and fair value of consideration transferred in a business combination.
D)All of the above are correct.
Answer: C
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3
Chapter 2: Stock Investments Investor Accounting and Reporting
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Q1) Pond Corporation uses the fair value method of accounting for its investment in Swan Company.Which one of the following events would affect the Investment in Swan Co.account?
A)Investee losses
B)Investee dividend payments
C)An increase in the investee's share price from last period
D)All of the above would affect the Investment in Swan Co.account.
Answer: C
Q2) Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1,2010,but was not able to exercise significant influence over Lilypad.During 2011,Jacana reported income of $120,000,excluding its income from Lilypad,and paid dividends of $50,000.Lilypad reported net income of $40,000 during 2011 and paid dividends of $20,000.Jacana should report net income for 2011 in the amount of
A)$115,000.
B)$120,000.
C)$125,000.
D)$130,000.
Answer: C
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Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) On July 1,2011,when Salaby Company's total stockholders' equity was $360,000,Pogana Corporation purchased 14,000 shares of Salaby's common stock at $30 per share.Salaby had 20,000 shares of common stock outstanding both before and after the purchase by Pogana,and the book value of Salaby's net assets on July 1,2011 was equal to the fair value.On a consolidated balance sheet prepared at July 1,2011,goodwill would be
A)$60,000.
B)$85,714.
C)$100,000.
D)$240,000.
Answer: D
Q2) Subsequent to an acquisition,the parent company and consolidated financial statement amounts would not be the same for
A)investments in unconsolidated subsidiaries.
B)investments in consolidated subsidiaries.
C)capital stock.
D)ending retained earnings.
Answer: B
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Chapter 4: Consolidated Techniques and Procedures
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Q1) On January 2,2011,PBL Enterprises purchased 90% of Santos Incorporated outstanding common stock for $1,687,500 cash.Santos' net assets had a book value of $1,300,000 at the time.A building with a 15-year remaining life and a book value of $100,000 had a fair value of $175,000.Any other excess amount was attributed to goodwill.PBL reported net income for the first year of $350,000 (without regard for its ownership in Santos),while Santos had $175,000 in earnings.
Required:
1.Calculate the amount of goodwill related to this acquisition as reported on the consolidated balance sheet at January 2,2011.
2.Calculate the amount of consolidated net income for the year ended December 31,2011.
3.What is the amount that will be assigned to the building on the consolidated balance sheet at the date of acquisition?
Q2) What amount of Goodwill will be reported?
A)$54,400
B)$68,000
C)$72,000
D)$90,000
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Page 6
Chapter 5: Intercompany Profit Transactions - Inventories
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Q1) A parent company regularly sells merchandise to its 70%-owned subsidiary.Which of the following statements describes the computation of noncontrolling interest share?
A)The subsidiary's net income times 30%
B)(The subsidiary's net income × 30%)+ unrealized profits in the beginning inventoryunrealized profits in the ending inventory
C)(The subsidiary's net income + unrealized profits in the beginning inventoryunrealized profits in the ending inventory)× 30%
D)(The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory)× 30%
Q2) If the intercompany sale was an upstream sale,the total amount of consolidated cost of goods sold for 2012 will be
A)$300,000.
B)$430,000.
C)$470,000.
D)$477,000.
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Chapter 6: Intercompany Profit Transactions - Plant Assets
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Q1) In preparing the consolidated financial statements for 2012,the elimination entry for depreciation expense was a A)debit for $5,000. B)credit for $5,000.
C)debit for $15,000. D)credit for $15,000.
Q2) On January 1,2012 Saffron Co.recorded a $40,000 profit on the upstream sale of some equipment that had a remaining four-year life under the straight-line depreciation method.The equipment has no salvage value.Saffron had separate income of $100,000 in 2012.The parent company,Pommel Incorporated,owns 90% of Saffron.Pommel would report investment income from Saffron in 2012 of A)$54,000.
B)$63,000.
C)$90,000.
D)$126,000.
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8
Chapter 7: Intercompany Profit Transactions - Bonds
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Q1) Popcorn Corporation owns 90% of the outstanding voting common stock of Salty Corporation.On January 1,2005,Salty issued $1,000,000 face amount of 12%,$1,000 bonds payable at 119.20.The bonds pay interest on January 1 and July 1 of each year and mature on January 1,2013.On July 2,2010,Popcorn purchased all of the outstanding bonds at a price of 107.50.Both companies use straight-line amortization.
