International Accounting Exam Review
Course Introduction
International Accounting examines the principles and practices of accounting in a global context, exploring how multinational companies prepare and report financial information across different countries. The course delves into the harmonization of accounting standards, such as International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), and the challenges posed by diverse cultural, legal, and economic environments. Topics include foreign currency translation, international taxation, global financial statement analysis, and ethical issues in cross-border financial reporting, equipping students with the knowledge needed to navigate complex international accounting environments.
Recommended Textbook
Advanced Accounting 12th Edition by
Floyd A. Beams
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Page 2
Chapter 1: Business Combinations
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Q1) Which of the following methods does the FASB consider the best indicator of fair values in the evaluation of goodwill impairment?
A)Senior executive's estimates
B)Financial analyst forecasts
C)Market value
D)The present value of future cash flows discounted at the firm's cost of capital
Answer: C
Q2) Picasso Co.issued 5,000 shares of its $1 par common stock,valued at $100,000,to acquire shares of Seurat Company in an all-stock transaction.Picasso paid the investment bankers $35,000 and will treat the investment banker fee as
A)an expense for the current year.
B)a prior period adjustment to Retained Earnings.
C)additional goodwill on the consolidated balance sheet.
D)a reduction to additional paid-in capital.
Answer: D
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Chapter 2: Stock Investments Investor Accounting and Reporting
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Q1) Which one of the following statements is correct for an investor company?
A)The balance in the Investment in Osprey Co.account can be reduced to represent a decline in the fair market value of the investment,but will not be adjusted if the fair market value increases.
B)Under the equity method,the balance in the Investment in Osprey Co.account can be negative if the investee corporation operates at a loss.
C)Once the balance in the Investment in Osprey Co.is reduced to zero,it will not be reduced any further.
D)Under the equity method,the balance in the Investment in Osprey Co.account will increase when cash dividends are received.
Answer: C
Q2) The income from an equity method investee is reported on one line of the investor company's income statement except when
A)the cost method is used.
B)the investee has extraordinary items.
C)the investor company is amortizing cost-book value differentials.
D)the investor company changes from the cost to the equity method.
Answer: B
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Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) From the standpoint of accounting theory,which of the following statements is the best justification for the preparation of consolidated financial statements?
A)In substance the companies are separate,but in form the companies are one entity.
B)In substance the companies are one entity,but in form they are separate.
C)In substance and form the companies are one entity.
D)In substance and form the companies are separate entities.
Answer: B
Q2) Percy Inc.acquired 80% of the outstanding stock of Sillson Company in a business combination.The book values of Sillson's net assets are equal to the fair values except for the building,whose net book value and fair value are $500,000 and $800,000,respectively.At what amount is the building reported on the consolidated balance sheet?
A)$400,000
B)$500,000
C)$640,000
D)$800,000
Answer: D
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Chapter 4: Consolidated Techniques and Procedures
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Q1) What amount of Goodwill will be reported?
A)$54,400
B)$68,000
C)$72,000
D)$90,000
Q2) When preparing the consolidation workpaper for a company and its controlled subsidiary,which of the following would be used for the entities being consolidated?
A)Post-closing trial balances
B)Adjusted trial balances
C)Unadjusted trial balances
D)The adjusted trial balance for the parent and the unadjusted trial balance for all controlled subsidiaries
Q3) What is the amount of total assets?
A)$1,380,000
B)$1,402,000
C)$1,470,000
D)$1,875,000
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6
Chapter 5: Intercompany Profit Transactions - Inventories
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Q1) Salli Corporation regularly purchases merchandise from their 90% owner,Playtime Corporation.Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets.At the time of acquisition,the book values and fair values of Salli's assets and liabilities were equal.Playtime makes their sales to Salli at 120% of cost.In 2014,Salli reported net income of $460,000,and made purchases totaling $172,000 from Playtime.Although Salli had no inventory on hand at the beginning of 2014 that they had purchased from Playtime,at year end,they had $51,600 of this merchandise in inventory.
Required:
1.Determine the unrealized profit in Salli's inventory at December 31,2014. 2.Compute Playtime's income from Salli for 2014.
Q2) What amount of unrealized profit did Pelga Company have at the end of 2015?
A)$10,000
B)$12,500
C)$50,000
D)$62,500
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Page 7
Chapter 6: Intercompany Profit Transactions - Plant Assets
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Q1) Pigeon Company owns 80% of the outstanding stock of Spiniflex Corporation,which was purchased on January 1,2008,when Spiniflex's book values were equal to its fair values.The amount paid by Pigeon included $16,000 for goodwill.
On January 1,2009,Pigeon purchased a truck for $40,000 which had no salvage value with a useful life of 8 years,depreciated on a straight-line basis.On January 1,2014,Pigeon sold the truck to Spiniflex Corporation for $18,000.The truck was estimated to have a three-year remaining life on this date and no salvage value.All affiliates use the straight-line depreciation method.
