Graduate Accounting Seminar
Pre-Test Questions
Course Introduction
The Graduate Accounting Seminar is an advanced course designed to engage students in critical analysis and discussion of contemporary issues and emerging trends within the accounting profession. Through a combination of research presentations, in-depth case studies, and scholarly readings, students explore topics such as regulatory changes, ethical considerations, international accounting standards, and the latest innovations in financial reporting and auditing. The seminar format encourages active participation, collaborative learning, and the development of analytical, communication, and research skills essential for leadership roles in accounting and related fields.
Recommended Textbook
Advanced Accounting 11th Edition by Floyd A. Beams
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Page 2
Chapter 1: Business Combinations
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Q1) Which of the following is not a reason for a company to expand through a combination, rather than by building new facilities?
A) A combination might provide cost advantages.
B) A combination might provide fewer operating delays.
C) A combination might provide easier access to intangible assets.
D) A combination might provide an opportunity to invest in a company without having to take responsibility for its financial results.
Answer: D
Q2) Historically, much of the controversy concerning accounting requirements for business combinations involved the ________ method.
A) purchase
B) pooling of interests
C) equity
D) acquisition
Answer: B
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Chapter 2: Stock Investments Investor Accounting and Reporting
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Q1) Assume that Pansy Incorporated used the cost method of accounting for its investment in Sunflower.The balance in the Investment in Sunflower account at December 31, 2013 was
A) $76,700.
B) $80,000.
C) $83,300.
D) $95,000.
Answer: B
Q2) Panda Corporation purchased 100,000 previously unissued shares of Skunk Company's $10 par value common stock directly from Skunk for $2,200,000.Skunk's stockholders' equity immediately before the investment by Panda consisted of $3,000,000 of common stock and $4,800,000 in retained earnings.What is Panda's book value of equity in the net assets of Skunk?
A) $2,200,000
B) $2,500,000
C) $3,000,000
D) $3,333,000
Answer: B
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Page 4
Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) What method must be used if FASB Statement No.94 prohibits full consolidation of a 70% owned subsidiary?
A) The cost method
B) The Liquidation value
C) Market value
D) Equity method
Answer: D
Q2) A newly acquired subsidiary had pre-existing goodwill on its books.The parent company's consolidated balance sheet will
A) not show any value for the subsidiary's pre-existing goodwill.
B) treat the goodwill similarly to other intangible assets of the acquired company.
C) not show any value for the pre-existing goodwill unless all other assets of the subsidiary are stated at their full fair value.
D) always show the pre-existing goodwill of the subsidiary at its book value.
Answer: A
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Chapter 4: Consolidated Techniques and Procedures
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Q1) What amount of Goodwill will be reported?
A) $54,400
B) $68,000
C) $72,000
D) $90,000
Q2) What amount of total liabilities will be reported?
A) $206,000
B) $278,400
C) $319,600
D) $348,000
Q3) What is the amount of total assets?
A) $1,380,000
B) $1,402,000
C) $1,470,000
D) $1,875,000
Q4) What is the amount of consolidated Retained Earnings?
A) $224,000
B) $259,200
C) $304,000
D) $324,000
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Chapter 5: Intercompany Profit Transactions - Inventories
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Q1) The consolidated income statement for Pouch Corporation and subsidiary for the year ended December 31, 2012 will show consolidated cost of sales of
A) $120,000.
B) $136,000.
C) $148,000.
D) $210,000.
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.
Q3) What is Pew's income from Sordid for 2011?
A) $32,000
B) $48,000
C) $60,000
D) $75,000
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Chapter 6: Intercompany Profit Transactions - Plant Assets
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Q1) Paula's Pizzas purchased 80% of their supplier, Sarah's Sauces.Sarah's book values equaled fair value at the time of the acquisition.Paula sold Sarah some packaging equipment on January 2, 2011 for $100,000.The equipment had a carrying value of $90,000, and original cost of $120,000, and had a remaining life of 10 years.Both Paula and Sarah depreciate their assets on the straight-line method.The equipment has no salvage value.