Required:
1.Prepare the journal entries for July 1,2010 through December 31,2010 for Popcorn Corporation.
2..Prepare the journal entries for July 1,2010 through December 31,2010 for Salty Corporation.
3.Prepare the elimination entries necessary on the consolidating working papers for the year ended December 31,2010.
Q2) Controlling interest share of consolidated net income for 2011 was
A)$443,600.
B)$444,000.
C)$444,400.
D)$448,000.
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Page 9
Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) What is Goldberg's percentage ownership in Savannah after Savannah issues its stock to Goldberg?
A)76.32%
B)80.43%
C)82.57%
D)83.43%
Q2) Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2,2011.Giant's percentage ownership immediately after the sale of additional stock would be
A)66-2/3%.
B)75%.
C)80%.
D)83-1/3%.
Q3) Preacquisition income for 2010 is
A)$50,000.
B)$35,000.
C)$44,000.
D)$36,000.
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Chapter 9: Indirect and Mutual Holdings
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Q1) Noncontrolling interest share for Achille is
A)$18,000.
B)$25,200.
C)$36,200.
D)$72,000.
Q2) Paik Corporation owns 80% of Acdol Corporation and 60% of Ben Corporation.Acdol Corporation owns 10% of Ben Corporation.All subsidiary investments were acquired at book value.There are no fair value/book value differentials associated with each investment.Separate net incomes (excluding investment income)of the affiliated companies for 2011 are:
Paik: $600,000 which includes $60,000 unrealized losses on inventory items sold to Ben Acdol: $360,000
Ben: $340,000 which includes $100,000 unrealized profit on land sold to Acdol Required:
Determine controlling interest share of consolidated net income and noncontrolling interest shares for Paik Corporation and Subsidiaries for 2011.
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Chapter 10: Subsidiary Preferred Stock, consolidated
Earnings Per Share, and Consolidated Income Taxation
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Q1) Pan Corporation has total stockholders' equity of $5,000,000 consisting of $1,000,000 of $10 par value Common Stock,$1,000,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.Pan owns 80% of Sailor Corporation's common stock purchased at book value,which equals fair value.Sailor has $900,000 of 10% cumulative preferred stock outstanding,with no preferred dividends in arrears.The preferred stock has no call price,redemption price or liquidation price.Pan acquired 60% of the preferred stock of Sailor for $500,000.After this transaction the balances in Pan's Retained Earnings and Additional Paid-in Capital accounts,respectively,are
A)$2,960,000 and $1,000,000.
B)$3,000,000 and $960,000.
C)$3,000,000 and $1,040,000.
D)$3,040,000 and $1,000,000.
Q2) What is the implied goodwill for Salter based on Pardy's purchase price for Salter on January 1,2011?
A)$ 0
B)$ 35,000
C)$ 70,000
D)$100,000
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Chapter 11: Consolidation Theories, push-Down Accounting, and Corporate Joint Ventures
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Q1) Assume the parent company theory is used.On January 2,2011,Leah Company will report Goodwill of ________ and Accounts Receivable of ________ on Leah's balance sheet.
A)$27,000;$30,000
B)$27,000;$35,000
C)$30,000;$30,000
D)$45,000;$34,500
Q2) Noncontrolling interest share is viewed as an expense under ________ theory.
A)parent company
B)entity
C)contemporary
D)joint venture
Q3) Under GAAP,the ________ will include the variable interest entity in consolidated financial statements.
A)special purpose entity
B)limited liability company
C)trust
D)primary beneficiary
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Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) Ulysses Company purchases goods from China amounting to 372,372 Yuan (the transaction is denominated in the Chinese Yuan).Assume the Yuan is trading at $0.154 at the date the goods are ordered,and the Yuan is trading at $0.155 at the date the goods are received,and when the invoice is paid a month later,the Yuan is trading at $.156.Assume all three dates are in the same fiscal year.Which of the following is true?
A)The entry to record the payment will include a gain of $744.74.
B)The entry to record the payment will include a gain of $372.37.
C)The entry to record the purchase will include a credit to Accounts Payable of $57,345.29.
D)The entry to record the purchase will include a credit to Accounts Payable of $57,717.66.
