International Accounting Exam Practice Tests
Course Introduction
International Accounting explores the principles, standards, and practices of accounting in a global context. The course examines how varying political, legal, and cultural environments influence accounting systems and financial reporting worldwide. Topics include comparative accounting frameworks, the convergence of international accounting standards such as IFRS and US GAAP, foreign currency translation, international financial statement analysis, and the challenges of cross-border mergers and acquisitions. Students will develop an understanding of how multinational corporations address regulatory and ethical issues in financial reporting, equipping them with the skills needed to analyze and interpret financial information on a global scale.
Recommended Textbook
Advanced Accounting Global 12th Edition by
Floyd A. Beams
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Page 2
Chapter 1: Business Combinations
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Q1) In the business combination of Polka and Spot
A) the costs of registering and issuing the securities are included as part of the purchase price for Spot.
B) the salaries of Polka's employees assigned to the merger are treated as expenses.
C) all of the costs except those of registering and issuing the securities are included in the purchase price of Spot.
D) only the accounting and legal fees are included in the purchase price of Spot.
Answer: B
Q2) Under the current GAAP, Goodwill arising from a business combination is
A) charged to Retained Earnings after the acquisition is completed.
B) amortized over 40 years or its useful life, whichever is longer.
C) amortized over 40 years or its useful life, whichever is shorter.
D) never amortized.
Answer: D
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3
Chapter 2: Stock Investments - Investor Accounting and Reporting
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Q1) Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1, 2013, but was not able to exercise significant influence over Lilypad. During 2014, Jacana reported income of $120,000, excluding its income from Lilypad, and paid dividends of $50,000. Lilypad reported net income of $40,000 during 2014 and paid dividends of $20,000. Jacana should report net income for 2014 in the amount of
A) $115,000.
B) $120,000.
C) $125,000.
D) $130,000.
Answer: C
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) Depreciation expense on the excess fair value attributed to building
Answer: A
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Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) On July 1, 2014, Polliwog Incorporated paid cash for 21,000 shares of Salamander Company's $10 par value stock, when it was trading at $22 per share. At that time, Salamander's total stockholders' equity was $597,000, and they had 30,000 shares of stock outstanding, both before and after the purchase. The book value of Salamander's net assets is believed to approximate the fair values.
Requirement 1: Prepare the journal entry that Polliwog would record at the date of acquisition on their general ledger.
Requirement 2: Calculate the balance of the goodwill that would be recorded on Polliwog's general ledger, on Salamander's general ledger, and in the consolidated financial statements.
Answer: Requirement 1:
11ea8548_c358_8877_a343_870e44d0ea63_TB2661_00
Requirement 2:
There is no goodwill recorded on the general ledger of the Polliwog or Salamander. The goodwill is recorded in consolidation only, as calculated below: 11ea8548_c358_8878_a343_3f0cf2428f37_TB2661_00
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Page 5
Chapter 4: Consolidated Techniques and Procedures
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Q1) In contrast with single entity organizations, consolidated financial statements include which of the following in the calculation of cash flows from operating activities under the indirect method?
A) Cash paid to employees
B) Noncontrolling interest dividends paid
C) Noncontrolling interest share
D) Proceeds from the sale of land
Q2) When performing a consolidation, if the balance sheet does not balance, A) that indicates that the Investment in Subsidiary account on the parent's books should not be adjusted to -0-, because there is excess value represented in the investment. B) it is frequently because of the noncontrolling interest, as these amounts do not appear on the separate companies' general ledgers.
C) the debit and credit totals of the adjusting/eliminating columns of the consolidation working paper should be checked to confirm that they balance, and if so, then there is no need to check the individual line items.
D) the amount that it is "off" will always equal the noncontrolling interest in the current year net income of the subsidiary.
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Chapter 5: Intercompany Profit Transactions Inventories
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Q1) If the intercompany sale was an upstream sale, the total amount of consolidated cost of goods sold for 2015 will be
A) $300,000.
B) $430,000.
C) $470,000.
D) $477,000.
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
Q3) The 2014 consolidated income statement showed noncontrolling interest share of
A) $3,200.
B) $6,400.
