International Accounting Exam Bank
Course Introduction
International Accounting explores the principles and practices of accounting within a global context, examining how accounting standards, practices, and regulations differ across countries. The course covers the development and application of International Financial Reporting Standards (IFRS), the convergence and divergence between US Generally Accepted Accounting Principles (GAAP) and IFRS, and the challenges of financial reporting in multinational organizations. Students will gain an understanding of how international transactions, foreign currency translation, and cross-border business activities impact financial reporting and analysis, as well as the ethical and cultural considerations accountants face in a global business environment.
Recommended Textbook
Advanced Accounting Global 12th Edition by Floyd
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23 Chapters
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A. Beams
Page 2
Chapter 1: Business Combinations
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Sample Questions
Q1) 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 valuable employee workforce
C) Noncontractual customer relationships
D) Employment contracts
Answer: B
Q2) In a business combination, which of the following will occur?
A) All identifiable assets and liabilities are recorded at fair value at the date of acquisition.
B) All identifiable assets and liabilities are recorded at book value at the date of acquisition.
C) Goodwill is recorded if the fair value of the net assets acquired exceeds the book value of the net assets acquired.
D) None of the above is correct.
Answer: A
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Chapter 2: Stock Investments - Investor Accounting and Reporting
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Q1) Which method of accounting will generally be used when one company purchases between 20% to 50% of the outstanding stock of another company?
A) Only the fair value method may be used.
B) Only the equity method may be used.
C) The GAAP prescribed the equity method may be used.
D) Neither the fair value method nor the equity method may be used, regardless of the level of ownership.
Answer: C
Q2) Which method of accounting will generally be used when one company purchases less than 20% of the outstanding stock of another company?
A) Only the fair value method may be used.
B) Only the equity method may be used.
C) Either the fair value method or the equity method may be used, depending upon the relationship between the companies.
D) Neither the fair value method nor the equity method may be used, regardless of the level of ownership.
Answer: C
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4
Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) On June 1, 2014, Puell Company acquired 100% of the stock of Sorrell Inc. On this date, Puell had Retained Earnings of $100,000 and Sorrell had Retained Earnings of $50,000. On December 31, 2014, Puell had Retained Earnings of $120,000 and Sorrell had Retained Earnings of $60,000. The amount of Retained Earnings that appeared in the December 31, 2014 consolidated balance sheet was
A) $120,000.
B) $130,000.
C) $170,000.
D) $180,000.
Answer: A
Q2) A subsidiary can be excluded from consolidation if
A) control does not rest with the majority owner.
B) the subsidiary is in legal reorganization.
C) the subsidiary is operating under severe foreign-exchange restrictions.
D) All of the above are correct.
Answer: D
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Chapter 4: Consolidated Techniques and Procedures
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Questions
Q1) A parent company uses the equity method to account for its wholly-owned subsidiary. Which of the following will be a correct procedure for the Investment account?
A) A debit for a subsidiary loss and a credit for dividends received
B) A credit for subsidiary income and a debit for dividends received
C) A debit for subsidiary dividends received and a credit for a subsidiary loss
D) A credit for a subsidiary loss and a credit for dividends received
Q2) What amount of total liabilities will be reported?
A) $206,000
B) $278,400
C) $319,600
D) $348,000
Q3) What amount of Inventory will be reported?
A) $170,000
B) $169,000
C) $186,500
D) $192,000
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Chapter 5: Intercompany Profit Transactions Inventories
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Q1) Psalm Enterprises owns 90% of the outstanding voting stock of Solomon Siding, which was purchased at a cost equal to 90% of the book value of Solomon's net assets many years ago. (At the time of purchase, the fair value and book value of Solomon's net assets were equal.) Psalm purchases merchandise from Solomon at 110% above Solomon's cost. In 2014, intercompany sales from Solomon to Psalm amounted to $362,000. Unrealized profits in Psalm's December 31, 2013 inventory and December 31, 2014 inventory were $82,000 and $26,000, respectively. Solomon reported net income of $980,000 for 2014.
Required:
1. Determine Psalm's income from Solomon for 2014.
2. In General Journal format, prepare consolidation working paper entries at December 31, 2014 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.
Q2) For 2014, 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
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Page 7
Chapter 6: Intercompany Profit Transactions Plant Assets
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Q1) Assume an upstream sale of machinery occurs on January 1, 2014. The parent owns 70% of the subsidiary. There is a gain on the intercompany transfer and the machine has five remaining years of useful life and no salvage value. Straight-line depreciation is used. Which of the following statements is correct?
A) Noncontrolling interest share for 2014 is equal to: subsidiary income for 2014 multiplied by 30%.
B) Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale plus the excess depreciation expense) multiplied by 30%.
C) Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 minus the gain on sale) multiplied by 30%.
D) Noncontrolling interest share for 2014 is equal to: (subsidiary income for 2014 plus the excess depreciation expense) multiplied by 30%.
Q2) The noncontrolling interest share for 2014 was
A) $18,000.
B) $22,000.
C) $23,000.
D) $27,000.
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Page 8
Chapter 7: Intercompany Profit Transactions Bonds
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Q1) Phlora purchased its 100% ownership in Speshal many years ago at a time when book values of assets and liabilities equaled market values.
On January 2, 2014, Phlora purchased $200,000 of Speshal Corporation's 6% bonds for $182,000. At that time, this was all of the bonds that had been issued by Speshal, and unamortized premium on Speshal's books was $3,500. The bonds pay interest on July 1 and January 1 and mature on January 1, 2019. Both Phlora and Speshal use straight-line amortization. Phlora uses the equity method of accounting for its investment in Speshal.
Q2) If an affiliate purchases bonds in the open market, the book value of the intercompany bond liability at the time of purchase is
A) always assigned to the parent company because it has control.
B) the par value of the bonds less the unamortized discount or plus the unamortized premium.
C) par value.
D) the par value of the bonds plus the unamortized discount or less the unamortized premium.
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9
Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) A 15% stock dividend by a subsidiary causes
A) the parent company investment account to decrease.
B) the parent company investment account to remain the same.
C) the parent company investment account to increase.
D) the noncontrolling interest equity to increase.
Q2) On April 1, 2014, Paramount Company acquires 100% of the outstanding stock of Yester Company on the open market. Paramount and Yester have December 31 fiscal year ends. Under GAAP, a consolidated income statement for the year ending December 31, 2014, will include
A) 100 percent of the revenues and expenses in 2014 of Yester Company after January 1, 2014.
B) no revenues and expenses in 2014 of Yester Company.
C) 80 percent of the revenues and expenses in 2014 of Yester Company.
D) 100 percent of the revenues and expenses in 2014 of Yester Company after April 1, 2014.
Q3) Noncontrolling interest share for 2013 is
A) $21,000.
B) $32,400.
C) $36,000.
D) $50,000.
Page 10
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Chapter 9: Indirect and Mutual Holdings
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Q1) The amount of noncontrolling interest share for the current year is
A) $69,000.
B) $85,000.
C) $95,000.
D) $99,000.
Q2) Paine Corporation owns 90% of Achan Corporation, Achan Corporation owns 85% of Badge Corporation, and Badge Corporation owns 5% of Achan Corporation. The separate net incomes (excluding investment income) of Paine, Achan, and Badge are $400,000, $160,000, and $220,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value. Required:
1. Calculate revised net incomes for Paine, Achan, and Badge by using the conventional method.
2. Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.
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Chapter 10: Subsidiary Preferred Stock, Consolidated
Per Share,
Income Taxation
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Sample Questions
Q1) When a subsidiary has preferred stock that is convertible into subsidiary common stock, the parent's equity in the subsidiary's diluted earnings is calculated by the number of
A) subsidiary shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure.
B) parent shares into which the subsidiary's dilutive securities can be converted times the parent's basic EPS figure.
C) subsidiary common shares held by the parent times the subsidiary's diluted EPS figure.
D) parent shares into which the subsidiary's dilutive securities can be converted times the subsidiary's basic EPS figure.
Q2) Assume Salter's net income for 2014 is $220,000. No dividends are declared or paid in 2014. What is the change in Pardy's Investment in Salter for the year ending December 31, 2014?
A) $ 84,000
B) $119,000
C) $154,000
D) $189,000
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Chapter 11: Consolidation Theories, Push-Down Accounting, and Corporate Joint Ventures
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Q1) On January 1, 2014, Parton Corporation acquired an 80% interest in Sandra Corporation for $184,000. Sandra's net assets on this date had a book value of $160,000 and a fair value of $210,000. The excess of fair value over book value at acquisition was attributable to $20,000 of understated plant assets with a remaining useful life of five years from January 1, 2014, and $30,000 to an understated patent with a remaining economic life of six years from January 1, 2014. Separate net incomes (excluding investment income) of Parton and Sandra for 2014 were $300,000 and $50,000, respectively.
Required:
1. Compute goodwill at January 1, 2014 under the parent company theory and the entity theory.
2. Determine consolidated net income and noncontrolling interest share for 2014 under the parent company theory and the entity theory.
Q2) Noncontrolling interest share was reported in the 2014 consolidated income statement at
A) $5,000.
B) $6,000.
C) $8,000.
D) $10,000.
