Intermediate Accounting Exam Practice
Tests
Course Introduction
Intermediate Accounting is an in-depth course designed to build upon foundational accounting principles, focusing on the comprehensive study of financial accounting standards and the preparation of financial statements. Students will explore complex topics such as revenue recognition, inventory valuation, long-term assets, liabilities, and shareholder equity. Emphasis is placed on the application of Generally Accepted Accounting Principles (GAAP), ethical considerations, and analytical skills necessary for interpreting and preparing accurate financial reports. This course prepares students for advanced accounting studies and professional roles that require a thorough grasp of accounting frameworks and financial statement analysis.
Recommended Textbook
Advanced Accounting 11th Edition by Floyd
A. Beams
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892 Verified Questions
892 Flashcards
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Page 2
Chapter 1: Business Combinations
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Sample Questions
Q1) When considering an acquisition, which of the following is NOT a method by which one company may gain control of another company?
A) Purchase of the majority of outstanding voting stock of the acquired company.
B) Purchase of all assets and liabilities of another company.
C) Purchase the assets, but not necessarily the liabilities, of another company previously in bankruptcy.
D) All of the above methods result in a company gaining control over another company.
Answer: D
Q2) According to FASB Statement 141R, which one of the following items may not be accounted for as an intangible asset apart from goodwill?
A) A production backlog
B) A talented employee workforce
C) Noncontractual customer relationships
D) Employment contracts
Answer: B
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Chapter 2: Stock Investments Investor Accounting and Reporting
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Sample Questions
Q1) Firms must conduct impairment tests more frequently than annually when A) other shareholders hold more than 50% interest.
B) a more-likely-than-not expectation exists that a reporting unit will be sold or disposed of.
C) a specific unit does not have publicly traded stock.
D) using the equity method.
Answer: B
Q2) Which one of the following items, originally recorded in the Investment in Falcon Co.account under the equity method, would not be systematically used to reduce investment income on a periodic basis?
A) Amortization expense of goodwill
B) Depreciation expense on the excess fair value attributed to machinery
C) Amortization expense on the excess fair value attributed to lease agreements
D) Interest expense on the excess fair value attributed to long-term bonds payable
Answer: A
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Chapter 3: An Introduction to Consolidated Financial Statements
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Sample Questions
Q1) Pomograte Corporation bought 75% of Sycamore Company's common stock, with a book value of $900,000, on January 2, 2011 for $750,000.The law firm of Dewey, Cheatam and Howe was paid $55,000 to facilitate the purchase.At what amount should Pomograte's Investment in Sycamore account be reported on January 2, 2011?
A) $675,000
B) $695,000
C) $750,000
D) $845,000
Answer: C
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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Sample Questions
Q1) Pigeon Corporation acquired an 80% interest in Statue Company on January 1, 2011, for $90,000 cash when Statue had Capital Stock of $60,000 and Retained Earnings of $40,000.The fair value/book value differential was attributable to equipment with a 10-year (straight-line)life.Statue suffered a $10,000 net loss in 2011 and paid no dividends.At year-end 2011, Statue owed Pigeon $18,000 on account.Pigeon's separate income for 2011 was $150,000.Controlling interest share of consolidated net income for 2011 was
A) $140,000.
B) $141,000.
C) $142,000.
D) $150,000.
Q2) What is the reported amount for the noncontrolling interest?
A) $80,000
B) $84,400
C) $98,000
D) $122,500
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Chapter 5: Intercompany Profit Transactions - Inventories
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Sample Questions
Q1) For 2011, consolidated net income will be what amount if the intercompany sale was downstream?
A) $180,000
B) $253,000
C) $256,000
D) $259,000
Q2) What is Pouch's income from Shenley for 2012?
A) $27,200
B) $29,600
C) $39,200
D) $49,000
Q3) What amount of unrealized profit did Pelga Company have at the end of 2012?
A) $10,000
B) $12,500
C) $50,000
D) $62,500
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Chapter 6: Intercompany Profit Transactions - Plant Assets
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Sample Questions
Q1) 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.
Q2) The 2011 unrealized gain from the intercompany sale
A) should be recognized in consolidation in 2011 by a working paper entry.
B) should be eliminated from consolidated net income by a working paper entry that credits land for $14,000.
