International Accounting Final
Exam Questions
Course Introduction
International Accounting explores the principles and practices of accounting in a global context, focusing on the differences and similarities between major international accounting standards such as IFRS and US GAAP. The course examines the impact of cultural, economic, and regulatory environments on financial reporting, including issues related to currency translation, consolidation of multinational operations, and international taxation. Students will develop an understanding of how global business activities influence financial decision-making and reporting, as well as the challenges and opportunities presented by the harmonization of accounting standards worldwide.
Recommended Textbook
Advanced Accounting 13th Edition By
Joe Ben Hoyle
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) The balance in the Investment in Sacco account at December 31, 2017, is
A) $100,000.
B) $112,000.
C) $106,000.
D) $107,500.
E) $140,000.
Answer: D
Q2) What is the balance in Jackie Corp's Investment in Rob Co.account at December 31, 2018?
A) $2,000,000.
B) $2,005,000.
C) $2,060,000.
D) $2,090,000.
E) $2,200,000.
Answer: B
Q3) What amount of gross profit on 2018 intra-entity sales should Steven defer at December 31, 2018?
Answer: [($75,000 - $54,000) × .10 × .40] = $840
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Chapter 1: A: the Equity Method of Accounting for Investments
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Sample Questions
Q1) The income reported by Dodge for 2017 with regard to the Gates investment is
A) $ 7,500.
B) $ 22,500.
C) $ 15,000.
D) $100,000.
E) $150,000.
Answer: A
Q2) Which statement is true concerning unrecognized profits in intra-entity inventory sales when an investor uses the equity method?
A) The investee must defer upstream ending inventory profits.
B) The investee must defer upstream beginning inventory profits.
C) The investor must defer downstream ending inventory profits.
D) The investor must defer downstream beginning inventory profits.
E) The investor must defer upstream beginning inventory profits.
Answer: C
Q3) What amount of equity income would Steven have recognized in 2018 from its ownership interest in Nicole?
Page 4
Answer: [($120,000 × .4) - $12,000 - $840 + $1,500] = $36,660
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Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) Compute consolidated goodwill at the date of the acquisition.
A) $360.
B) $450.
C) $460.
D) $440.
E) $475.
Answer: B
Q2) Compute the consolidated revenues for 2018.
A) $2,700.
B) $ 720.
C) $ 920.
D) $3,300.
E) $1,540.
Answer: A
Q3) What is the difference in consolidated results between a business combination whereby the acquired company is dissolved, and a business combination whereby separate incorporation is maintained?
Answer: There is no difference in consolidated results.
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Chapter 2: A: Consolidation of Financial Information
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Sample Questions
Q1) Compute consolidated revenues immediately following the acquisition.
A) $3,540.
B) $2,880.
C) $1,170.
D) $1,650.
E) $4,050.
Q2) How is contingent consideration accounted for in an acquisition business combination transaction?
Q3) Which of the following statements is true regarding a statutory consolidation?
A) The original companies dissolve while remaining as separate divisions of a newly created company.
B) Both companies remain in existence as legal corporations with one corporation now a subsidiary of the acquiring company.
C) The acquired company dissolves as a separate corporation and becomes a division of the acquiring company.
D) The acquiring company acquires the stock of the acquired company as an investment.
E) A statutory consolidation is no longer a legal option.
Q4) How are direct combination costs accounted for in an acquisition transaction?
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Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Q1) In Cale's accounting records, what amount would appear on December 31, 2017 for equity in subsidiary earnings?
A) $77,000.
B) $79,000.
C) $125,000.
D) $127,000.
E) $81,800.
Q2) What is the partial equity method? How does it differ from the equity method? What are its advantages and disadvantages compared to the equity method?
Q3) Compute goodwill, if any, at January 1, 2017.
A) $ 150.
B) $ 250.
C) $ 700.
D) $1,200.
E) $ 550.
Q4) For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping is the easiest for the parent to use?
Q5) How much goodwill impairment should Pritchett report for 2018?