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Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) If the sale of the merchandise was denominated in Swiss francs, the November 30 entry to record the receipt of payment from Watchem included a
A) credit to Accounts Receivable for $104,040.
B) credit to Exchange Gain for $3,060.
C) debit to Cash for $107,100.
D) debit to Exchange Loss for $3,060.
Q2) On November 1, 2014, the Yankee Corporation, a US corporation, purchased and received an extruding machine from Wales Corporation, a UK company. The purchase price was $10,000(U.S. dollars) and Yankee agreed to pay in pounds on February 1, 2015. Both corporations are on a calendar year accounting period. Assume that the spot rates for the British pound on November 1, 2014, December 31, 2014, and February 1, 2015, are $1.60, $1.62, and $1.66, respectively.
Required:
Record the November 1, December 31, and February 1 transactions in the General Journals of Yankee Corporation and Wales Corporation. If no entry is required on a particular date, indicate "No entry" in the General Journal.
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Chapter 13: Accounting for Derivatives and Hedging
Activities
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Q1) On November 1, 2013, Athom Corporation purchased 5,000 television sets for its merchandise inventory from Sockk, a South Korean firm, at a total quoted cost of 600,000,000 won (W). On this date, the spot rate for the won was $1 = 1,080W. On the same day, Athom invested $500,000 cash in a non-interest bearing account with a Japanese bank, to hedge its exposed liability position. The account payable to Sockk is due on January 30, 2014. The exchange rates on December 31, 2013 and January 30, 2014 were $1 = 1,060W, and $1 = 1,030W, respectively. Athom agreed to pay Sockk in won. The bank deposit made by Athom will be held in won, but will be withdrawn in dollars by Athom on January 30th. Assume that Athom has a December 31 year-end. Assume this is a fair value hedge.
Required:
Prepare all the journal entries for Athom Corporation's General Journal on November 1, 2013, December 31, 2013, and January 30, 2014. Round entries to the nearest whole dollar. If no entry is required on a particular date, indicate "No entry" in the General Journal.
Q2) What is the fair value of the forward contract at December 31, 2014?
A) $400.00 liability
B) $400.00 asset
C) $396.04 liability
D) $396.04 asset
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Chapter 14: Foreign Currency Financial Statements
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Q1) Which of the following statements about the Current Rate method is false?
A) Translation involves restating the functional currency amounts into the reporting currency.
B) All assets and liabilities are translated at the current rate.
C) If the subsidiary maintains their books in their functional currency, the current rate method is used.
D) The effect of exchange rate changes are reported on the income statement as a foreign exchange gain or loss.
Q2) Selvey Inc. is a wholly-owned subsidiary of Parsfield Incorporated, a U.S. firm. The country where Selvey operates is determined to have a highly inflationary economy according to GAAP definitions. Therefore, for purposes of preparing consolidated financial statements, the functional currency is
A) its reporting currency.
B) its current rate method currency.
C) the US dollar.
D) its local currency.
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16
Chapter 15: Segment and Interim Financial Reporting
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Q1) Dott Corporation experienced a $100,000 extraordinary loss in the second quarter of 2014 in their East Coast operating segment. The loss should be recognized
A) only at the consolidated report level at the end of the year.
B) entirely in the second quarter of 2014 in the East Coast operating segment.
C) in equal amounts allocated to the remaining three quarters of 2014 at the corporate level.
D) in equal amounts allocated to the remaining three quarters of 2014 of the East Coast segment.
Q2) Which one of the following operating segment disclosures is not required by GAAP?
A) Total Assets
B) Equity
C) Intersegment sales
D) Extraordinary items
Q3) What is the threshold for reporting a major customer?
A) 5 percent of revenues
B) 5 percent of profits
C) 10 percent of revenues
D) 10 percent of profits
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Chapter 16: Partnerships - Formation, Operations, and Changes in Ownership Interests
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Q1) By how much will the capital accounts of Lemon, Mango, and Nobb increase, respectively, due to the revaluation of the assets and the recognition of goodwill?
A) The capital accounts will increase by $50,000 each.
B) The capital accounts will increase by $60,000 each.
C) $36,000, $54,000, and $90,000
D) $40,000, $50,000, and $60,000
Q2) Under the Uniform Partnership Act, loans made by a partner to the partnership are treated as
A) liabilities to the partnership for which interest shall be paid from the date of the liability.
B) advances to the partnership that are carried in the partners' capital accounts.
C) Accounts Payable of the partnership for which interest is paid.
D) advances to the partnership for which interest does not have to be paid.
Q3) What partnership capital will Robert have after Quincy retires?
