Intermediate Accounting II
Textbook Exam Questions
Course Introduction
Intermediate Accounting II builds upon the foundations of financial accounting introduced in previous coursework, emphasizing the recognition, measurement, and disclosure of more complex financial transactions. Key topics include accounting for liabilities, stockholders equity, income taxes, pensions, leases, and accounting changes and errors. The course highlights relevant Generally Accepted Accounting Principles (GAAP), explores the preparation and analysis of vital financial statements, and applies conceptual frameworks to real-world scenarios. Students will develop a deeper understanding of how to analyze financial information, interpret accounting standards, and address ethical issues faced by accounting professionals.
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) For all acquired contingencies,the acquirer should do all of the following except:
A)Provide documentation from the acquirer's attorney regarding pending lawsuits and loan guarantees
B)Provide a description of each contingency
C)Disclose the amount recognized at the acquisition date
D)Describe the estimated range of possible undiscounted outcomes of the contingency
Answer: A
Q2) Based on the information provided,at the time of the transfer,Selvick Company should record
A)the building at $220,000 and accumulated depreciation of $44,000.
B)the building at $220,000 with no accumulated depreciation.
C)the building at $176,000 with no accumulated depreciation.
D)the building at $250,000 with no accumulated depreciation.
Answer: A
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3
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 Pullman Company as the balance in its investment account on December 31,20X8?
A)$100,000
B)$123,400
C)$120,400
D)$142,000
Answer: B
Q2) Based on the preceding information,what amount of total assets was reported in the consolidated balance sheet immediately after acquisition?
A)$600,000
B)$800,000
C)$1,050,000
D)$1,150,000
Answer: C
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4
Chapter 3: The Reporting Entity and the Consolidation of
Less-Than-Wholly- Owned Subsidiaries With No Differential
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Q1) Putter Corporation owns 80 percent of the voting common shares of Sand Corporation.Noncontrolling interest was assigned $24,000 of income in the 20X9 consolidated income statement.What amount of net income did Sand Corporation report for the year?
A)$150,000
B)$96,000
C)$120,000
D)$30,000
Answer: C
Q2) Which of the following usually does not represent a variable interest?
A)Common stock,with no special features or provisions
B)Senior debt
C)Subordinated debt
D)Loan or asset guarantees
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 of total liabilities will be reported in the consolidated balance sheet for 20X8?
A)$225,000
B)$221,000
C)$217,000
D)$137,000
Q2) Based on the preceding information,what amount of liabilities will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$615,000
B)$406,000
C)$300,000
D)$265,000
Q3) Based on the information provided,what amount of net income will be reported in the consolidated financial statements for the year?
A)$226,000
B)$55,000
C)$230,000
D)$171,000
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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 1,20X8?
A)$230,400
B)$180,000
C)$234,000
D)$203,400
Q2) Based on the preceding information,what is the amount of write-off of differential associated with this acquisition recorded by Peak during 20X9?
A)$0
B)$32,500
C)$26,000
D)$20,000
Q3) Based on the preceding information,what amount of total inventory will be reported in the consolidated balance sheet prepared immediately after the business combination?
A)$130,000
B)$135,000
C)$90,000
D)$45,000
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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 sold must be reported in the consolidated income statement for 20X8?
A)$2,765,000
B)$1,620,000
C)$1,422,000
D)$2,963,000
Q2) Playa Inc.owns 85 percent of Seashore Inc.During 20X8,Playa sold goods with a 25 percent gross profit to Seashore.Seashore sold all of these goods in 20X8.How should 20X8 consolidated income statement items be adjusted?
A)No adjustment is necessary.
B)Sales and cost of goods sold should be reduced by 85 percent of the intercompany sales.
C)Net income should be reduced by 85 percent of the gross profit on intercompany sales.
D)Sales and cost of goods sold should be reduced by the intercompany sales.
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Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Q1) Based on the preceding information,the amount of income assigned to the controlling shareholders in the consolidated income statement for 20X8 will be:
A)$190,000.
B)$170,000.
C)$175,000.
D)$150,000.
Q2) Based on the information provided,while preparing the 20X4 consolidated income statement,depreciation expense will be
A)credited for $350 in the consolidation entries.
B)debited for $350 in the consolidation entries.
C)credited for $700 in the consolidation entries.
D)debited for $700 in the consolidation entries.
Q3) PeopleMag sells a plot of land for $100,000 to Seven Star Company,its 100 percent owned subsidiary,on January 1,20X7.The cost of the land was $75,000,when it was purchased in 20X6.In 20X9,Seven Star sells the land to Hot Properties Inc. ,an unrelated entity,for $120,000.How is the land reported in the consolidated financial statements for 20X7,20X8 and 20X9?