Required: Prepare the following entries:
1.Journal entries Paula and Sarah will prepare on their separate books in 2011.
2.Eliminating/adjusting entries on the consolidation worksheet at the end of 2011.
3.Eliminating/adjusting entries on the consolidation worksheet at the end of 2012.
Q2) Controlling interest share in consolidated net income for 2012 was
A) $121,000.
B) $125,000.
C) $131,000.
D) $143,000.
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Chapter 7: Intercompany Profit Transactions - Bonds
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Q1) Platts Incorporated purchased 80% of Scarab Company several years ago when the fair value equaled the book value.On January 1, 2010, Scarab has $100,000 of 8% bonds that were issued at face value and have five years to maturity.Interest is paid annually on December 31.Both Platts and Scarab would use the straight-line method to amortize any premium or discount incurred in the issuance or purchase of bonds.On January 1, 2011, Platts purchased all of Scarab's bonds for $96,000.
Required:
1.Prepare the journal entries in 2011 that would be recorded by Platts and Scarab on their separate financial records.
2.Prepare the consolidating working paper entries required for the year ending December 31, 2011.
Q2) Consolidated Interest Expense and consolidated Interest Income, respectively, that appeared on the consolidated income statement for the year ended December 31, 2010 was
A) $10,800 and $0.
B) $10,800 and $6,600.
C) $0 and $0.
D) $16,200 and $6,600.
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Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) 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%.
Q2) On January 1, 2011, Fly Corporation held a 60% interest in Liptin Corporation.The investment account balance was $2,100,000, consisting of 60% of Liptin's $3,500,000 of net assets.
During 2011, Liptin earned $300,000 uniformly and paid dividends of $110,000 on November 1.On October 1, 2011, Fly sold 10% of its investment in Liptin for $364,000, thereby reducing its interest in Liptin to 54%.
Required: Compute the following using the actual sales date assumption: 1.Gain or loss on sale.
2.Income from Liptin for 2011.
3.Noncontrolling interest share for 2011.
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Page 10
Chapter 9: Indirect and Mutual Holdings
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Q1) The controlling interest share of consolidated net income for the current year is A) $341,000.
B) $348,400.
C) $351,000.
D) $355,000.
Q2) The amount of income for the current year assigned to the noncontrolling shareholders of Badock Corporation is
A) $100,000.
B) $104,000.
C) $120,000.
D) $140,000.
Q3) Pallet Corporation owns 80% of Adelt Corporation and Adelt owns 60% of Bajo Inc.Which of the following is correct?
A) Bajo should not be consolidated because noncontrolling interests hold 52%.
B) Bajo should be consolidated because the 60% of Bajo stock is held in the affiliate structure.
C) Pallet has 8% indirect ownership of Bajo.
D) Pallet has 80% indirect ownership of Bajo.
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Chapter 10: Subsidiary Preferred Stock, Consolidated
Earnings Per Share, and Consolidated Income Taxation
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Q1) What should be the noncontrolling interest share, preferred in the consolidated financial statements of Parminter for the year ending December 31, 2011?
A) $1,000
B) $2,000
C) $4,000
D) $5,000
Q2) For the year ending December 31, 2011, the amount of Pamplin's income from Sage (associated with the common stock investment in Sage)is
A) $32,400.
B) $36,000.
C) $60,000.
D) $90,000.
Q3) In computing consolidated diluted EPS, the replacement calculation replaces the parent's equity in subsidiary earnings with the
A) parent's share of basic EPS of the subsidiary.
B) subsidiary's share of basic EPS of the parent.
C) parent's share of diluted EPS of the subsidiary.
D) subsidiary's share of diluted EPS of the parent.
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Chapter 11: Consolidation Theories, Push-Down Accounting, and Corporate Joint Ventures
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Q1) Pascoe's income from Sarabet under the equity method for 2011 was
A) $72,000.
B) $87,500.
C) $90,000.
D) $100,000.
