Graduate Financial Accounting Exam Review
Course Introduction
Graduate Financial Accounting explores advanced concepts and practices in financial accounting, focusing on the preparation, analysis, and interpretation of financial statements in accordance with international and national accounting standards. The course covers complex topics such as revenue recognition, financial instruments, consolidation, segment reporting, and the effects of regulatory frameworks. Students will gain an in-depth understanding of accounting theory, the impact of financial reporting on decision-making, and the ethical considerations in accounting practice, preparing them for roles in corporate finance, auditing, and financial management.
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) Which of the following observations refers to the term differential?
A)Excess of consideration exchanged over fair value of net identifiable assets.
B)Excess of fair value over book value of net identifiable assets.
C)Excess of consideration exchanged over book value of net identifiable assets.
D)Excess of fair value over historical cost of net identifiable assets.
Answer: C
Q2) Which of the following observations concerning "goodwill" is NOT correct?
A)Once written down,it may be written up for recoveries.
B)It must be tested for impairment at least annually.
C)A goodwill impairment loss must be reported as a separate line item within income from continuing operations unless it relates to discontinued operations.
D)It must be reported as a separate line item in the balance sheet.
Answer: A
Q3) Based on the preceding information,immediately after the transfer,
A)Conservative's total assets decreased by $23,000.
B)Conservative's total assets decreased by $20,000.
C)Conservative's total assets increased by $56,000.
D)Conservative's total assets remained the same.
Answer: B
Page 3
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Chapter 2: Reporting Intercorporate Investments and
Consolidation of Wholly Owned Subsidiaries With No Differential
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Q1) Based on the preceding information,what amount would be reported by Pony Company as the balance in its investment account on December 31,20X4?
A)$200,000
B)$220,500
C)$232,500
D)$255,500
Answer: C
Q2) A change from carrying securities at fair value to the equity method of accounting for an investment in common stock resulting from an increase in the number of shares held by the investor requires:
A)only a footnote disclosure.
B)that the cumulative amount of the change be shown as a line item on the income statement,net of tax.
C)retroactive restatement as if the investor always had used the equity method.
D)that the investor begins accruing income earned by the investee under the equity method at the date of acquisition of the new shares.
Answer: D
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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) Based on the preceding information,what amount will be assigned to noncontrolling interest on January 2,20X2,in the consolidated balance sheet?
A)$120,000
B)$126,000
C)$180,000
D)$420,000
Answer: C
Q2) Based on the preceding information,what will be the amount of net income reported by Salmon Corporation in 20X2?
A)$45,000
B)$50,000
C)$75,000
D)$105,000
Answer: B
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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 preceding information,what amount should be allocated to goodwill in the consolidated balance sheet prepared immediately after the combination?
A)$110,000.
B)$65,000.
C)$45,000.
D)$0.
Q2) Based on the preceding information,what amount should be allocated to goodwill in the consolidated balance sheet,prepared after this business combination?
A)$0
B)$25,000
C)$70,000
D)$45,000
Q3) Based on the preceding information,what amount of differential will arise in the consolidation process?
A)$0
B)$5,000
C)$15,000
D)$65,000
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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,what balance would Plus report as its investment in Side at January 1,20X9?
A)$251,100
B)$224,100
C)$215,100
D)$234,000
Q2) Based on the preceding information,what amount will be reported as noncontrolling interest in the consolidated balance sheet prepared immediately after the business combination?
A)$0
B)$81,000
C)$90,000
D)$96,000
Q3) Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$190,000
B)$230,000
C)$240,000
D)$440,000
7
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Chapter 6: Intercompany Inventory Transactions
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Q1) Based on the information given above,what amount of cost of goods must be eliminated from the consolidated income statement for 20X5?
A)$3,596,000
B)$3,379,000
C)$806,000
D)$589,000
Q2) Based on the information given above,what inventory balance will be reported by the consolidated entity on December 31,20X8?
A)$51,490
B)$53,100
C)$37,000
D)$20,100
Q3) Based on the information given above,what amount of sales will be reported in the 20X6 consolidated income statement?
A)$120,000
B)$135,000
C)$150,000
D)$160,000
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8
Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) Based on the preceding information,in the preparation of consolidation entries related to the equipment transfer for the 20X9 consolidated financial statements,the net effect on accumulated depreciation will be:
A)a decrease of $160,000.
B)an increase of $160,000.
C)an increase of $135,000.
D)a decrease of $135,000.
Q2) Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net income:
I.in the year of the downstream sale.
II.over the period of time the subsidiary uses the land.
III.in the year the subsidiary sells the land to an unrelated party.
A)I
B)II
C)III
D)I or II
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of interest expense should be reported in the 20X8 consolidated income statement?