C) $8,800.
D) $12,000.
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Chapter 6: Intercompany Profit Transactions Plant Assets
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Q1) In the eliminating/adjusting entries on consolidation working papers for 2014, the Truck account was
A) debited for $3,000.
B) credited for $3,000.
C) debited for $15,000.
D) credited for $15,000.
Q2) Pied Imperial Corporation acquired a 90% interest in Somest Corporation in 2012 when Somest's book values were equivalent to fair values. Somest sold equipment with a book value of $80,000 to Pied for $130,000 on January 1, 2014. Pied is fully depreciating the equipment over a 4-year period by using the straight-line method. Somest reported net income for 2014 was $320,000. Pied's 2014 income from Somest was
A) $249,250.
B) $250,500.
C) $254,250.
D) $288,000.
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8
Chapter 7: Intercompany Profit Transactions Bonds
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Q1) If the bonds were originally issued at 103, and 70% of them were purchased on January 2, 2016 at 104, the constructive gain or (loss) on the purchase was
A) $(142,800).
B) $( 42,000).
C) $ 42,000.
D) $ 142,800.
Q2) No constructive gain or loss arises from the purchase of an affiliate's bonds if the A) affiliate is a 100%-owned subsidiary.
B) bonds are purchased at book value.
C) bonds are purchased with arm's-length bargaining from outside entities.
D) gain or loss cannot be reasonably estimated.
Q3) Using the original information, the balances for the Bonds Payable and Bond Interest Payable accounts, respectively, on the consolidated balance sheet for December 31, 2015 were
A) $3,000,000 and $ 90,000.
B) $3,000,000 and $180,000.
C) $6,000,000 and $ 90,000.
D) $6,000,000 and $180,000.
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Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) Preacquisition income for 2013 is
A) $50,000.
B) $35,000.
C) $44,000.
D) $36,000.
Q2) 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.
Q3) Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2, 2014. Giant's percentage ownership immediately after the sale of additional stock would be
A) 66-2/3%.
B) 75%.
C) 80%.
D) 83-1/3%.
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Page 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, 2013. 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 2013 are as follows: Page, $500,000, Ace, $300,000, and Bader, $400,000. Page's controlling interest share of consolidated net income for 2013 is
A) $808,000.
B) $848,000.
C) $920,000.
D) $960,000.
Q2) The amount of noncontrolling interest share for the current year is
A) $69,000.
B) $85,000.
C) $95,000.
D) $99,000.
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Chapter 10: Subsidiary Preferred Stock, Consolidated
Earnings Per Share, and Consolidated Income Taxation
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Q1) Pandy Corporation owns a 90% interest in Sakaj Corporation's common stock. Throughout 2014, 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 2014. 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.
Q2) What is the goodwill on the consolidated balance sheet for Pamplin and Subsidiaries on December 31, 2014 based on Pamplin's purchase of Sage's common stock?
A) $140,000
B) $240,000
C) $290,000
D) $306,667
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Page 12
Chapter
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Q1) With regard to a variable interest entity (VIE), Ann Company may meet the following two conditions: Condition I
Ann Company has the power to direct VIE activities that significantly impact VIE's economic performance.
Condition II
Ann Company has an obligation to absorb losses and/or a right to receive significant benefits from the VIE.
Ann Company must consolidate a VIE if
A) Condition I is met only.
B) Condition II is met only.
C) either Condition I or Condition II is met.
D) both Condition I and Condition II are met.
Q2) Under the entity theory, what amount of goodwill was reported on the consolidated balance sheet at December 31, 2014?
A) $185,000
B) $191,250
C) $193,000
D) $200,000
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Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) When the billing for a U.S. company's sale to a company in a foreign country is denominated in U.S. dollars, ________ is required when preparing journal entries for the sale.
A) translation to a foreign currency
B) conversion to a foreign currency
C) translation to U.S. dollars
D) no translation
Q2) On April 1, 2014, Button Industries enters into an agreement with Bows Incorporated to lock in the price of cotton. Button agrees to purchase (and Bows agrees to sell) 100,000 pounds of cotton at $1.19 per pound, six months from the date of agreement. On October 1, 2014, the price of cotton is $1.17 per pound. The contract allows for net settlement. Required:
Determine the net settlement on the forward contract.
