Graduate Accounting Test Bank
Course Introduction
Graduate Accounting provides an advanced exploration of accounting theory, financial reporting, and regulatory frameworks essential for professional accountants. The course covers key topics such as advanced financial accounting, managerial accounting, auditing principles, and taxation, with an emphasis on critical analysis and interpretation of complex financial data. Students will engage in case studies, research projects, and practical exercises designed to develop expertise in ethical decision-making, corporate governance, and strategic financial management, preparing them for leadership roles in public accounting, industry, or government sectors.
Recommended Textbook
Advanced Accounting 12th Edition by Hoyle
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19 Chapters
1777 Verified Questions
1777 Flashcards
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) When applying the equity method, how is the excess of cost over book value accounted for?
A) The excess is allocated to the difference between fair value and book value multiplied by the percent ownership of current assets.
B) The excess is allocated to the difference between fair value and book value multiplied by the percent ownership of total assets.
C) The excess is allocated to the difference between fair value and book value multiplied by the percent ownership of net assets.
D) The excess is allocated to goodwill.
E) The excess is ignored.
Answer: C
Q2) Idler Co. has an investment in Cowl Corp. for which it uses the equity method. Cowl has suffered large losses for several years, and the balance in the investment account has been reduced to zero. How should Idler account for this investment?
Answer: Idler should discontinue the use of the equity method. The investment would have a zero balance until investee profits eliminate unrealized losses.
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Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) What is the difference in consolidated results between a business combination whereby the acquired company is dissolved, and a business combination whereby separate incorporation is maintained?
Answer: There is no difference in consolidated results.
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) Which of the following is a not a reason for a business combination to take place?
A) Cost savings through elimination of duplicate facilities.
B) Quick entry for new and existing products into domestic and foreign markets.
C) Diversification of business risk.
D) Vertical integration.
E) Increase in stock price of the acquired company.
Answer: E
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Page 4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) Prince Company acquires Duchess, Inc. on January 1, 2011. The consideration transferred exceeds the fair value of Duchess' net assets. On that date, Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of $400,000 and fair value of $500,000. If push-down accounting is not used, what amounts in the Building account appear on Duchess' separate balance sheet and on the consolidated balance sheet immediately after acquisition?
A) $400,000 and $1,600,000.
B) $500,000 and $1,700,000.
C) $400,000 and $1,700,000.
D) $500,000 and $2,000,000.
E) $500,000 and $1,600,000.
Answer: C
Q2) What advantages might push-down accounting offer for internal reporting?
Answer: Push-down accounting requires the subsidiary to record acquisition fair value allocations and amortizations in its accounting records. One advantage that the method offers to internal reporting is that it simplifies the consolidation process. More important, it provides better information for internal evaluation.
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) Beta Corp. owns less than one hundred percent of the voting common stock of Shedds Co. Under what conditions will Beta be required to prepare consolidated financial statements?
Q2) When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What amount should have been reported for the land in a consolidated balance sheet at the acquisition date?
A) $52,500.
B) $70,000.
C) $75,000.
D) $92,500.
E) $100,000.
Q3) Prevatt, Inc. owns 80% of Franklin Company. During the current year, a portion of the investment in Franklin is sold. Prior to recording the sale, Prevatt adjusts the carrying value of its investment. What is the purpose of the adjustment?
Q4) Where should a non-controlling interest appear on a consolidated balance sheet?
Q5) What is preacquisition income?
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Sample Questions
Q1) Stiller Company, an 80% owned subsidiary of Leo Company, purchased land from Leo on March 1, 2012, for $75,000. The land originally cost Leo $60,000. Stiller reported net income of $125,000 and $140,000 for 2012 and 2013, respectively. Leo uses the equity method to account for its investment.
Compute income from Stiller on Leo's books for 2012.
A) $110,000.
B) $100,000.
C) $125,000.
D) $85,000.
E) $88,000.
Q2) Virginia Corp. owned all of the voting common stock of Stateside Co. Both companies use the perpetual inventory method, and Virginia decided to use the partial equity method to account for this investment. During 2012, Virginia made cash sales of $400,000 to Stateside. The gross profit rate was 30% of the selling price. By the end of 2012, Stateside had sold 75% of the goods to outside parties for $420,000 cash. Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2012.