Required:
Prepare all relevant entries with respect to the truck.
1.Record the journal entries on Pigeon's books for 2014.
2.Record the journal entries on Spiniflex's books for 2014.
3.Prepare the consolidation entries required for Pigeon and subsidiary for 2014 as a result of this transaction.
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) 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.
Q2) Bonds issued by a company remain on their books as a liability,but are considered constructively retired when
A)the company borrows money from unaffiliated entities to re-purchase its own bonds at a gain.
B)The company borrows money from an affiliate to re-purchase its own bonds at a gain.
C)The company's parent or subsidiary purchases the bonds from outside entities.
D)The company borrows money from an affiliate to repurchase its own bonds at a gain or at a loss.
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Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) At December 31,2015 year-end,Lapwing Corporation's investment in Ground Inc.was $200,000 consisting of 80% of Ground's $250,000 stockholders' equity on that date.On April 1,2016,Lapwing sold 20% interest (one-fourth of its holdings)in Ground for $65,000.During 2016,Ground had net income of $75,000(earned uniformly)and on July 1,2016,Ground paid dividends of $40,000.Lapwing uses the equity method to account for the investment.
Required:
1.What is the gain or loss on sale of the 20% interest?
2.Record the journal entries for Lapwing for the year ending December 31,2016.Use the actual-sale-date assumption.
Q2) Noncontrolling interest share for 2013 is
A)$21,000.
B)$32,400.
C)$36,000.
D)$50,000.
Q3) Preacquisition income for 2013 is
A)$50,000.
B)$35,000.
C)$44,000.
D)$36,000.
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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) The controlling interest share of consolidated net income for the current year is
A)$341,000.
B)$348,400.
C)$351,000.
D)$355,000.
Q3) The equation,in a set of simultaneous equations,that computes Paiva Corporation income on a consolidated basis is
A)P = $50,000 + 0.8B.
B)P = $30,000 + 0.2A.
C)P = $100,000 + 0.2A.
D)P = $100,000 + 0.8A.
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11
Chapter
Share,and Consolidated Income Taxation
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Q1) What should be the noncontrolling interest share,preferred in the consolidated financial statements of Parminter for the year ending December 31,2014?
A)$1,000
B)$2,000
C)$4,000
D)$5,000
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)$306,667
Q3) What is the implied goodwill for Salter based on Pardy's purchase price for Salter on January 1,2014?
A)$ 0
B)$ 35,000
C)$ 70,000
D)$100,000
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Chapter 11: Consolidation Theories,push-Down
Accounting,and Corporate Joint Ventures
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Q1) Noncontrolling interest share was reported in the 2014 consolidated income statement at
A)$5,000.
B)$6,000.
C)$8,000.
D)$10,000.
Q2) Goodwill was reported in the December 31,2014 consolidated balance sheet at
A)$170,000.
B)$180,000.
C)$200,000.
D)$210,000.
Q3) Assume the entity theory is used.On January 2,2014,Leah Company will report Goodwill of ________ and Accounts Receivable of ________ on Leah's balance sheet.
A)$27,000;$30,000
B)$27,000;$34,500
C)$30,000;$30,000
D)$50,000;$35,000
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Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) On September 1,2014,Bylin Company purchased merchandise from Himeji Company of Japan for 20,000,000 yen payable on October 1,2014.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 1,2014.
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 1,2014?
3.What journal entry did Bylin record on October 1,2014?
Q2) Which of the following is a true statement regarding the recording of a transaction which involves foreign currency?
A)A transaction is always settled in the currency in which it is denominated.
B)A transaction is always measured in the currency in which it is denominated.
C)A transaction is always settled in the currency in which it is measured.
D)A transaction is always recorded in the currency in which it is denominated.
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Page 14
Chapter 13: Accounting for Derivatives and Hedging
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Q1) Opie Industries is a manufacturer of plastic bottles.On September 1,2014,Opie purchased an option contract at a cost of $2,000.The purpose of the option is to hedge against increases in the price of this type of plastic,"PET." The option is to buy 1,000,000 pounds of PET on March 1,2015 for $.75 per pound.If the market price of PET is below $.75 on March 1,Opie will let the option expire.If the market price is above $.75,then Opie will exercise the option.The option is to be settled net.Opie assumes a 6% annual borrowing rate.Assume this is a cash flow hedge.
Required:
Prepare the entry that Opie should record on September 1,2014.Then,assuming that the price of PET is $.72 on December 31,2014 (Opie's year end),prepare the entry that Opie should record.Finally,prepare the entries for March 1,2015,assuming that the price of PET is $.78.
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.
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Chapter 14: Foreign Currency Financial Statements
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Q1) If a U.S.company wants to hedge a prospective loss on its investment in a foreign entity that may result from a foreign currency fluctuation,the U.S.company should
A)purchase a forward to swap currency of the foreign entity's local country for U.S.currency.
B)purchase a call option to buy currency of the foreign entity's local country.
C)issue a loan in the foreign entity's local country.