A)$0
B)$6,548
C)$6,511
D)$19,643
Q2) Based on the information given above,what was the effect of Stick's purchase of Post's bonds on the noncontrolling interest amount reported in Post's June 30,20X2 consolidated balance sheet?
A)$3,000 increase
B)$7,000 decrease
C)$7,000 increase
D)No effect
Q3) Based on the information given above,what price did Peanut pay to purchase the Snoopy bonds?
A)$533,769
B)$516,875
C)$500,000
D)$550,644
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Page 10
Chapter 9: Consolidation Ownership Issues
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Q1) Based on the preceding information,what will be the equity method income reported by Princeton Company from its investment in Stanford Company during 20X9?
A)$32,000
B)$30,000
C)$72,000
D)$48,000
Q2) Based on the preceding information,what is the ending balance in noncontrolling interest in the net assets of Siena?
A)$186,000
B)$418,500
C)$523,125
D)$232,500
Q3) Based on the preceding information,what is Shovel's contribution to consolidated net income for 20X9?
A)$80,000
B)$100,000
C)$90,000
D)$50,000
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11
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) Based on the preceding information,what amount will be reported by the company as cash flows from operating activities for 20X5?
A)$225,000
B)$227,000
C)$232,000
D)$257,000
Q3) Based on the preceding information,income tax expense for Ponte for the year 20X8 will be:
A)$67,000
B)$64,600
C)$64,000
D)$66,400
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12
Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) Based on the preceding information,the entries on June 30,20X2,include a
A)debit to Dollars Payable to Exchange Broker,$262,500.
B)credit to Cash,$254,000.
C)credit to Premium on Forward Contract,$6,000.
D)credit to Foreign Currency Receivable from Exchange Broker,$262,500.
Q2) Based on the preceding information,the entries on May 31,20X2,include a A)credit to Foreign Currency Payable to Exchange Broker,$3,500.
B)debit to Foreign Currency Transaction Loss,$3,500.
C)credit to Foreign Currency Receivable from Exchange Broker,$2,500.
D)credit to Foreign Currency Receivable from Exchange Broker,$260,000.
Q3) Based on the preceding information,the entries on December 31,20X8 related to the forward contract include a:
A)Credit to Foreign Currency Payable to Exchange Broker,$4,000.
B)Debit to Foreign Currency Receivable from Exchange Broker,$6,000.
C)Debit to Foreign Currency Receivable from Exchange Broker,$186,000.
D)Debit to Foreign Currency Transaction Gain,$4,000.
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Q1) Parent Company's wholly-owned subsidiary,Son Corporation,maintains its accounting records in Danish krone.However,because all of Son's branch offices are in Sweden,its functional currency is the Swedish krona.Remeasurement of Son's 20X3 financial statements resulted in a $3,200 loss,and translation of its financial statement resulted in a $2,600 loss.What amount should Parent report as a loss in its income statement for the year ended December 31,20X3?
A)$0
B)$2,600
C)$3,200
D)$5,800
Q2) Based on the preceding information,in the stockholders' equity section of Leo's consolidated balance sheet at December 31,20X8,Leo should report the translation adjustment as a component of other comprehensive income of:
A)$19,440
B)$17,000
C)$18,786
D)$19,380
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Page 14
Chapter 13: Segment and Interim Reporting
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Q1) Crisfield Company has two reportable segments,C and D.Segment C made $4,000,000 of sales to external customers and $400,000 of sales to other operating segments.Segment D,on the other hand,made sales of $8,000,000 to external customers and $1,600,000 of sales to other operating segments.Crisfield Company reported $13,200,000 of revenues on its consolidated income statement.What calculation below correctly determines whether Crisfield Company's reportable segments satisfy the 75% revenue test?
A)$14,000,000/$15,200,000
B)$14,000,000/$13,200,000
C)$12,000,000/$13,200,000
D)$12,000,000/$15,200,000
Q2) Based on the preceding information,in the entry to record the replacement of the 1,500 units in November,Accounts Payable will be credited for:
A)$67,500.
B)$75,000.
C)$62,500.
D)$60,000.
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Page 15
Chapter 14: Sec Reporting
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Q1) Which of the following classes of information are included in the Form 10-K?
I.Management's discussion and analysis
II.Audited financial statements and footnotes
III.Auditor's opinion on the company's internal control system
A)I and II
B)I and III
C)II and III
D)I,II,and III
Q2) Which of the following forms is the most comprehensive registration statement?
A)Form S-1
B)Form S-2
C)Form S-3
D)Form 20-F
Q3) Which of the following acts requires that a trustee be appointed for sales of bonds,debentures,and other debt securities of public corporations?