Q2) If a sale on account by a U.S.company is made with a foreign company,and the U.S.company has no foreign currency risk,then
A)the U.S.company has measured the transaction in US dollars.
B)the U.S.company has denominated the transaction in US dollars.
C)the foreign company has measured the transaction in their own currency.
D)the foreign company has denominated the transaction in their own currency.
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Page 14
Chapter 13: Accounting for Derivatives and Hedging
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Q1) Assuming a present value factor of 1 for simplicity,what is the fair value of this forward contract on December 31?
A)$160 asset
B)$160 liability
C)$140 asset
D)$140 liability
Q2) Which of the following is not an approach appropriate for hedge accounting?
A)Cash Flow Hedge Accounting
B)Critical Term Hedge Accounting
C)Fair Value Hedge Accounting
D)Hedge of Net Investment in Foreign Subsidiary
Q3) A forward contract used as a cash flow hedge will be recorded as an asset if
A)the holder is expecting to receive a payment as a result of the contract.
B)the holder is accounting for the hedged instrument as a fair value hedge.
C)the holder is hedging the net investment in a foreign entity.
D)the holder is using the alternate accounting method and deferring all gains or losses from the hedge.
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Chapter 14: Foreign Currency Financial Statements
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Q1) Which of the following assets and/or liabilities are considered monetary?
A)Intangible Assets and Plant,Property,and Equipment
B)Bonds Payable and Common Stock
C)Cash and Accounts Payable
D)Notes Receivable and Inventories carried at cost
Q2) Which of the following statements about the Current Rate method is false?
A)Translation involves restating the functional currency amounts into the reporting currency.
B)All assets and liabilities are translated at the current rate.
C)If the subsidiary maintains their books in their functional currency,the current rate method is used.
D)The effect of exchange rate changes are reported on the income statement as a foreign exchange gain or loss.
Q3) All of the following factors would be used to define a foreign entity's functional currency,except
A)high volume of intercompany transactions.
B)expenses for foreign entity primarily driven by local factors.
C)financing for foreign entity denominated in local currency.
D)foreign entity's status as a local tax haven for transfer pricing purposes.
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Page 16
Chapter 15: Segment and Interim Financial Reporting
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Q1) For an operating segment to be considered a reporting segment under the revenue threshold,its reported revenue must be 10% or more of
A)the combined enterprise revenues,eliminating all relevant intracompany transfers and balances.
B)the combined revenues,excluding intersegment revenues,of all operating segments.
C)the combined revenues,including intersegment revenues,of all operating segments.
D)the consolidated revenue of all operating segments.
Q2) GAAP requires disclosures for each reportable operating segment for each of the following,except for
A)Revenues.
B)Depreciation expense.
C)R&D expenditures.
D)Extraordinary items.
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Chapter 16: Partnerships - Formation,operations,and
Changes in Ownership Interests
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Q1) On July 1,2011,Joe,Kline,and Lama began a partnership in which Joe and Kline each contributed cash of $200,000;and Lama contributed property with a fair value of $100,000 and a tax basis $150,000.Joe receives a 10% bonus of partnership income.Kline and Lama receive salaries of $40,000 each.The partnership agreement of Joe,Kline,and Lama provides that all partners receive 5% interest on capital and that profits and losses of the remaining income be distributed to Joe,Kline,and Lama by a 1:1:3 ratio.
Required:
Prepare a schedule to distribute $225,000 of partnership net income to the partners.
Q2) The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership income,after deduction of the bonus.If the partnership's income is $140,000,how much is Partner Y's bonus allocation?
A)$12,727
B)$13,860
C)$14,000
D)$15,400
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Chapter 17: Partnership Liquidation
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Q1) Which of the following procedures is acceptable when accounting for a deficit balance in a partner's capital account during partnership liquidation,if the partner with a negative capital balance is personally insolvent?
A)The partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero.
B)The negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners.
C)The negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances.
D)The partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to the same level of the other partners' capital accounts.
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19
Chapter 18: Corporate Liquidations and Reorganizations
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Q1) An entity which qualified for fresh-start accounting is not required to disclose which of the following items in their initial financial statements?
A)Adjustments from historical cost of assets and liabilities
B)Amount of debt of the prior entity forgiven
C)Amount of ending retained earnings/deficit of the prior entity
D)Changes to the management team from the prior entity
Q2) What is an advantage of filing a Chapter 11 petition?