D)borrow money in the foreign entity's local country.
Q2) 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.
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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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) Which one of the following operating segment information items is not directly named by GAAP to be reconciled to consolidated totals?
A)Assets
B)Liabilities
C)Revenues
D)Profit or loss
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Chapter 16: Partnerships -
Formation,operations,and
Changes in Ownership Interests
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Q1) On July 1,2014,Joe,Kline,and Lama began a partnership in which Joe and Kline each contributed cash of $200,000;and Lama contributed property with a fair value of $100,000 and a tax basis $150,000.Joe receives a 10% bonus of partnership income.Kline and Lama receive salaries of $40,000 each.The partnership agreement of Joe,Kline,and Lama provides that all partners receive 5% interest on capital and that profits and losses of the remaining income be distributed to Joe,Kline,and Lama by a 1:1:3 ratio.
Required:
Prepare a schedule to distribute $225,000 of partnership net income to the partners.
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 advance.
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.
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Chapter 17: Partnership Liquidation
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Q1) If all partners are included in the first installment of an installment liquidation,then in future installments
A)cash will be distributed according to the residual profit and loss sharing ratios.
B)cash should not be distributed until all non-cash assets are converted into cash.
C)vulnerability rankings for each partner should be prepared.
D)a cash distribution plan must be prepared so that partners will know when they will be included in cash distributions.
Q2) Gains and losses incurred at liquidation are distributed to the partners using the residual profit and loss sharing ratios because
A)using ownership percentages would permit solvent partners to not share profits with insolvent partners.
B)the residual profit and loss ratios represent the ownership percentages.
C)these amounts represent profits and losses from prior periods that would have been shared using the residual profit and loss ratios.
D)using the established profit and loss sharing ratios is not permitted.
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19
Chapter 18: Corporate Liquidations and Reorganizations
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Q1) Oceana Corporation is being liquidated under Chapter 7 of the Bankruptcy Act.The trustee has determined that the unsecured claims will receive $.35 on the dollar.Loans-R-Us holds a $1,000,000 mortgage note receivable from Oceana that is secured by building and equipment with a $1,200,000 book value and a $900,000 fair value.
Required:
How much of the mortgage receivable will Loans-R-Us recover?
Q2) 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.
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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20
Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) Because a fund is an accounting entity,each fund has I.its own accounting equation.
II.its own journals,ledgers,and other accounting records.
III.its own separate auditor.
A)I only
B)II only
C)I and II
D)I,II and III
Q2) Which type of fund is used to account for a government activity that sells goods or services either solely or almost solely to external customers?
A)A temporary fund
B)A general fund
C)An agency fund
D)An enterprise fund
Q3) The modified accrual basis of accounting is used for A)governmental funds.
B)proprietary funds.
C)internal service funds.
D)both A and C.
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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) When a capital lease is used to lease fixed assets for the general government,the governmental fund acquiring the fixed assets debits ________ at the ________.
A)expenditures;future value of the minimum lease payments
B)fixed assets;future value of the minimum lease payments
C)expenditures;present value of the minimum lease payments
D)fixed assets;present value of the minimum lease payments
Q3) Taxes which were billed,but are not paid by the due date,require which of the following entries at the fiscal close?
A)Debit Taxes Receivable - Delinquent
B)Debit Allowance for Uncollectible Taxes - Delinquent
C)Credit Taxes Receivable - Delinquent
D)Credit Allowance for Uncollectible Taxes - Current
Page 22
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Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) An enterprise fund collects $100,000 cash for customer deposits to insure timely payment for services.What journal entry did the enterprise fund prepare?
A)Debit Cash $100,000,credit Revenue $100,000
B)Debit Cash $100,000,credit Deferred Revenue $100,000
C)Debit Restricted Cash $100,000,credit Customer Deposits $100,000
D)Debit Restricted Cash $100,000,credit Revenue $100,000
Q2) The fixed assets and long-term liabilities associated with Proprietary Funds are reported on the
A)financial statements of governmental funds.
B)financial statements of fiduciary funds.
C)financial statements of proprietary funds.
D)financial statements of trust funds.
Q3) Enterprise funds are accounted for in a manner similar to
A)internal service funds.
B)capital project funds.
C)special revenue funds.
D)debt service funds.
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Page 23
Chapter
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Q1) Voluntary health and welfare organizations classify fund-raising costs as A)costs of services sold.
B)program services.
C)auxiliary expenses.
D)supporting services.
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) 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.
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Chapter 23: Estates and Trusts
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Q1) 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
Q2) In reference to accounting for trusts or estates,which of the following statements is correct?
A)Estates are subject to taxation,but trusts are not.
B)Estates are subject to probate laws that vary widely across the fifty states.
C)Estates are subject to income taxes at the federal level,but not at the state level.
D)Estates and trusts are taxed regardless of size.
Q3) Under the Uniform Probate Code,the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?
A)For one week
B)For two weeks
C)For three weeks
D)For five weeks
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