A)Securities Investor Protection Act
B)Trust Indenture Act
C)Investment Company Act
D)Investment Advisors Act
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Page 16
Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and 40 percent to Y.For the year 20X8,partnership net income was double X's withdrawals.Assume X's beginning capital balance was $80,000,and ending capital balance (after closing)was $140,000.Partnership net income for the year was:
A)$120,000.
B)$300,000.
C)$500,000.
D)$600,000.
Q2) 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
Q3) Transferable interest of a partner includes all of the following except:
A)the partner's share of the profits and losses of the partnership.
B)the right to receive distributions.
C)the right to receive any liquidating distribution.
D)the authority to transact any of the partnership's business operations.
Page 17
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Chapter 16: Partnerships: Liquidation
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Q1) Which of the following statements is (are)true?
I.In the calculation of the loss absorption potential for a partner,a partner's loan balance (an amount that is owed by the partnership)should be added to the partner's capital balance.
II.In liquidation,a partner's loan balance (an amount that is owed by the partnership)should be paid to the partner as a creditor of the partnership after the outside creditors.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q2) On a partner's personal statement of changes in net worth,what type(s)of income is (are)recognized?
I.Realized
II.Unrealized
A)I only
B)II only
C)Both I and II
D)Neither I nor II
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) In a town's general fund operating budget for the year,the amount of its estimated revenues exceeded the amount of its appropriations.This excess should be:
A)credited to Budgetary Fund Balance-Unassigned.
B)debited to Budgetary Fund Balance-Unassigned.
C)credited to Fund Balance-Unassigned.
D)debited to Fund Balance-Unassigned.
Q2) 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.
Q3) Briefly discuss the various types of governmental funds and proprietary funds.
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Page 19
Chapter 18: Governmental Entities: Special Funds and Governmentwide Financial Statements
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Q1) In 20X6,Dorian City received $15,000,000 of bond proceeds to be used for capital projects.Of this amount,$3,000,000 was expended in 20X6.Expenditures for the $12,000,000 balance were expected to be incurred in 20X7.These bond proceeds should be recorded in capital projects funds for:
A)$3,000,000 in 20X6 and $12,000,000 in 20X7.
B)$3,000,000 in 20X6 and in the general fund for $12,000,000 in 20X6.
C)$15,000,000 in 20X6.
D)$15,000,000 in 20X7.
Q2) For which of the following funds are the principles and accounting most like those of the general fund?
A)Debt service fund
B)Internal service fund
C)Special revenue fund
D)Investment trust fund
Q3) The statement of changes in fiduciary net assets includes all of the following except:
A)employee benefit trust funds.
B)investment trust funds.
C)private-purpose trust funds.
D)agency funds.
Page 20
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Chapter 19: Not-For-Profit Entities
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Q1) "Basis of accounting for private NFPs" describes which term listed above?
A)Fair value
B)Net assets without donor restrictions
C)GASB
D)FASB
E)Statement of Revenues,Expenditures,and Changes in Fund Balance
F)Lower of cost or market
G)Accrual method
H)Statement of Activities
I)General fund,restricted fund,endowment fund
J)Modified accrual method
K)Net assets with donor restrictions
L)Endowment fund
M)Unrestricted,temporarily restricted,permanently restricted
N)Depreciation
O)Works of art and other historical treasures
P)General fund
Q)Cost
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Chapter 20: Corporations in Financial Difficulty
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Q1) Under a composition agreement,
A)creditors agree to accept less than the face amount of their claims.
B)debtors in financial difficulty transfer assets "without recourse."
C)a creditors' committee is initiated with a plan of settlement proposed by the debtor.
D)the debtor petitions for relief in a bankruptcy court.
Q2) Creditors may file which type of petition when seeking remedy under the Bankruptcy Code?
I.Voluntary
II.Involuntary
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q3) In a statement of realization and liquidation,unusual revenue items are reported under:
A)assets.
B)discontinued items.
C)supplementary items.
D)These are never reported.
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Page 22
Chapter 21: Intercompany Indebtednessfully Adjusted
Equity Method Using Straight-Line Interest Amortization
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Q1) Based on the information given above,what amount of interest receivable will be recorded by Puget Corporation on December 31,20X8,in its separate financial statements?
A)$5,000
B)$6,500
C)$10,000
D)$6,000
Q2) Based on the information given above,what amount of interest income will be eliminated in the preparation of the 20X9 consolidated financial statements?
A)$17,000
B)$13,300
C)$18,500
D)$22,200
Q3) Based on the information given above,what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement?
A)$6,600
B)$4,800
C)$6,000
D)$5,400
23
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