C) should be eliminated from consolidated net income by a working paper entry that debits land for $14,000.
D) should be eliminated from consolidated net income by a working paper entry that credits gain on sale of land for $14,000.
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Page 8
Chapter 7: Intercompany Profit Transactions - Bonds
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Sample Questions
Q1) Pongo Company has $2,000,000 of 6% bonds outstanding on December 31, 2010 with unamortized premium of $60,000.These bonds pay interest semiannually on January 1 and July 1 and mature on January 1, 2016.Straight-line amortization is used. Syring Inc., 90%-owned subsidiary of Pongo, buys $1,000,000 par value of Pongo's outstanding bonds in the market for $980,000 on January 2, 2011.There is only one issue of outstanding bonds of the affiliated companies and they have consolidated financial statements.
For the year 2011, Pongo has income from its separate operations (excluding investment income)of $3,000,000 and Syring reports net income of $200,000.Pongo uses the equity method to account for the investment.
Required: Determine the following:
1.Noncontrolling interest share for 2011.
2.Controlling share of consolidated net income for Pongo Company and subsidiary for 2011.
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Chapter 8: Consolidations - Changes in Ownership
Interests
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Sample Questions
Q1) Preacquisition income for 2010 is
A) $50,000.
B) $35,000.
C) $44,000.
D) $36,000.
Q2) Jersey Company acquired 90% of York Company on April 1, 2011.Both Jersey Company and York Company have December 31 fiscal year ends.Under current GAAP, which of the following statements is false?
A) The consolidated income statement in 2011 should not include York's revenues and expenses prior to April 1, 2011.
B) When preparing consolidating work papers in 2011, York's revenues prior to April 1, 2011 are eliminated.
C) York's earnings prior to April 1, 2011 should appear as a deduction on the consolidated income statement in 2011.
D) The consolidated income statement in 2011 should include York's revenues and expenses after April 1, 2011.
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10
Chapter 9: Indirect and Mutual Holdings
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Q1) Page Corporation acquired a 60% interest in Ace Corporation at a price $40,000 in excess of book value and fair value on January 1, 2010.On the same date, Ace acquired a 70% interest in Bader Corporation at a price $30,000 in excess of book value and fair value.The excess purchase cost paid by Page and Ace was attributed to goodwill.Separate net incomes (excluding investment income)for the three affiliates for 2010 are as follows: Page, $500,000, Ace, $300,000, and Bader, $400,000. Page's controlling interest share of consolidated net income for 2010 is
A) $808,000.
B) $848,000.
C) $920,000.
D) $960,000.
Q2) Bailey's noncontrolling interest share for 2011 is
A) $7,609.
B) $8,044.
C) $15,652.
D) $23,696.
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Chapter 10: Subsidiary Preferred Stock, Consolidated
Earnings Per Share, and Consolidated Income Taxation
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Sample Questions
Q1) 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.
Q2) Pandy Corporation owns a 90% interest in Sakaj Corporation's common stock.Throughout 2010, Sakaj had 20,000 shares of common stock outstanding and Pandy had 50,000 shares of common stock outstanding.Sakaj's only dilutive security consists of 10,000 stock options, with an exercise price of $20 per share.The average price of Sakaj's stock is $50 per share in 2010.The options are exercisable for one share of Sakaj's common stock.Pandy's and Sakaj's separate net incomes for the year are $200,000 and $180,000, respectively.
Required:
Compute the amount of basic and diluted earnings per share for Pandy (Consolidated)and Sakaj Corporations.
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Page 12
Chapter 11: Consolidation Theories, Push-Down Accounting, and Corporate Joint Ventures
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Sample Questions
Q1) Assume Paris's inventory account had a book value of $40,000 and a fair value of $44,000 on January 1, 2011.Using the parent company theory, what was the amount reported on the consolidated balance sheet for inventories on January 1, 2011?
A) $65,000
B) $66,000
C) $69,000
D) $70,000
Q2) Entities other than the primary beneficiary account for their investment in a variable interest entity using the
A) cost method.
B) equity method.
C) cost or equity methods.
D) consolidated method.
Q3) Under the parent company theory, what amount of goodwill was reported on the consolidated balance sheet at December 31, 2011?