Q3) When is the gain on an intra-entity transfer of land realized?
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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115 Verified Questions
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Sample Questions
Q1) How would consolidated earnings per share be calculated if the subsidiary has no convertible securities or warrants?
A) Parent's earnings per share plus subsidiary's earnings per share.
B) Parent's net income divided by parent's number of shares outstanding.
C) Consolidated net income divided by parent's number of shares outstanding.
D) Average of parent's earnings per share and subsidiary's earnings per share.
E) Consolidated income divided by total number of shares outstanding for the parent and subsidiary.
Q2) Which of the following characteristics is not indicative of an enterprise qualifying as a primary beneficiary with a controlling financial interest in a variable interest entity?
A) The power to direct the most significant economic performance activities.
B) The power through voting or similar rights to direct activities which significantly impact economic performance.
C) The obligation to absorb potentially significant losses of the entity.
D) No ability to make decisions about the entity's activities.
E) The right to receive potentially significant benefits of the entity.
Q3) How does the existence of a non-controlling interest affect the preparation of a consolidated statement of cash flows?
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) Which of the following statements is true regarding a subsidiary's investment in the parent company's stock?
A) The treasury stock approach focuses on the parent's control over its subsidiary.
B) For consolidation, both the parent and subsidiary must eliminate all intra-entity investments.
C) In consolidation, the parent's retained earnings will not be reduced by the dividends it paid to the subsidiary.
D) This corporate combination is known as mutual ownership.
E) All of these are true statements.
Q2) What are the essential criteria for including a subsidiary within an affiliated group?
Q3) Why might a consolidated group file separate income tax returns?
A) There are no intra-entity transfers.
B) There are no unrealized gains in ending inventory.
C) One company is a foreign company.
D) Parent owns 68 percent of one company and 82 percent of another.
E) All of these.
Q4) Under what conditions must a deferred income tax asset be recorded?
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Chapter 8: Segment and Interim Reporting
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Sample Questions
Q1) On February 23, 2013, Cleveland, Inc. paid property taxes of $300,000 for the calendar year 2013.
Q2) Gregor Inc. uses the LIFO cost-flow assumption to value inventory. Inventory for Gregor on January 1, 2013 was 100 units at a LIFO cost of $25 per unit. During the first quarter of 2013, 200 units were purchased costing an average of $40 per unit, and sales of 265 units at a retail price of $50 per unit were made. Assuming Gregor does not expect to replace the units of beginning inventory sold, what is the amount of cost of goods sold for the quarter ended March 31, 2013?
Q3) What is the major objective of segment reporting?
Q4) Which one of the following items is not required to be disclosed for each operating segment?
A) Factors used to identify operating segments.
B) Products and services from which each segment derives its revenues.
C) Revenues from external customers.
D) Factors used to allocate company-wide expenses.
E) Revenues from transactions with other operating segments.
Q5) According to U.S. GAAP, how should common costs be allocated to individual segments to determine segment profit or loss?
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) All of the following hedges are used for future purchase/sale transactions except
A) Forward contracts used as a fair value hedge of a firm commitment.
B) Options used as a fair value hedge of a firm commitment.
C) Option contract cash flow hedge of a forecasted transaction.
D) Forward contract cash flow hedges of a forecasted transaction.
E) Forward contracts used to hedge a foreign currency denominated liability.
Q2) All of the following data may be needed to determine the fair value of a forward contract at any point in time except
A) The forward rate when the forward contract was entered into.
B) The current forward rate for a contract that matures on the same date as the forward contract entered into.
C) The future spot rate.
D) A discount rate.
E) The company's incremental borrowing rate.
Q3) What is meant by the spot rate?
Q4) Yelton Co. just sold inventory for 80,000 euros, which Yelton will collect in sixty days. Briefly describe a hedging transaction Yelton could engage in to reduce its risk of unfavorable exchange rates.
Page 11
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Chapter 10: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Under the current rate method, common stock would be translated at what rate?
