Intermediate Accounting II
Pre-Test Questions
Course Introduction
Intermediate Accounting II builds upon foundational accounting principles to explore more complex topics such as long-term liabilities, shareholders equity, investments, revenue recognition, income taxes, leases, pensions, and accounting changes. Students will deepen their understanding of financial statement preparation, measurement, disclosure requirements, and the application of current accounting standards. The course emphasizes analytical skills, ethical considerations, and the practical implications of advanced accounting issues, preparing students for professional certification and advanced studies in accounting.
Recommended Textbook
Advanced Financial Accounting 12th Edition by Theodore E. Christensen
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Chapter 1: Intercorporate Acquisitions and Investments in
Other Entities
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Q1) Based on the information provided,at the time of the transfer,Regan Company should record:
A)Building at $180,000 and no accumulated depreciation.
B)Building at $162,000 and no accumulated depreciation.
C)Building at $200,000 and accumulated depreciation of $24,000.
D)Building at $180,000 and accumulated depreciation of $18,000.
Answer: D
Q2) The length of the measurement period allowed to value the assets and liabilities in an acquired business combination starts on the date of acquisition and lasts until:
A)All necessary information about the facts of the acquisition is obtained
B)All necessary information about the facts of the acquisition is obtained,not to exceed one month
C)All necessary information about the facts of the acquisition is obtained,not to exceed one reporting period
D)All necessary information about the facts of the acquisition is obtained,not to exceed one year
Answer: D
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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 of total assets was reported in the consolidated balance sheet immediately after acquisition?
A)$650,000
B)$880,000
C)$920,000
D)$750,000
Answer: B
Q2) Based on the preceding information,what is Parent's post-closing retained earnings balance on December 31,20X1?
A)$485,000
B)$505,000
C)$525,000
D)$600,000
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) On January 1,20X9,Peanuts Corporation acquired 80 percent of Schulz Corporation's voting common stock.On that date,Peanuts had equipment with a book value of $50,000 and a fair value of $200,000.Schulz's buildings and equipment had a book value of $300,000 and a fair value of $300,000 at the time of acquisition.What will be the amount at which buildings and equipment will be reported in consolidated statements immediately following the acquisition?
A)$350,000
B)$340,000
C)$280,000
D)$300,000
Answer: A
Q2) Based on the preceding information,what amount would be reported as income to controlling interest in the consolidated financial statements for 20X9?
A)$168,000
B)$138,000
C)$164,000
D)$150,000
Answer: C
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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 information provided,what amount of retained earnings will be reported in the consolidated financial statements for the year?
A)$331,000
B)$110,000
C)$441,000
D)$456,000
Q2) Perimeter,Inc.acquired 30 percent of South Co.'s (South)voting stock for $200,000 on January 1,20X1.Perimeter's 30 percent interest in South gave Perimeter the ability to exercise significant influence over South's operating and financial policies.On that date,South reported assets of $500,000 and liabilities of $100,000.South had equipment with a book value of $60,000 that was actually worth $160,000.The equipment had a remaining useful life of five years.During 20X1,South reported net income of $80,000 and paid dividends of $50,000.What amount of income should Perimeter recognize in 20X1 as a result of this investment?
A)$18,000
B)$4,000
C)$15,000
D)$16,750
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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 Pint report as its investment in Size at January 1,20X4?
A)$200,000
B)$224,000
C)$232,000
D)$240,000
Q2) All of the following are examples of how a parent company may lose control over a subsidiary and discontinue future consolidation,except:
A)The parent sells some of its interest in the subsidiary.
B)The subsidiary issues additional common stock.
C)The subsidiary comes under the control of the government or other regulator. D)The subsidiary issues a stock dividend or a stock split.
Q3) Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$0
B)$40,000
C)$20,000
D)$15,000
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Chapter 6: Intercompany Inventory Transactions
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Q1) 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
Q2) Based on the information given above,what amount of cost of goods sold did Sink record in 20X4?
A)$1,612,000
B)$2,418,000
C)$2,790,000
D)$3,596,000
Q3) 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
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Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) Based on the preceding information,what amount of income should be assigned to the noncontrolling shareholders in the consolidated income statement for 20X8?
A)$47,700
B)$44,400
C)$55,600
D)$60,000
Q2) A wholly owned subsidiary sold land to its parent during the year at a gain.The parent continues to hold the land at the end of the year.The amount to be reported as consolidated net income for the year should equal:
A)the parent's separate operating income,plus the subsidiary's net income.
B)the parent's separate operating income,plus the subsidiary's net income,minus the intercompany gain.
C)the parent's separate operating income,plus the subsidiary's net income,plus the intercompany gain.
D)the parent's net income,plus the subsidiary's net income,minus the intercompany gain.
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Chapter 8: Intercompany Indebtedness
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Q1) Portuguese owns 80 percent of the common stock of Spanish Company.Portuguese also purchases some of Spanish's bonds directly from Spanish and holds the bonds as a long-term investment.How is the acquisition of the bonds treated for consolidated reporting purposes?