Q3) What is the final amount of the loan payable that Sooty repaid?
A) $250,000
B) $287,500
C) $397,500
D) $402,500
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Chapter 13: Accounting for Derivatives and Hedging
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Q1) International accounting standards differ from U.S. Generally Accepted Accounting Principles in that International standards
A) require that firm sale or purchase commitments are accounted for as fair value hedges.
B) require that firm sale or purchase commitments are accounted for as cash flow hedges.
C) state that firm sale or purchase commitments may not be treated as a hedged transaction.
D) permit firm sale or purchase commitments to be accounted for as either fair value hedges or cash flow hedges.
Q2) Which of the following is not an approach appropriate for hedge accounting?
A) Cash Flow Hedge Accounting
B) Critical Term Hedge Accounting
C) Fair Value Hedge Accounting
D) Hedge of Net Investment in Foreign Subsidiary
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Chapter 14: Foreign Currency Financial Statements
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Q1) 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.
Q2) A U.S. firm has a Belgian subsidiary that uses the British pound as its functional currency. According to GAAP, the U.S. dollar from Belgian unit's point of view will be
A) its only foreign currency.
B) its local currency.
C) its current rate method currency.
D) its reporting currency.
Q3) Which of the following assets and/or liabilities are considered monetary?
A) Intangible Assets and Plant, Property, and Equipment
B) Bonds Payable and Common Stock
C) Cash and Accounts Payable
D) Notes Receivable and Inventories carried at cost
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Page 16
Chapter 15: Segment and Interim Financial Reporting
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Q1) 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.
Q2) How does GAAP view interim accounting periods?
A) As discrete units for which net income may be separately determined
B) As integral units of the entire year for which each interim period is an essential part of an annual period
C) As integral units of the entire year with each interim period as an independent accounting period
D) As discrete units of the entire year using the same principles that are applied to the annual period
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Chapter 16: Partnerships - Formation, Operations, and Changes in Ownership Interests
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Q1) Required:
1. Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $36,000 for 2014.
2. Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the partnership).
Q2) What partnership capital will Robert have after Quincy retires?
A) $200,000
B) $280,000
C) $360,000
D) $440,000
Q3) If the partnership experiences a net loss of $60,000 for the year, what will be the final net amount of profit or (loss) closed to each partner's capital account?
A) ($90,000) to Alfred and $30,000 to Barne
B) ($30,000) to Alfred and ($30,000) to Barne
C) ($24,000) to Alfred and ($36,000) to Barne
D) $30,000 to Alfred and ($90,000) to Barne
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Chapter 17: Partnership Liquidation
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Q1) The cash available for distribution to the partners on July 31, 2014 is
A) $ 4,000.
B) $ 8,000.
C) $14,000.
D) $22,000.
Q2) In partnership liquidation, how are partner salary allocations treated?
A) Salary allocations take precedence over creditor payments.
B) Salary allocations take precedence over amounts due to partners with respect to their capital interests, but not profits.
C) Salary allocations take precedence over amounts due to partners with respect to their capital profits, but not capital interests.
D) Salary allocations are disregarded.
Q3) A cash distribution plan for the Sammi, Tammy, and Udd partnership was as follows:
Q4) In a schedule of assumed loss absorptions
A) the partner with lowest loss absorption is eliminated last.
B) it is necessary to have a cash distribution plan first.
C) the least vulnerable partner is eliminated first.
D) the most vulnerable partner is eliminated first.
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Chapter 18: Corporate Liquidations and Reorganizations
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Q1) Which of the following must approve a Chapter 11 plan?
A) The organization's management and the assigned trustee
B) The assigned trustee and creditors
C) The assigned trustee and entity's stockholders
D) The bankruptcy court and the creditors
Q2) Fresh-start reporting results in
A) a new reporting entity with no retained earnings/deficit balance.
B) a new reporting entity with a retained earnings/deficit balance equal to the reorganization value.
C) a continuation of the reorganized organization with no retained earnings/deficit balance.