A) $148,000
B) $153,000
C) $154,400
D) $160,000
13
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Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Sample Questions
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) On September 1, 2011, Bylin Company purchased merchandise from Himeji Company of Japan for 20,000,000 yen payable on October 1, 2011.The spot rate for yen was $0.0079 on September 1 and the spot rate was $0.0077 on October 1.The purchase was paid on October 1, 2011.
Required:
1.Did the U.S.dollar strengthen or weaken from September to October and what are the implications for Bylin's business?
2.What journal entry did Bylin record on September 1, 2011?
3.What journal entry did Bylin record on October 1, 2011?
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Chapter 13: Accounting for Derivatives and Hedging
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Sample Questions
Q1) If a financial instrument is classified as a cash flow hedge, then
A) its gains or losses are reported in the income statement if a fiscal year-end occurs before the settlement date.
B) it is classified as a held-to-maturity asset.
C) it does not require a notional amount.
D) its gains or losses are reported in the balance sheet if a fiscal year-end occurs before the settlement date.
Q2) When a cash flow hedge is appropriate, the effective portion of the gain or loss on the derivative is
A) deferred using other comprehensive income.
B) recognized immediately at the time the agreement is made.
C) recognized over time, amortized over the period of the agreement.
D) recognized over time, offset by the fluctuation in the value of the hedged asset or liability.
Q3) What is the fair value of the forward contract at February 29?
A) $-0-
B) $1,654.97 asset
C) $1,654.97 liability
D) $1,680 asset
Page 15
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Chapter 14: Foreign Currency Financial Statements
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Sample Questions
Q1) Which of the following foreign subsidiary accounts will have the same value on consolidated financial statements, regardless of whether the statements are remeasured or translated?
A) Trademark
B) Deferred Income
C) Accounts Receivable
D) Goodwill
Q2) 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.
Q3) A foreign subsidiary's accounts receivable balance should be translated for the consolidated financial statements at
A) the appropriate historical rate.
B) the prior year's forecast rate.
C) the future rate for the next year.
D) the spot rate at year-end.
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Page 16
Chapter 15: Segment and Interim Financial Reporting
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Sample Questions
Q1) GAAP requires that segment information be reported
A) by geographics, without regard to size of the segment.
B) by geographics, without regard to industry or product-line.
C) however management organizes the enterprise into units for internal decision-making and performance-evaluation purposes.
D) by industry or product-line, without regard to geographics.
Q2) Jacana Company uses the LIFO inventory method.During the second quarter, Jacana experienced a 100-unit liquidation in its LIFO inventory at a LIFO cost of $430 per unit.Jacana considered the liquidation temporary and expects to replace the units in the third quarter at an estimated replacement cost of $460 a unit.The cost of goods sold computation in the interim report for the second quarter will
A) include the 100 liquidated units at the $460 estimated replacement unit cost.
B) include the 100 liquidated units at the $430 LIFO unit cost.
C) be understated by $3,000.
D) be overstated by $3,000.
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Page 17
Chapter 16: Partnerships - Formation, Operations, and Changes in Ownership Interests
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Sample Questions
Q1) Required:
1.Prepare a schedule to allocate income to the partners assuming that partnership net income for 2011 is $250,000.
2.Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).
Q2) Required:
1.Prepare a schedule to allocate income to the partners assuming that partnership net income for 2011 is $330,000.
2.Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).
Q3) In a limited partnership, a general partner
A) is excluded from management of the business.
B) is not entitled to a bonus at the end of the year.
C) has limited liability for partnership debt.
D) has unlimited liability for partnership debt.
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18
Chapter 17: Partnership Liquidation
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Q1) Which statement is correct in describing the rank order of payments as specified by the Uniform Partnership Act?
A) Payments to partners are ranked equally, regardless of underlying basis.
B) Payment to partners with excess capital balances may be placed ahead of payments to creditors.
C) Payments to creditors other than partners are ranked ahead of payments to partners.
D) After payments are made to other creditors and partners with loans to the partnership, payment up to the same amount can be made to partners with capital interests.
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.
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Chapter 18: Corporate Liquidations and Reorganizations
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Q1) A primary difference between voluntary and involuntary bankruptcy petitions is that
A) creditors file the petition in an involuntary filing.
B) trustees are not used in an voluntary filing.