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Chapter 3: A: Consolidations - Subsequent to
the Date of Acquisition
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Q1) What was the total for consolidated patents as of December 31, 2018?
Q2) Red Co.acquired 100% of Green, Inc.on January 1, 2017.On that date, Green had land with a book value of $42,000 and a fair value of $52,000.Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000.Green had equipment with a book value of $350,000 and a fair value of $280,000.The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life.How much total expense will be in the consolidated financial statements for the year ended December 31, 2017 related to the acquisition allocations of Green?
A) $43,000.
B) $33,000.
C) $ 5,000.
D) $15,000.
E) $0.
Q3) Compute the December 31, 2020, consolidated land.
A) $220,000.
B) $180,000.
C) $670,000.
D) $630,000.
E) $450,000.
Page 8
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) The acquisition value attributable to the noncontrolling interest at January 1, 2019 is:
A) $23,400.
B) $24,000.
C) $24,900.
D) $26,000.
E) $20,000.
Q2) Compute Pell's Investment in Demers account balance at December 31, 2019.
A) $580,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $541,000.
Q3) Determine the amount of goodwill to be recognized in this acquisition.
Q4) What is consolidated stockholders' equity at January 2, 2019?
A) $112,000.
B) $133,000.
C) $168,000.
D) $182,000.
E) $203,000.
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Chapter 4: A: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) Compute Pell's income from Demers for the year ended December 31, 2020.
A) $90,400.
B) $89,000.
C) $50,400.
D) $56,000.
E) $96,000.
Q2) When consolidating a subsidiary that was acquired on a date other than the first day of the fiscal year, which of the following statements is true of the subsidiary with respect to the presentation of consolidated financial statement information?
A) Pre-acquisition earnings are deducted from consolidated revenues and expenses.
B) Pre-acquisition earnings are added to consolidated revenues and expenses.
C) Pre-acquisition earnings are deducted from the beginning consolidated stockholders' equity.
D) Pre-acquisition earnings are added to the beginning consolidated stockholders' equity.
E) Pre-acquisition earnings are ignored in the consolidated income statement.
Q3) How does a parent company account for the sale of a portion of an investment in a subsidiary?
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Q1) Prepare the consolidation entries that should be made at the end of 2017.
Q2) During 2017, Von Co.sold inventory to its wholly-owned subsidiary, Lord Co.The inventory cost $30,000 and was sold to Lord for $44,000.For consolidation reporting purposes, when is the $14,000 intra-entity gross profit recognized?
A) When goods are transferred to a third party by Lord.
B) When Lord pays Von for the goods.
C) When Von sold the goods to Lord.
D) When Lord receives the goods.
E) No gain can be recognized since the transfer was between related parties.
Q3) In the consolidation worksheet for 2017, which of the following accounts would be credited to eliminate the intra-entity transfer of inventory?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.
Q4) What is the impact on the noncontrolling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies?
Page 11
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Chapter 5: A: Consolidated Financial Statements
Intra-Entity Asset Transactions
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Q1) Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?
A) Net income attributable to the noncontrolling interest is never affected by a gain on the transfer.
B) Net income attributable to the noncontrolling interest is always affected by a gain on the transfer.
C) Net income attributable to the noncontrolling interest is affected by a downstream gain only.
D) Net income attributable to the noncontrolling interest is affected only when the transfer is upstream.
E) Net income attributable to the noncontrolling interest is increased by an upstream gain in the year of transfer.
Q2) Assume the same information, except Shannon sold inventory to Patti.Compute consolidated sales.
A) $10,000,000.
B) $10,126,000.
C) $10,140,000.
D) $10,200,000.
E) $10,260,000.
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Q1) Which of the following statements regarding consolidation of a VIE with its primary beneficiary is true?
A) The consolidation of a VIE with its primary beneficiary requires the business enterprise to follow a separate process than the one required for consolidations based on voting interests.
B) All intra-entity transactions between the primary beneficiary and the VIE are included in the consolidation.
C) Only intra-entity transactions between the primary beneficiary and the VIE resulting from intra-entity transfers are eliminated in the consolidation.