D) a continuation of the reorganized organization with a retained earnings/deficit balance equal to the reorganization value.
Q3) A petition commencing a case against a corporate debtor
A) can be filed only under Chapter 7 of the bankruptcy act.
B) can be filed only under Chapter 11 of the bankruptcy act.
C) can be filed under either Chapter 7 or Chapter 11 of the bankruptcy act.
D) will be determined by the trustee whether it shall be Chapter 7 or Chapter 11 of the bankruptcy act.
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Page 20
Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) The following are transactions for the city of Clinton.
a. Borrowed $100,000 by issuing a one-year, 5% note, three months before year-end.
b. Accrued interest at year end, but did not pay the interest at year end.
c. Charges for services rendered of $2,500 were billed and collected immediately.
d. Incurred salary costs of $5,000, unpaid.
Required:
Analyze the above transactions by using the accounting equation for a proprietary fund.
Q2) The following are transactions for the city of Franklin.
a. Borrowed $20,000 by issuing a two-year note.
b. Purchased equipment for $6,000 cash.
c. Licenses for $700 were billed on account.
d. Accrued employee salary costs of $7,000.
e. Depreciation expense on equipment for year, $1,000.
Required:
Analyze the above transactions by using the accounting equation for a governmental fund.
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21
Chapter 20: Accounting for State and Local Governmental Units
- Governmental Funds
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Q1) Assume you are preparing journal entries for the General Fund under the consumption method. What account should be debited when office supplies are ordered?
A) Appropriations
B) Encumbrances
C) Expenditures
D) Other financing use
Q2) Which of the following represents the recording of a budget in the accounts of the General Fund?
A) Debit Appropriations, Credit Estimated Revenues and Credit Fund BalanceUnassigned
B) Debit Appropriations, Credit Estimated Revenues
C) Debit Estimated Revenues, Credit Appropriations, Credit Estimated Other Financing Uses, Credit Fund Balance - Unassigned
D) Debit Estimated Other Financing Uses, Credit Appropriations and Credit Fund Balance - Unassigned
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Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) What basis of accounting is used by fiduciary funds?
A) Modified accrual accounting
B) Accrual accounting
C) Cash basis accounting
D) Present value accounting
Q2) Proprietary funds are required to prepare financial statements that include:
A. Statement of Activities
B. Statement of Revenues, Expenditures and Changes in Fund Balance
C. Balance Sheet
D. Statement of Cash Flows
E. Statement of Net Position
F. Statement of Revenues, Expenses and Changes in Net Position
A) C, D, F
B) A, B, D
C) B, C, D
D) D, E, F
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Chapter 22: Accounting for Not-For-Profit Organizations
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Q1) Marshfield Hospital is a private, not-for-profit hospital. The following transactions occurred:
1. Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $180,000. The cash gifts were used in the current year in accordance with restrictions.
2. Unrestricted pledges of $800,000 were received. Ten percent of the pledges typically prove uncollectible. Additional cash contributions during the year totaled $300,000.
3. Gifts in kind were received that were sold at a silent auction for $23,000. The fair value of the donated gifts in kind could not be reasonably determined.
4. Expenses were incurred and paid as follows: Salary of doctor, $190,000; facility rental, $36,000; purchases of supplies, $8,000; and utility costs, $10,000.
5. Marketable securities with a fair value of $650,000 were received as a donation with a stipulation that the hospital use the funds to purchase suitable land for the hospital. Required: Prepare journal entries for the aforementioned transactions.
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Chapter 23: Estates and Trusts
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Q1) Cindy Lou's parents passed away while she was still dependent on them, and their will designated that a trust should be established with their estate proceeds to care for her. The following transactions occurred in the first two months following their deaths.
1. The trust account was opened with the $2,000,000 in funds received from the estate. The funds were deposited into a non-interest bearing checking account to be used for expenses.
2. $1,500,000 was put into a multi-year certificate of deposit which earned 3% annually, with interest paid monthly back to the checking account.
3. One month's interest from the certificates of deposit was received.
4. The bank's trust administration fee was paid for $65.
5. Tuition was paid for the boarding school where Cindy Lou was living for $6,500. Required:
Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.
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