A)The continuation of interest accrual on liabilities
B)Restrictions imposed by the bankruptcy court on day-to-day transactions
C)It is less costly than filing Chapter 7.
D)The opportunity to cancel unfavorable contracts
Q3) A single creditor
A)can never file a petition for bankruptcy.
B)with a $12,300 or more secured claim may file a petition for bankruptcy.
C)with a $12,300 or more unsecured claim may file a petition for bankruptcy,if there are fewer than 12 unsecured creditors.
D)with a $12,300 or more unsecured claim may file a petition for bankruptcy if there are more than 12 unsecured creditors.
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Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) The following are transactions for the city of Greenville.
a.Issued $50,000 10-year bonds.
b.Used $30,000 of the cash to buy a truck.
c.Sold the truck that was replaced which had cost $28,000,for $2,000.The old truck was fully depreciated.Residual value is zero.
d.Computed depreciation on the new truck for the year of $6,000.
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.
Q2) The modified accrual basis of accounting is used for
A)governmental funds.
B)proprietary funds.
C)internal service funds.
D)both A and C.
Q3) A comprehensive annual financial report has the following three major sections:
A)introductory,financial,and management's discussion and analysis.
B)introductory,financial,and statistical.
C)transmittal,financial,and statistical.
D)transmittal,financial,and management's discussion and analysis.
Page 21
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Chapter 20: Accounting for State and Local Governmental Units
- Governmental Funds
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Q1) Assume you are preparing journal entries for the General Fund.What account should be debited when office supplies are ordered?
A)Appropriations
B)Encumbrances
C)Expenditures
D)Other financing use
Q2) When recording an approved budget into the accounts of the general fund,which of the following accounts would be credited?
A)Appropriations
B)Encumbrances
C)Estimated revenues
D)Deferred revenues
Q3) Governments must record a liability for uncollected taxes instead of revenues for uncollected taxes if the taxes are going to be collected
A)30 days after the fiscal year end.
B)45 days after the fiscal year end.
C)60 days after the fiscal year end.
D)120 days after the fiscal year end.
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Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) The fixed assets and long-term liabilities associated with Proprietary Funds are reported on the
A)financial statements of governmental funds.
B)financial statements of fiduciary funds.
C)financial statements of proprietary funds.
D)financial statements of trust funds.
Q2) Prepare journal entries in an Internal Service Fund of Union County to record each of the following transactions.
1.Purchased equipment on September 1,2011 by paying $25,000 down and borrowing $100,000 on a 6%,2-year note.
2.In 2011,billed General Fund $620,000 for services provided.Billings to the Enterprise Fund totaled $165,000.All billings were collected by December 31,2011 except for $100,000 charged to the General Fund.
3.Accrued year-end adjustments at December 31,2011 for interest expense and depreciation.The useful life of the equipment is 5 years with no salvage value.
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Page 23
Chapter 22: Accounting for Not-For-Profit Organizations
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Q1) A nongovernmental,not-for-profit entity is subject to: I.GASB
II)FASB
A)I only
B)II only
C)a combination of I and II depending on the entity's purpose
D)neither I or II
Q2) In a not-for-profit,private university,the federal grant funds given directly to students for financial aid are an example of A)a bequest.
B)an agency transaction.
C)unrestricted revenue.
D)a restricted contribution.
Q3) Which of the following is not true?
A)A not-for-profit entity operates for purposes other than to provide goods or services at a profit.
B)A not-for-profit entity may be governmental or non-governmental.
C)A not-for-profit entity may possess ownership interests like a corporation.
D)A not-for-profit entity receives resources from resource providers who do not expect commensurate or proportionate pecuniary return.
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Chapter 23: Estates and Trusts
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Q1) Under the Uniform Probate Code,the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?
A)For one week
B)For two weeks
C)For three weeks
D)For five weeks
Q2) What is the dollar amount of the federal lifetime maximum gift tax exclusion?
A)$24,000
B)$600,000
C)$1,000,000
D)$2,000,000
Q3) What is the document prepared by the executor or administrator to show accountability for estate property received and maintained or disbursed in accordance with the will?
A)The Administrator/Executor's Fiduciary Report
B)The charge-discharge statement
C)The Administrator/Executor's Testamentary Report
D)The Administrator/Executor's Principal/Income Report
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