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Page 9
Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of consolidated net income should be reported for 20X8?
A)$147,240
B)$134,240
C)$149,134
D)$136,134
Q2) Based on the information given above,in the preparation of the 20X8 consolidated financial statements,interest income will be:
A)debited for $12,293 in the consolidating entries.
B)credited for $12,293 in the consolidating entries.
C)debited for $16,000 in the consolidating entries.
D)credited for $16,000 in the consolidating entries.
Q3) Based on the information given above,what amount of interest expense will be eliminated in the preparation of the December 31,20X9 consolidated financial statements?
A)$13,292
B)$18,988
C)$16,296
D)$9,483
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Chapter 9: Consolidation Ownership Issues
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Q1) Based on the information provided,what amount will be reported as the noncontrolling interest in the consolidated balance sheet on January 1,20X6?
A)$133,800
B)$191,400
C)$204,600
D)$210,000
Q2) Based on the preceding information,Storm Company's net income for 20X9 and 20X0 are:
A)$10,000 and $20,000 respectively.
B)$25,000 and $35,000 respectively.
C)$35,000 and $45,000 respectively.
D)$25,000 and $45,000 respectively.
Q3) Based on the preceding information,the amount assigned to the noncontrolling stockholders' share of preferred stock interest in the preparation of a consolidated balance sheet on January 1,20X6 is
A)$57,600.
B)$49,600.
C)$48,000.
D)$40,000.
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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 information provided,what was the consolidated cash balance at January 1,20X8?
A)$60,000
B)$85,000
C)$15,000
D)$380,000
Q3) Based on the information provided,what is the consolidated net income reported for the year 20X4?
A)$280,000
B)$275,000
C)$260,000
D)$200,000
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Q1) Based on the preceding information,the entries on January 30,20X9 related to the forward contract include a:
A)Debit to Dollars Payable to Exchange Broker,$184,000.
B)Credit to Foreign Currency Transaction Gain,$4,000.
C)Credit to Foreign Currency Receivable from Exchange Broker,$180,000.
D)Debit to Foreign Currency Units (SFr),$184,000.
Q2) Based on the preceding information,what is the overall effect of speculation on 20X8 net income?
A)$4,000 gain
B)$6,000 gain
C)$8,000 loss
D)$8,000 gain
Q3) Based on the preceding information,the call option:
A)has no intrinsic value currently.
B)is at the money.
C)is out of the money.
D)is in the money.
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Q1) Which of the following defines a foreign-based entity that uses a functional currency different from the recording currency?
I.A U.S.subsidiary in Britain maintains its accounting records in pounds sterling,with the majority of its transactions denominated in pounds sterling.
II.A U.S.subsidiary in Peru conducts virtually all of its business in Latin America,records transactions in the respective local currencies,and uses the U.S.dollar as its major currency.
A)I.
B)II.
C)Both I and II.
D)Neither I nor II.
Q2) Refer the information provided above.Assuming the U.S.dollar is the functional currency,what is the amount of Stack's cost of goods sold remeasured in U.S.dollars?
A)$1,680
B)$1,712
C)$1,700
D)$1,692
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Chapter 13: Segment and Interim Reporting
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Q1) Samuel Corporation foresees a downturn in its business in the medium term.It expects to sustain an operating loss of $160,000 for the full year ending December 31,20X8.Samuel's tax rate is 35 percent.Anticipated tax credits for 20X8 total $8,000.No permanent differences are expected.Realization of the full tax benefit of the expected operating loss and realization of anticipated tax credits are assured beyond any reasonable doubt because they will be carried back.For the first quarter ended March 31,20X8,Samuel reported an operating loss of $30,000.How much of a tax benefit should Samuel report for the interim period ended March 31,20X8?
A)$8,000
B)$12,000
C)$13,500
D)$15,500
Q2) Based on the preceding information,in the entry to record the replacement of the 1,500 units in November,Cost of Goods Sold will be debited for:
A)$52,500.
B)$22,500.
C)$15,000.
D)$7,500.
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Chapter 14: Sec Reporting
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Q1) Which of the following covers new or revised administrative practices and interpretations used by the SEC staff in reviewing financial statements?
A)Securities Exchange Act releases
B)Exchange Act industry guides
C)Accounting and Auditing Enforcement Releases
D)Staff Accounting Bulletins
Q2) For an accelerated filer,how many years of audited financial statements must be presented in the issuer's annual report?
I.Three years of audited income statements
II.Two years of audited balance sheets
III.Three years of audited statements of cash flows
A)I and II
B)II and III
C)I and III
D)I,II,and III
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) Refer to the information provided above.Erin invests $52,000 for a one-fifth interest.What amount of goodwill will be recorded?