A)As a retirement of bonds.
B)As an increase in the Bonds Payable account on Spanish's books.
C)Everything related to the intercompany bonds is eliminated in the consolidation worksheet,and nothing related to the bonds appears in the consolidated financial statements.
D)As an increase in noncurrent assets.
Q2) Based on the information given above,what amount of interest income will be eliminated in the preparation of the December 31,20X9 consolidated financial statements?
A)$8,184
B)$16,296
C)$12,704
D)$18,988
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Chapter 9: Consolidation Ownership Issues
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Q1) Based on the preceding information,what is Safety's contribution to consolidated net income for 20X6?
A)$48,000
B)$56,000
C)$72,000
D)$80,000
Q2) Based on the preceding information,by what amount did the Investment in Siena account change?
A)Increase of $296,500
B)Decrease of $296,500
C)Increase of $64,000
D)Decrease of $64,000
Q3) Based on the information provided,what amount of income will be assigned to the controlling interest in the consolidated income statement for 20X9?
A)$400,000
B)$345,000
C)$285,000
D)$175,000
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Chapter 10: Additional Consolidation Reporting Issues
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Q1) Which of the following observations concerning the comparisons between the direct and indirect approaches of presenting a cash flow statement is true?
A)The final dollar amount of cash flows from operating activities is different under the two approaches.
B)The direct approach provides a clearer picture of cash flows related to operations.
C)Authoritative bodies have generally expressed a preference for the indirect method.
D)A separate reconciliation of operating cash flows and net income is required under the indirect approach.
Q2) Dividends paid to noncontrolling shareholders:
I.are reported as a cash outflow in the consolidated cash flow statement.
II.represent funds that are no longer available to the consolidated entity.
III.are reported in the consolidated retained earnings statement.
A)Observation I alone is true.
B)Observation III alone is true.
C)Observations I and II are true.
D)Observations I,II,and III are true.
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) Based on the information given above,the indirect exchange rates for the Swiss franc and the Swedish krona (from a U.S.perspective)are
A)0.9642 Swiss francs and 6.5531 Swedish krona respectively.
B)1.6893 Swiss francs and 5.2563 Swedish krona respectively.
C)1.0371 Swiss francs and 0.1527 Swedish krona respectively.
D)0.8372 Swiss francs and 4.2713 Swedish krona respectively.
Q2) Company X denominated a December 1,20X9,purchase of goods in a currency other than its functional currency.The transaction resulted in a payable fixed in terms of the amount of foreign currency,and was paid on the settlement date,January 10,2010.Exchange rates moved unfavorably at December 31,20X9,resulting in a loss that should:
A)be included as a separate component of stockholders' equity at Dec.31,20X9.
B)be included as a component of income from continuing operations for 20X9.
C)be included as a deferred charge at December 31,20X9.
D)not be reported until January 10,2010,the settlement date.
Q3) Based on the preceding information,the entries on June 30,20X2,include a
A)debit to Foreign Currency Transaction Loss,$4,000.
B)credit to Foreign Currency Units (Br.reals),$262,500.
C)credit to Cash,$262,500.
D)debit to Dollars Payable to Exchange Broker,$254,000.
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Q1) All of the following describe the International Accounting Standard Board (IASB)except for:
A)The IASB is a privately funded accounting standards-setting body based in London.
B)The mission of the IASB is to develop a single set of high-quality,understandable and enforceable global accounting standards.
C)Board members of the IASB come from diverse geographical countries that have adopted IFRS.
D)IASB members serve a five-year term subject to one reappointment.
Q2) Which of the following statements is true regarding the SEC's timeline for convergence?
A)The SEC has no immediate plans to converge GAAP reporting with IFRS standards.
B)The SEC has a plan in place to allow firms to begin filing in the United States based on IFRS during the next several years.
C)The SEC has a plan in place to allow companies to choose to file statements under GAAP reporting or IFRS standards indefinitely.
D)The SEC currently allows domestic companies to choose to file financial statements under either GAAP or IFRS reporting standards.
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Chapter 13: Segment and Interim Reporting
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Q1) On June 30,20X0,Bow Corporation incurred a $150,000 net loss from disposal of a business component.Also on June 30,20X0,Bow paid $50,000 for property taxes assessed for the calendar year 20X0.What amount of the preceding items should be included in the determination of Bow's net income or loss for the six-month interim period ended June 30,20X0?
A)$100,000
B)$150,000
C)$175,000
D)$200,000
Q2) Refer to the above information.Which of the operating segments above are reportable segments?
A)B,C,and D
B)A,B,D,and E
C)B,D,and E
D)A,B,C,D,and E
Q3) FASB has specified a "75% percent consolidated revenue test".
Required:
a)What is the 75% test?
b)How is the 75% test impacted by the "10% Significance Rule"?