A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.
Q2) When preparing a consolidation worksheet for a parent and its foreign subsidiary accounted for under the equity method, which of the following statements is false?
A) The cumulative translation adjustment included in the Investment in Subsidiary account is eliminated.
B) The excess of fair value over book value since the date of acquisition is revalued for the change in exchange rate.
C) The amount of equity income recognized by the parent in the current year is eliminated.
D) The allocations of excess of fair value over book value at the date of acquisition are eliminated.
E) The subsidiary's stockholders' equity accounts as of the beginning of the year are eliminated.
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Sample Questions
Q1) The types of differences that exist between IFRS and U.S. GAAP would not generally include:
A) Presentation differences.
B) Measurement differences.
C) Disclosure differences.
D) Comparability differences.
E) Recognition differences.
Q2) A U.S. company has many foreign subsidiaries and wants to convert its consolidated financial statements from U.S. GAAP to IFRS. Which of the following items is not one of the likely accounting issues to resolve for the opening IFRS balance sheet?
A) Measuring asset impairment.
B) Classifying extraordinary items.
C) Sale and leaseback gain recognition.
D) Measuring salaries expense.
E) Prior service cost recognition for pension amendments.
Q3) What is the IOSCO?
Q4) What are measurement differences in international reporting and what would be an example of a difference?
Q5) What are the two major types of legal systems used around the world?
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Sample Questions
Q1) What was the purpose of the Securities Act of 1933?
Q2) A letter of comments would be issued by the SEC
A) to request clarification of a registration statement.
B) to convey your pertinent comments to the SEC.
C) in response to a company's filing of Form 8-K.
D) after receiving the company's Form 10-K.
E) to indicate that a registration statement has been approved.
Q3) Which statement is false regarding the registration of public accounting firms with the PCAOB under the Sarbanes-Oxley Act?
A) Registration is required of all U.S. firms that prepare, issue, or participate in the preparation of an audit report for an entity that issues securities.
B) Foreign accounting firms are exempt from registration.
C) Disclosure requirements include annual fees received from each issuer for the firm's audit and non-audit services.
D) The Public Company Accounting Oversight Board subjects registered firms to periodic inspections.
E) Information regarding disagreements between the issuer and the audit firm during the previous year must be disclosed.
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Sample Questions
Q1) What are free assets?
A) assets for which net realizable value is greater than historical cost.
B) assets for which no market exists.
C) assets for which replacement cost is greater than historical cost.
D) assets available to be distributed for liabilities with priority and for other unsecured obligations.
E) assets available to be distributed to stockholders.
Q2) On a statement of financial affairs, a company's assets should be valued at A) historical cost.
B) net realizable value, if lower than historical cost.
C) replacement cost.
D) net realizable value, if higher than historical cost.
E) net realizable value, whether higher or lower than historical cost.
Q3) What is the meaning of the phrase debtor in possession?
Q4) What is meant by a "partially secured liability"?
Q5) What information is included on the statement of realization and liquidation?
Q6) What are the four categories of debts in a Statement of Financial Affairs?
Q8) To what does the term Chapter 7 bankruptcy refer? Page 15
Q7) Who must accept and confirm the Reorganization plan?
Q9) What is meant by a "fully secured liability"?
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Page 16
Chapter 14: Partnerships: Formation and Operation
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Sample Questions
Q1) For what events or conditions should the Articles of Partnership make provision?
Q2) Norr and Caylor established a partnership on January 1, 2012. Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000. For both partners, the beginning capital balance was to equal the initial investment. Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2012, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2013, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively. Each partner withdrew $1,000 per month throughout 2012 and 2013.
Determine the balance in both capital accounts at the end of 2012.
Q3) Under what circumstances does a partner's balance in his or her capital account have practical consequences for the partner?
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Chapter 15: Partnerships: Termination and Liquidation
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Sample Questions
Q1) A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners' capital accounts are as follows Harry $40,000, Landers $30,000 and Waters 15,000. The partners share profits and losses 4:4:2. If the building is sold for $50,000, how much cash will Waters receive in the final settlement?
A) $5,000.