Q2) Under parent company theory, the amount of consolidated net income is equal to the amount of ________ under entity theory.
A) noncontrolling interest share
B) noncontrolling interest income
C) income attributable to controlling stockholders
D) income attributable to noncontrolling stockholders
Q3) Under push-down accounting, the ________ of the acquired subsidiary's assets and liabilities are reported on the financial statements of the ________.
A) book value; subsidiary
B) book value; parent
C) fair value; subsidiary
D) present value; parent
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Page 13
Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) Crabby Industries, a U.S.corporation, purchased inventory from a company in Sweden on November 18, 2011 when the Swedish krona was trading at 1 krona = $0.161.The transaction was for 600,000 krona, and was to be paid in krona in 90 days.Crabby closed their books at December 31 for financial reporting purposes when the krona was trading at $0.167.On February 16, 2012, Crabby paid the invoice when the krona was trading at $0.156.
Required:
Show the journal entries recorded by Crabby on November 18, 2011, December 31, 2011, and February 16, 2012.
Q2) Gains or losses on foreign currency transactions are recorded before the related receivable or payable is settled when
A) the government cannot set an exchange rate for the foreign currency.
B) the foreign currency is unknown.
C) the fiscal year ends after the settlement of the receivable or payable.
D) the fiscal year ends before the settlement of the receivable or payable.
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Page 14
Chapter 13: Accounting for Derivatives and Hedging Activities
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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) International accounting standards differ from U.S.Generally Accepted Accounting Principles in that International standards
A) require that firm sale or purchase commitments are accounted for as fair value hedges.
B) require that firm sale or purchase commitments are accounted for as cash flow hedges.
C) state that firm sale or purchase commitments may not be treated as a hedged transaction.
D) permit firm sale or purchase commitments to be accounted for as either fair value hedges or cash flow hedges.
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Chapter 14: Foreign Currency Financial Statements
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Q1) A foreign entity is a subsidiary of a U.S.parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company.Which one of the following statements is false?
A) The U.S. dollar is the functional currency of this company.
B) Changes in exchange rates between the subsidiary's country and the parent's country are not expected to affect the foreign entity's cash flows.
C) Translation adjustments are shown in stockholders' equity as increases or decreases in other comprehensive income.
D) Translation adjustments are not shown on the income statement.
Q2) A U.S.parent corporation loans funds to a foreign subsidiary to be used to purchase equipment.The loan is denominated in U.S.dollars and the functional currency of the subsidiary is the euro.This intercompany transaction is a foreign currency transaction of A) neither the subsidiary nor the parent, as it is eliminated as part of the consolidation procedure.
B) the subsidiary but not the parent.
C) both the subsidiary and the parent.
D) the parent but not the subsidiary.
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Page 16
Chapter 15: Segment and Interim Financial Reporting
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Q1) In general, GAAP encourages the identification of reportable segments based on the following:
A) Reported segments must account for at least 75% of all external and inter-segment sales.
B) Reported segments must ideally account for at least 75% of all sales, unless there are many smaller divisions and separate reporting would create less clarity in reporting.
C) If there are more than 10 reportable segments, the company should consider additional aggregation of their segments.
D) Reported segments must account for 100% of the external sales, but only 75% of external and inter-segment sales.
Q2) What is the purpose of interim reporting?
A) Provide shareholders with more timely information
B) Provide shareholders with more accurate information
C) Provide shareholders with more extensive detail about specific accounts and transactions
D) Provide shareholders with more current audited information
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Chapter 16: Partnerships - Formation, Operations, and Changes in Ownership Interests
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Q1) Required:
1.Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $26,200 for 2011.
2.Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the partnership).
Q2) The profit and loss sharing agreement for the Mason, Nell, and Odell partnership provides for a $15,000 salary allowance to Nell.Residual profits and losses are allocated
5:3:2 to Mason, Nell, and Odell, respectively.In 2010, the partnership recorded $120,000 of net income that was properly allocated to the partners' capital accounts.On January 25, 2011, after the books were closed for 2010, Mason discovered that office equipment, purchased for $12,000 on December 29, 2010, was recorded as office expense by the company bookkeeper.