A)$7,000
B)$28,000
C)$50,000
D)$80,000
Q2) When a partner retires from a partnership and the retiring partner is paid more than the capital balance in her account,which of the following explains the difference?
I.The retiring partner is receiving a bonus from the other partners.
II.The retiring partner's goodwill is being recognized.
A)I only
B)II only
C)Either I or II
D)Neither I nor II
Q3) Which of the following observations is true of an S corporation?
A)It elects to be taxed in the same manner as a corporation.
B)It does not have the burden of double taxation of corporate income.
C)Its shareholders have personal liability for the corporation's obligations.
D)Its primary income source should be passive investments.
Page 17
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Chapter 16: Partnerships: Liquidation
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Q1) On a partner's personal statement of financial condition,how should liabilities be valued?
I.Present value
II.Lower of present value or cash settlement amount
A)I
B)II
C)Both I and II
D)Neither I nor II
Q2) On a partner's personal statement of financial condition,how are assets valued?
A)Historical cost
B)Book value
C)Discounted value
D)Estimated current value
Q3) Based on the preceding information,what amount will be paid out to Scott upon liquidation of the partnership?
A)$0
B)$2,500
C)$5,000
D)$6,429
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) Which of the following funds provides goods and services only to other departments or agencies of the government on a cost-reimbursement basis?
A)Internal service funds
B)Enterprise funds
C)Special revenue funds
D)The general fund
Q2) All of the following funds have a financial resources measurement focus with the exception of which fund?
A)Debt service fund
B)Special revenue fund
C)Capital projects fund
D)Private-purpose trust fund
Q3) Discuss major differences between a governmental entity's uses of the modified accrual method and a for-profit corporation's use of the accrual method.
Q4) Which of the following funds are classified as proprietary funds?
A)Agency and special revenue funds.
B)Enterprise and internal service funds.
C)Debt service and capital projects funds.
D)Agency and pension trust funds.
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Chapter 18: Governmental Entities: Special Funds and Governmentwide Financial Statements
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Q1) Which presentation method combines the component unit's results into the primary government's financial results?
A)Blended presentation
B)Discrete presentation
C)Combined presentation
D)Consolidated presentation
Q2) GASB 34 specifies two criteria for determining major governmental funds to be reported separately in the Governmental Fund Balance Sheet and Statement of Revenues,Expenditures,and Changes in Fund Balances.To be considered a major governmental fund,a fund must:
A)meet at least one criterion.
B)be the general fund or meet at least one criterion.
C)be the general fund or meet two criteria.
D)either meet at least one criterion or be the general fund or meet two criteria.
Q3) Enterprise and internal service funds should recognize revenues when they are
A)received in cash.
B)available and earned.
C)measurable and earned.
D)measurable and available.
Page 20
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Chapter 19: Not-For-Profit Entities
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Q1) Transaction: The governing board designated assets for plant expansion. Effect on Statement of Operations:
A)Increases operating income.
B)Decreases operating income.
C)The event is reported on the statement of operations,but there is no effect on operating income.
D)The event is not reported on the statement of operations.
Q2) In accordance with ASC 958,contributions from donors that are to be permanently invested should be disclosed on the statement of activities of a private university as an increase in:
A)net assets with donor restrictions.
B)funds without donor restrictions.
C)endowment fund balance.
D)deferred revenues.
Q3) Reporting requirements of other not-for-profit entities (ONPOs)are similar to those of which of the following entities?
A)A public university
B)A voluntary health and welfare organization
C)An enterprise fund of a state or local government
D)A hospital operated by a county government
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Chapter 20: Corporations in Financial Difficulty
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Q1) Under Chapter 11 proceedings,what represents the fair value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the entity's assets?
A)Reorganization value
B)Fire sale value
C)Fresh start value
D)Excess value
Q2) The statement of realization and liquidation contains sections for all the following items except:
A)assets.
B)supplementary items.
C)liabilities.
D)stockholders equity.
Q3) Chapter 7 of the Bankruptcy Code provides for:
I.Reorganization.
II.Liquidation.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
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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 interest income does Scissor record for 20X8?
A)$12,000
B)$2,500
C)$7,500
D)$9,500
Q2) Based on the information given above,what amount of gain or loss on bond retirement was recorded?
A)No gain or loss
B)$85,000 gain
C)$85,000 loss
D)$35,000 loss
Q3) Based on the information given above,in the preparation of the 20X8 consolidated financial statements,interest income will be:
A)debited for $11,500 in the consolidating entries.
B)credited for $11,500 in the consolidating entries.
C)debited for $16,000 in the consolidating entries.
D)credited for $16,000 in the consolidating entries.
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