D) VIEs with controlling interests must include one hundred percent of the primary beneficiary's net income in a consolidation.
E) The allocation of the VIE's net income is based on an analysis of the underlying contractual arrangements between the primary beneficiary and other holders of variable interests.
Q2) Parent Corporation had just purchased some of its subsidiary's outstanding bonds on the open market.What items related to these bonds will have to be accounted for in the consolidation process?
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Chapter 6: A: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Sample Questions
Q1) How would consolidated earnings per share be calculated if the subsidiary has no convertible securities or warrants?
A) Parent's earnings per share plus subsidiary's earnings per share.
B) Parent's net income divided by parent's number of shares outstanding.
C) Consolidated net income divided by parent's number of shares outstanding.
D) Average of parent's earnings per share and subsidiary's earnings per share.
E) Consolidated income divided by total number of shares outstanding for the parent and subsidiary.
Q2) How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?
A) They will be included in both basic and diluted earnings per share if they are dilutive.
B) They will only be included in diluted earnings per share if they are dilutive.
C) They will only be included in basic earnings per share if they are dilutive.
D) Only the warrants owned by the parent company affect consolidated earnings per share.
E) Because the warrants are for subsidiary shares, there will be no effect on consolidated earnings per share.
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Page 14
Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) Strong Company has had poor operating results in recent years and has a $160,000 net operating loss carryforward.Leader Corp.pays $700,000 to acquire Strong and is optimistic about its future profitability potential.The book value and fair value of Strong's identifiable net assets is $500,000 at date of acquisition.Strong's tax rate is 30% and Leader's tax rate is 40%.What is goodwill resulting from this business acquisition?
A) $ 40,000.
B) $ 88,000.
C) $104,000.
D) $152,000.
E) $248,000.
Q2) Using the percentage allocation method for assigning income tax expense, the income tax expense assigned to Hill is closest to:
A) $21,000.
B) $24,000.
C) $20,100.
D) $17,400.
E) $ 0.
Q3) Required:
Prepare a schedule to show consolidated net income.
Page 15
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Chapter 7: A: Consolidated Financial Statements -
Ownership Patterns and Income Taxes
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Sample Questions
Q1) Jastoon Co.acquired all of Wedner Co.for $588,000 cash in a tax-free transaction.On that date, the subsidiary had net assets with a $560,000 fair value but a $420,000 book value and income tax basis.The income tax rate was 30%.What amount of goodwill should have been recognized on the date of the acquisition?
A) $ 70,000.
B) $ 28,000.
C) $ (14,000).
D) $ 19,600.
E) $ 65,000.
Q2) The accrual-based net income of Jade Co.is calculated to be
A) $193,000.
B) $189,000.
C) $196,000.
D) $201,000.
E) $144,000.
Q3) X Co.owned 80% of Y Corp., and Y Corp.owned 15% of X Co.Under the treasury stock approach, how would the dividends paid by X Co.to Y Corp.be handled on a consolidation worksheet?
Q4) Under what conditions must a deferred income tax asset be recorded?
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Chapter 8: Segment and Interim Reporting
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Q1) What is the operating profit or loss for the VCRs segment?
A) $121,000 profit.
B) $121,000 loss.
C) $124,000 profit.
D) $124,000 loss.
E) $500,000 profit.
Q2) Which operating segments are separately reportable under the revenue test?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
Q3) According to U.S.GAAP, how should general corporate costs be allocated to individual segments to determine segment profit or loss?
Q4) Which operating segments are reportable under the profit or loss test?
A) Rakes, Pails, and Shovels.
B) Rakes, Pails, Shovels, and Hardware.
C) Rakes, Pails, and Hardware.
D) Rakes, Pails, Shovels, Hardware, and Accessories.
E) Pails and Hardware.
Page 17
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Chapter 8: A: Segment and Interim Reporting
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Q1) Compute the after-tax effect of Harrison's change in inventory method.
Q2) Which of the following is not correct regarding inventory procedures reported in an interim financial statement?