Required:
Prepare the necessary correcting entry(s)for the partnership.
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Chapter 17: Partnership Liquidation
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Q1) How much cash would Baker receive from the cash that is available for distribution on July 31? (Assume a safe payments schedule is used.)
A) $ 0
B) $ 800
C) $2,400
D) $4,000
Q2) If conditions produce a debit balance in a partner's capital account when liquidation losses are allocated, then
A) the partner receives further allocations of liquidation losses, but not gains.
B) the partner receives further allocations of liquidation gains, but not losses.
C) the partner is no longer obligated to partnership creditors.
D) the partner has an obligation of personal net assets to the other partners.
Q3) The cash available for distribution to the partners on July 31, 2011 is
A) $ 4,000.
B) $ 8,000.
C) $14,000.
D) $22,000.
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Chapter 18: Corporate Liquidations and Reorganizations
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Q1) A company emerging from bankruptcy will have a reorganization value that
A) approximates the book value of the entity's assets prior to bankruptcy.
B) approximates the book value of the entity prior to bankruptcy.
C) approximates the fair market value of the entity without considering liabilities.
D) approximates the fair market value of the entity's liabilities.
Q2) In a Chapter 11 case, the debtor corporation filing the petition may continue in possession of the corporation's property, and is referred to as a(n)
A) examiner.
B) trustee.
C) liquidator.
D) debtor in possession.
Q3) 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
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Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) The key focus of government fund accounting concerns
A) capital expenditures.
B) intergovernmental transfers from the general fund.
C) income measurement.
D) the current ability to provide and fund services and goods.
Q2) Under the modified accrual basis of accounting, revenues are recognized in the period
A) when the relevant service is done.
B) when they are collected.
C) when the paying entity is billed.
D) when they become both measurable and available.
Q3) The modified accrual basis of accounting is used for
A) governmental funds.
B) proprietary funds.
C) internal service funds.
D) both A and C.
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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) 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.
Q3) Which of the following funds has similar accounting and reporting to the special revenue fund?
A) The proprietary fund
B) The trust fund
C) The general fund
D) The agency fund
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Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) 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.
Q2) Enterprise funds are accounted for in a manner similar to A) internal service funds. B) capital project funds. C) special revenue funds.
D) debt service funds.
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Chapter 22: Accounting for Not-For-Profit Organizations
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Q1) In a nonprofit, nongovernmental hospital, courtesy allowances are A) charity care services.
B) revenue deductions. C) expenses.
D) revenues earned even if the standard charge is above or below the allowance.
Q2) The following information is available about the operations for a private, not-for-profit university.
1.The university sold $20,000,000 of 5% bonds to finance the construction of a new building for the business school.The bonds were sold on January 1 and pay interest on December 31 of each year.The bonds were sold at par and mature in 20 years.
2.The university received $7,500,000 cash in alumni and corporate donations for the new business school building.
3.The building was constructed at a total cost of $22,000,000 and the contractor was paid in full.
4.Interest was paid on the bonds.
5.Depreciation on the new building the first year was $275,000. Required:
Prepare the appropriate journal entries for the university for these transactions.
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Page 24
Chapter 23: Estates and Trusts
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Q1) Which of the following is a gift of an object to a devisee?
A) A general devise
B) A specific devise
C) A testamentary allocation
D) An administrative devise
Q2) Under the amended Uniform Probate Code, if the decedent dies intestate, and if there are descendants from a prior marriage or relationship, the surviving spouse receives what?
A) $25,000 and 2/3 of the remaining intestate estate
B) $200,000 and 1/3 of the remaining intestate estate
C) $50,000 and 1/2 of the remaining intestate estate
D) $100,000 and 1/2 of the remaining intestate estate
Q3) What is the current annual gift amount that can be left to an individual donee, without being subject to a federal gift tax?
A) $6,500
B) $13,000
C) $19,500
D) $26,000
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