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Chapter 14: Sec Reporting
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Q1) Which of the following acts helps businesses raise funds in public capital markets by minimizing regulatory requirements?
A)Dodd-Frank Wall Street Reform and Consumer Protection Act
B)Foreign Corrupt Practices Act
C)Jumpstart Our Business Startups (JOBS)Act
D)Sarbanes-Oxley Act
Q2) Which of the following best describes a "red herring" prospectus?
A)A shortened version of registration Form S-1 available to those companies that already have publicly traded securities.
B)A prospectus containing material irregularities and deficiencies.
C)Preliminary information provided to investors about an upcoming issue,and issued between the time a registration statement is presented to the SEC and its effective date.
D)Disclosure in the business press,outlined in red,informing investors of an upcoming offering.
Q3) Both the FCPA (Foreign Corrupt Practices Act of 1977)and SOX (Sarbanes-Oxley Act of 2002)contain provisions related to internal control.Discuss some significant differences between how the two acts impact internal control practices for publicly held companies.
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) When a new partner is admitted into a partnership and the new partner receives a capital credit less than the tangible assets contributed,which of the following explains the difference?
I.The new partner's goodwill has been recognized.
II.The old partners received a bonus from the new partner.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q2) 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.
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Chapter 16: Partnerships: Liquidation
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Q1) The personal financial statements of a partner include which of the following?
I.Statement of financial condition.
II.Statement of changes in net worth.
III.Statement of cash flows.
A)I and II
B)I and III
C)II and III
D)I,II,and III
Q2) Refer to the information provided above.How much cash will be distributed to David at the end of the second month?
A)$75,000
B)$60,000
C)$41,250
D)$33,750
Q3) Based on the preceding information,what amount will be paid out to Bill upon liquidation of the partnership?
A)$0
B)$5,000
C)$25,000
D)$2,500
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) 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.
Q2) Blue Ridge Township uses the consumption method of accounting for its inventory of supplies.On the December 31,20X7 balance sheet for the general fund,the township reported $10,000 of supplies inventory.During 20X8,expenditures for supplies amounted to $40,000,and,at December 31,20X8,unused supplies totaled $7,000.In the adjusting entry for supplies at December 31,20X8,
A)Expenditures should be credited for $3,000.
B)Expenditures should be debited for $3,000.
C)Fund Balance-Nonspendable should be debited for $7,000.
D)Fund Balance-Nonspendable should be credited for $7,000.
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Chapter 18: Governmental Entities: Special Funds and Governmentwide Financial Statements
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Q1) The costs of a building being constructed by a capital projects fund should be debited,or charged,to which of the following accounts in the capital projects fund?
A)Expenditures.
B)Building.
C)Construction in Progress.
D)Other Financing Uses.
Q2) Fixed assets and investments are reported in which of the following funds?
I.Fiduciary fund
II.Enterprise fund
III.Internal Service funds
IV.Capital Projects fund
V.Debt Service fund
A)I,II,III
B)II,IV,V
C)I,II,V
D)II,III,IV
Q3) GASB 34 requires a reconciliation schedule for the Statement of Net Assets.What does this schedule document?
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Chapter 19: Not-For-Profit Entities
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Q1) On the statement of operations prepared for a private,not-for-profit hospital,patient service revenue earned during the year is reported net of amounts for which of the following items?
I.Contractual adjustments
II.Bad debts expense
A)I only
B)II only
C)I and II
D)Neither I nor II
Q2) A private,not-for-profit geographic society received cash contributions that were restricted by the donors for the acquisition of fixed assets.In which section of the statement of cash flows would these cash contributions be reported?
A)Financing activities
B)Investing activities
C)Operating activities
D)Capital and related financing activities
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Chapter 20: Corporations in Financial Difficulty
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Q1) Which of the following items are likely to be reported in the supplementary items section of a statement of realization and liquidation?
A)Creditors' claims settled during the period.
B)Trustee's administration fees.
C)New obligations incurred by the trustee.
D)Assets subsequently acquired by the trustee.
Q2) Which chapters of the Bankruptcy Code deal with corporations?
A)Chapters 1,3,and 5
B)Chapter 9
C)Chapters 7 and 11
D)Chapters 12 and 13
Q3) On a debtor-in-possession income statement,which of the following items should be reported under the heading "Reorganization Items"?
A)Sales
B)Selling expenses
C)Income tax benefit
D)Loss on disposal of assets
Q4) What are the conditions necessary for using fresh start reporting in reorganization?
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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 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
Q2) Based on the information given above,what amount of interest income does Scissor record for 20X8?
A)$12,000
B)$2,500
C)$7,500
D)$9,500
Q3) Based on the information given above,in the preparation of the 20X8 consolidated financial statements,premium on bonds payable will be:
A)debited for $45,000 in the consolidating entries.
B)credited for $40,500 in the consolidating entries.
C)debited for $40,500 in the consolidating entries.
D)credited for $45,000 in the consolidating entries.
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