A) LIFO liquidations a company expects to be replaced by year-end should be recorded in cost of goods sold, quantified at expected replacement cost rather than original LIFO cost.
B) Lower-of-cost-or-net realizable value adjustments are not made for the interim period if they are expected to reverse by the end of the year.
C) Variances in a standard costing system are reported at the end of the interim period unless they are expected to be absorbed by year-end.
D) FIFO is remeasured using the LIFO method in an interim financial statement.
E) LIFO liquidations not expected to be replaced by the end of the year are reflected in cost of goods sold at original LIFO cost.
Q3) Assuming Gregor does not expect to replace the units of beginning inventory sold, what is the amount of cost of goods sold for the quarter ended March 31, 2018?
Q4) What is the major objective of segment reporting?
Q5) What related items need to be disclosed in regard to total segment assets?
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) How much foreign exchange gain or loss should be included in Shannon's 2018 income statement?
A) $1,000 gain.
B) $1,000 loss.
C) $2,000 gain.
D) $2,000 loss.
E) $8,000 loss.
Q2) Assuming a forward contract was entered into on December 16, at what amount should the forward contract be recorded at December 31, 2018? Assume an annual interest rate of 12% and a fair value hedge.The present value for one month at 12% is .9901.
A) $ 200.
B) $ 295.
C) $ 495.
D) $ 500.
E) $ 9,300.
Q3) What factors create a foreign exchange gain?
Q4) What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency depreciates?
Q5) What is the purpose of a hedge of foreign exchange risk?
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Chapter 9: A: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) Primo Inc., a U.S.company, ordered parts costing 100,000 rupee from a foreign supplier on July 7 when the spot rate was $.025 per rupee.A one-month forward contract was signed on that date to purchase 100,000 rupee at a rate of $.027.The forward contract is properly designated as a fair value hedge of the 100,000 rupee firm commitment.On August 7, when the parts are received, the spot rate is $.028.At what amount should the payable be carried on Primo's books?
A) $2,000.
B) $2,100.
C) $2,500.
D) $2,700.
E) $2,800.
Q2) How much foreign exchange gain or loss should be included in Shannon's 2018 income statement?
A) $1,000 gain.
B) $1,000 loss.
C) $2,000 gain.
D) $2,000 loss.
E) $8,000 loss.
Q3) What is meant by the spot rate?
Q4) How is the fair value of a Forward Contract determined by U.S.GAAP?
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Chapter 10: Translation of Foreign Currency Financial Statements
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Q1) Required:
Assume that Boerkian was a foreign subsidiary of a U.S.multinational company and the local currency of the subsidiary (stickle) is the functional currency.On the December 31, 2018 balance sheet, what was the translated value of the Land account?
Q2) Assume the functional currency is the Euro; compute the U.S.income statement amount for sales for 2018.
A) $364,000.
B) $372,000.
C) $380,000.
D) $360,000.
E) $404,000.
Q3) Kennedy's share of Hastie's net income for 2018 would be
A) $18,000.
B) $15,000.
C) $18,200.
D) $16,000.
E) $18,500.
Q4) Prepare an income statement for this subsidiary in stickles and then translate these amounts into U.S.dollars.
Page 21
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Chapter 10: A: Translation of Foreign Currency Financial Statements
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Q1) Under the temporal method, how would cost of goods sold be remeasured?
A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) A single historical rate.
E) Historical rates.
Q2) Under the temporal method, inventory at net realizable value would be remeasured for the balance sheet at what rate?
A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.
Q3) Under the temporal method, retained earnings would be remeasured at what rate?
A) Beginning of the year rate.
B) Average rate.
C) Current rate.
D) Historical rate.
E) Composite amount.
Q4) Contrast the purpose of remeasurement with the purpose of translation.
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) The most relevant factor in determining the purpose of financial reporting is:
A) The nature of the country's financing system
B) The country's current economic conditions
C) The ability to control inflation
D) A strong equity financing system which is more conservative, minimal disclosures, and tight tax laws.
E) A weak equity financing system which is less conservative, extensive disclosures and loose tax laws.