B) $9,000.
C) $18,000.
D) $28,000.
E) $55,000.
Q2) Safe capital balances
At the start of a liquidation, this document provides guidance for all payments made to the partners throughout the liquidation.
Q3) What is the role of the accountant during the liquidation process?
Q4) What events or circumstances might force the termination of a partnership and liquidation of its assets?
Q5) What is the purpose of a predistribution plan?
Q6) For a partnership, how should liquidation gains and losses be accounted for?
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Chapter 16: Accounting for State and Local Governments
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Sample Questions
Q1) The Town of Anthrop has recorded the receipt of a $10,000 grant to make its Town Hall handicapped-accessible. The town now spends $10,000 to make the Town Hall handicapped-accessible.
Required:
Prepare the journal entry (or entries), and identify the fund for recording, to record that the town spends $10,000 of a grant it received to make the Town Hall handicapped-accessible.
Q2) Which standard issued by the Governmental Accounting Standards Board in 1999 required two distinct sets of financial statements for state and local governments?
A) GASB Statement No. 32.
B) GASB Statement No. 33.
C) GASB Statement No. 34.
D) GASB Statement No. 35.
E) GASB Statement No. 36.
Q3) What are the four fiduciary fund types?
Q4) Under modified accrual accounting, when should revenues be reported by a governmental-type fund?
Q5) When should property taxes be recognized under modified accrual accounting?
Q6) What is the definition of the term fund?
Page 19
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Chapter 17: Accounting for State and Local Governments
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Sample Questions
Q1) Which one of the following is a criterion for identifying a primary government?
A) it has an appointed board of directors.
B) it is fiscally dependent.
C) it is a local government.
D) it has a separately elected governing body.
E) it must prepare financial statements.
Q2) Which statement is false regarding the government-wide Statement of Net Assets?
A) the purpose of the Statement of Net Assets is to report the economic resources of the government as a whole.
B) assets are reported excluding capital assets.
C) capital assets are reported net of depreciation.
D) investments are reported at fair value rather than historical cost.
E) Business-type activities include Enterprise Funds.
Q3) What is meant by the term fiscally independent?
Q4) What three criteria must be met before a governmental unit can elect to not capitalize and therefore report a work of art or historical treasure as an asset?
Q5) How is the Statement of Cash Flows for Proprietary Funds similar and dissimilar to a Statement of Cash Flows for a for-profit business?
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Chapter 18: Accounting and Reporting for Private
Not-For-Profit Organizations
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Sample Questions
Q1) What are the objectives of accounting for a not-for-profit organization?
Q2) For a voluntary health and welfare organization, what are supporting services expenses?
Q3) A not-for-profit organization receives a computer as a donation (valued at $2,000). Prepare the journal entry for the transaction.
Q4) Wakefield Home is a private not-for-profit healthcare organization offering services for a fee. In the first quarter of 2013, Wakefield Home rendered services of $300,000 to patients. Of this amount 75% will be paid by patients, and $25,000 will be adjusted based on estimated insurance agreements. The remaining amount is to be paid by third party insurance providers.
Record the journal entries that reflect all of this information.
Q5) For May 2013, Carlington Hospital's charges for patient services were $608,000, of which 80% was billed to third-party payors.
Required:
Prepare the journal entry to accrue patient charges for the month.
Q6) For a not-for-profit organization, when is recognition of contributions of artworks and historical treasures not required?
Page 21
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Chapter 19: Accounting for Estates and Trusts
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Sample Questions
Q1) The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds
$50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny Mack's funeral was $20,000. Prepare the journal entry to record the collection of rental income of $10,000. $1,000 had been earned prior to the decedent's death.
Q2) A gift that is specified in a will as "I leave $5,000 in cash to my son" is a A) general legacy.
B) specific legacy.
C) demonstrative legacy. D) residual legacy.
E) devise.
Q3) Executor's fees and court costs for settling an estate usually A) must be apportioned between the principal and the income of the estate. B) are adjustments to the principal of the estate. C) are adjustments to the income of the estate. D) are subtracted from life insurance proceeds. E) are ignored.
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Page 22