A) $200,000
B) $280,000
C) $360,000
D) $440,000
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Chapter 17: Partnership Liquidation
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Q1) The book value of the partnership equity (i.e., total equity of the partners) on June 30, 2014 is
A) $ 58,000.
B) $ 60,000.
C) $ 84,000.
D) $120,000.
Q2) In partnership liquidations, what are safe payments?
A) The amounts of distributions that can be made to the partners, after all creditors have been paid in full.
B) The amounts of distributions that can be made to the partners with assurance that such amounts will not have to be returned to the partnership.
C) The amounts of distributions that can be made to the partners, after all non-cash assets have been adjusted to fair market value.
D) The amounts of distributions that can be made to the partners during the liquidation based on the partner's contributed capital return.
Q3) A cash distribution plan for the Sammi, Tammy, and Udd partnership was as follows:
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Chapter 18: Corporate Liquidations and Reorganizations
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Q1) In a liquidation under Chapter 7, the trustee
A) may not be appointed, but may only be elected.
B) may not be elected, but may only be appointed.
C) is responsible for converting assets to cash and distributing payments to claimants.
D) is responsible for appointing a creditors' committee.
Q2) A bankruptcy petition filed by a firm's creditors is
A) a Chapter 2 petition.
B) a petition for liquidation.
C) an involuntary petition.
D) a voluntary petition.
Q3) A single creditor
A) can never file a petition for bankruptcy.
B) with a $14,425 or more secured claim may file a petition for bankruptcy.
C) with a $14,425 or more unsecured claim may file a petition for bankruptcy, if there are fewer than 12 unsecured creditors.
D) with a $14,425 or more unsecured claim may file a petition for bankruptcy if there are more than 12 unsecured creditors.
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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 City of Attross entered the following transactions during 2014:
1. The city authorized a bond issue of $2,500,000 par to finance construction of a fountain and pavilion in the city square. The bonds were issued for $2,560,000. The premium was transferred to the fund for which the debt will be serviced. (This was a nonreciprocal transfer.)
2. The city entered into a contract for construction of the fountain at an estimated cost of $2,425,000.
3. The city received and paid a bill for $2,445,000 from the contractor upon completion of and approval of the fountain.
4. The unused bond proceeds were set aside for debt service on the bonds. Accordingly, those resources were paid to the appropriate fund(nonreciprocal).
Required:
Prepare journal entries for each of the above transactions. Identify the appropriate fund or funds used by Attross.
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Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) The City's municipal golf course had the following transactions.
1. Received a beautification(operating) grant from the state for $600,000. Received cash of $600,000.
2. Incurred and paid qualifying expenses under the state grant program in (1) above of $280,000.
3. Incurred and paid construction costs on an uncompleted clubhouse for $1,200,000.
4. Received $1,000,000 cash from a grant to assist with construction costs for the clubhouse.
Required:
Given that the golf course is operated based on user fees for upkeep, prepare the necessary journal entries for each of these transactions.
Q2) What is a significant difference for agency funds when compared to governmental funds?
A) An agency fund has a separate ledger.
B) An agency fund does not report revenues.
C) Agency funds are not associated with any governmental unit.
D) An agency fund will not balance because there is no fund balance account.
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Page 23
Chapter 22: Accounting for Not-For-Profit Organizations
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Q1) An alumnus of a nonprofit, nongovernmental university establishes an endowment of $50,000. When the university receives the endowment from the donor, what account will the university credit?
A) Temporarily restricted revenues
B) Temporarily restricted support
C) Permanently restricted revenues
D) Permanently restricted support
Q2) Not-for-profit, private colleges classify student unions, dining halls, and residence halls as
A) educational and general services.
B) auxiliary enterprises.
C) independent operations.
D) restricted enterprises.
Q3) Voluntary health and welfare organizations
A) may not have paid executives or staff.
B) are governed by separate GASB statements.
C) use fund accounting, following the rules for proprietary fund reporting.
D) are supported by, and provide voluntary services to, the public.
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24
Chapter 23: Estates and Trusts
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Q1) Under the Uniform Probate Code, the personal representative must inform the heirs and devisees of his or her appointment and provide other selected information within how many days of the appointment?
A) 10 days
B) 20 days
C) 30 days
D) 60 days
Q2) Philiam Benedict dies on October 1, 2014, leaving his entire estate to his sole surviving niece, Muriel Finster. After all devise distributions and payments for estate expenses and liabilities, the fair value of Philiam's estate is $6,350,000.
Required:
Calculate the federal estate tax on Philiam's estate, assuming that federal estate taxes are paid at the 45% rate.
Q3) Which type of trust is created pursuant to a will?
A) A testamentary trust
B) A Crummey trust
C) A generation-skipping trust
D) A life estate trust
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