Q2) Convergence of accounting standards would not occur by:
A) FASB adopting an existing IASB standard.
B) IASB adopting an existing FASB standard.
C) IASB issuing a new standard.
D) IASB and FASB jointly developing a new standard.
E) IASB and FASB each issuing a similar but not identical standard.
Q3) What are some examples of accounting treatments under IFRS for SMEs for recognizing and measuring assets, liabilities, income, and expenses?
Q4) What are the two primary methods used by countries to incorporate IFRS into their financial reporting requirements for listed companies?
Page 23
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Chapter 11: A: Worldwide Accounting Diversity and International Accounting Standards
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Q1) Which statement is correct as it relates to diverse accounting practices across countries?
A) Gaining access to foreign capital markets is relatively easy and inexpensive once the financial statements are converted to the local currency of the country where the financing is desired.
B) U.S. GAAP is acceptable worldwide wherever IFRS has not been adopted.
C) To have stock listed on a U.S. stock exchange, all financial statements submitted to the SEC must be prepared either using U.S. GAAP or using IFRS.
D) Stock analysts specializing in industry coverage can compare financial statements regardless of various national or international accounting standards used by companies being compared.
E) Translating financial statements of various currencies into one common currency for consolidation purposes does not resolve the problem of diversity of accounting practices across countries.
Q2) With regard to IFRS, what does SME refer to, and what is the significance with regard to financial reporting requirements?
Q3) Prepare the journal entry for the 2017 depreciation expense for Ide Corp.based on U.S.GAAP.
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) Information required in proxy statements includes all except which of the following?
A) Listing of company directors and executive officers.
B) Description of the business activities including principal products and sources and availability of raw materials.
C) Market price of the company's common stock for each quarterly period within the two most recent fiscal years.
D) Five-year summary of operations including sales, total assets, income from continuing operations, and cash dividends per share.
E) Two-year summary of industry segments, export sales, and foreign and domestic operations.
Q2) Which one of the following requires the audit committee to be responsible for the appointment and compensation of the external auditor?
A) The Securities Act of 1933.
B) The Securities Exchange Act of 1934.
C) The Investment Company Act of 1940.
D) The Foreign Corrupt Practices Act of 1977.
E) The Sarbanes-Oxley Act of 2002.
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Chapter 12: A: Financial Reporting and the Securities and Exchange Commission
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Q1) Name the two broad categories of filings with the SEC.
Q2) The goals of the SEC include all except which one of the following?
A) Prohibiting the dissemination of materially misstated information.
B) Controlling the number of companies whose stock is listed on major stock exchanges.
C) Regulating the operation of securities markets.
D) Ensuring that full and fair information is disclosed to all investors before the securities of a company may be bought and sold.
E) Preventing the misuse of information especially by inside parties.
Q3) When would a letter of comments be issued by the SEC?
A) To request clarification of a registration statement.
B) To convey your pertinent comments to the SEC.
C) In response to a company's filing of Form 8-K.
D) After receiving the company's Form 10-K.
E) To indicate that a registration statement has been approved.
Q4) What Federal agency has Congressional authority to amend, modify, repeal, or reject auditing standards?
Q5) When must Form 8-K be filed with the SEC and in what situations must this form be used?
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) Lawyer's fees incurred during a reorganization are accounted for as:
A) An expense.
B) An intangible asset, Reorganization Cost, which would normally be amortized over a five-year period.
C) Additional paid-in capital.
D) Retained earnings.
E) A prepaid asset until the entity emerges from reorganization.
Q2) How much will be paid to the holder of the note payable secured by the land and building?
(Round your payout percentage to the nearest whole number.)
Q3) What is meant by a "fully secured liability"?
Q4) What are free assets?
A) Assets for which net realizable value is greater than historical cost.
B) Assets for which no market exists.
C) Assets for which replacement cost is greater than historical cost.
D) Assets available to be distributed for liabilities with priority and for other unsecured obligations.
E) Assets available to be distributed to stockholders.
Page 27
Q5) What are the four categories of debts in a Statement of Financial Affairs?