C) voluntary petitions are not subject to review by the bankruptcy court.
D) the debtor corporation files the petition in an involuntary filing.
Q2) Chapter 7 bankruptcy cases differ from Chapter 11 bankruptcy cases because Chapter 7 bankruptcy
A) is involuntary.
B) requires a reorganization plan that is approved by the court.
C) requires the debtor corporation to file a list of creditors, schedule of assets and liabilities, and work with a trustee.
D) leads to full liquidation of the bankrupt company.
Q3) 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
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Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) Identify the fund type of the fund being described.
1.A fund used to account for the external portion of investment pools reported by the sponsoring government.
2.A fund used to account for resources that are legally restricted to use of the earnings only for government programs or activities.
3.A fund used to account for resources used to pay for a new stadium.
4.A fund used to account for local taxes withheld on behalf of another county.
5.A fund used to account for resources used to pay interest on a long-term bond issue.
6.A fund used to account for specific revenues that are restricted in use.
7.A fund used to account for the local swimming pool that is owned by the city and used by residents for a membership fee.
8.A fund used to account for the centralized data processing services of the state government.
9.A fund used to account for all funds except those required to be accounted for in another fund.
10.A fund that accounts for government pension plans if the government is the trustee
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Page 21
Chapter 20: Accounting for State and Local Governmental Units
- Governmental Funds
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Q1) The estimated revenues control account of Metro City's general fund is created when
A) the city's tax receipts are measurable and available.
B) the budget is recorded in the accounting records.
C) encumbrances are made.
D) taxes are levied and bills are mailed.
Q2) Carson County had the following transactions for their General Fund relating to the levy and collection of property taxes.
1.Property tax bills for $1,000,000 are sent to property tax owners.Taxes are due in 45 days.History shows that Carson County should expect 1.5% of the property taxes to be uncollectible.
2.$850,000 in property taxes is collected.The remaining receivables are past due.
3.An additional $80,000 of the delinquent taxes is collected.
4.Wrote off $10,000 of delinquent taxes determined to be uncollectible.
Required:
Prepare the journal entries in the General Fund for the transactions.
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Page 22
Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Sample Questions
Q1) GASB requires ________ method(s)for the cash flow statement for proprietary funds.
A) the reconciliation
B) the indirect
C) the direct
D) either the direct or indirect
Q2) Prepare journal entries to record the following grant-related transactions of the municipal swimming pool, which is funded primarily by membership fees.
1.Received an operating grant in cash from the state for $200,000, to be used for life-saving and first-aid training.
2.Incurred and paid qualifying expenses on the state grant program by providing training, $165,000.
3.Received a federal grant to finance purchase of an energy efficient heating system for the pool, $120,000 (cash received in advance).
4.New heating system installed and paid, $115,000.
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Chapter
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Q1) Under GAAP, for nonprofit, nongovernmental entities, an unconditional transfer of cash or other assets to an entity, or a settlement or cancellation of its liabilities in a voluntary, non-reciprocal transfer, is called a(n)
A) unconditional promise to give.
B) contribution.
C) conditional promise to give.
D) residual equity transfer.
Q2) The gift shop of a nonprofit, private hospital has cash revenue of $24,000.What account will the hospital credit?
A) Unrestricted support
B) Unrestricted revenue
C) Temporarily restricted revenue
D) Other operating revenue - unrestricted
Q3) In a nongovernmental, nonprofit hospital, contractual adjustments are
A) the discounted rate given to hospital employees.
B) discounts arranged with third-party payors.
C) recorded as a deduction from revenue or as an expense.
D) additional amounts paid by select group participants.
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24
Chapter 23: Estates and Trusts
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Q1) In reference to the Uniform Probate Code, which of the following statements is correct?
A) The Code entitles the surviving spouse to a homestead allowance that is exempt from, and has priority over, all claims against the estate.
B) The Code provides a homestead allowance to the surviving spouse of $100,000.
C) The Code provides an allowance for dependents, after other claims have been settled.
D) The Code entitles the surviving spouse to claim 100% of the estate after claims to third-parties are settled.
Q2) The executor or administrator of a will is required to prepare and file an inventory of property owned by the deceased within what time period?
A) One month of appointment
B) Two months of appointment
C) Three months of appointment
D) 45 days of appointment
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