Q6) What are the three categories of assets in a Statement of Financial Affairs?
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Chapter 13: A: Accounting for Legal Reorganizations and Liquidations
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Q1) What are the three categories of assets in a Statement of Financial Affairs?
Q2) What occurs in the accounting records for fresh start accounting when a bank agrees to accept less than the debtor's book value of a note payable?
Q3) What are free assets?
A) Assets for which net realizable value is greater than historical cost.
B) Assets for which no market exists.
C) Assets for which replacement cost is greater than historical cost.
D) Assets available to be distributed for liabilities with priority and for other unsecured obligations.
E) Assets available to be distributed to stockholders.
Q4) Prepare a schedule to show the amount of assets available for unsecured creditors after payment of liabilities with priority.
Q5) What is meant by a "partially secured liability"?
Q6) On a statement of financial affairs, a company's liabilities should be valued at
A) The present value of future cash flows.
B) Net realizable value.
C) The amount required for settlement.
D) Replacement cost.
E) The amount expected to be paid if the company could honor its debts.
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Chapter 14: Partnerships: Formation and Operation
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Q1) Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the bonus method is used, what is the capital of the remaining partners?
A) Donald, $40,000; Todd, $30,000
B) Donald, $30,000; Todd, $10,000
C) Donald, $50,000; Todd, $50,000
D) Donald, $24,000; Todd, $18,000
E) Donald, $70,000; Todd, $40,000
Q2) When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000.The four partners shared net income and losses equally, and no revaluation will take place.The journal entry to record the effect on John's capital due to Danny's withdrawal would include:
A) $ 6,667 debit to John, Capital.
B) $ 6,667 credit to John, Capital.
C) $20,000 debit to John, Capital.
D) $ 5,000 debit to John, Capital.
E) $ 5,000 credit to John, Capital.
Q3) Prepare the journal entries for the dissolution of Howell's partnership interest, assuming the goodwill method is to be applied.
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Chapter 14: A: Partnerships: Formation and Operation
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Q1) What was Cleary's total share of net income for 2018?
A) $34,420.
B) $75,540.
C) $65,540.
D) $70,040.
E) $61,420.
Q2) Record the journal entry for the admission of Noris.Goodwill is not to be recorded.
Q3) Partnerships have alternative legal forms including all of the following except:
A) General Partnership.
B) Limited Partnership.
C) Subchapter S Partnership.
D) Limited Liability Partnership.
E) Limited Liability Company.
Q4) What was the balance in Thurman's Capital account at the end of the first year?
A) $120,900.
B) $118,300.
C) $126,100.
D) $ 80,600.
E) $111,500.
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) If the land is sold for $450,000, how much cash will Mones receive in the final settlement?
A) $ 0.
B) $ 15,000.
C) $300,000.
D) $217,500.
E) $362,500.
Q2) Prepare journal entries to record the actual liquidation transactions.
Q3) How much cash should each partner receive at this time, pursuant to a proposed schedule of liquidation?
Q4) How much of this money should Zobart receive?
A) $15,467.
B) $14,467.
C) $17,333.
D) $15,633.
E) $15,867.
Q5) Compute safe cash payments after the noncash assets have been sold and the liquidation expenses have been paid.
Q6) What should occur when a solvent partner has a deficit balance?
Q7) What is a safe cash payment?
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Chapter 15: A: Partnerships: Termination and Liquidation
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Q1) How much of the existing cash balance could be distributed safely to partners at this time?
Q2) When a partnership is insolvent and a partner has a deficit capital account balance, that partner is legally required to:
A) Declare personal bankruptcy.
B) Initiate legal proceedings against the partnership.
C) Contribute cash to the partnership.
D) Deliver a note payable to the partnership with specific payment terms.
E) None of these answer choices are correct. The partner has no legal responsibility to cover the capital deficit balance.
Q3) How much cash should each partner receive at this time, pursuant to a proposed schedule of liquidation?
Q4) What is a safe cash payment?
Q5) Xygote, Yen, and Zen were partners who were liquidating their partnership.Each partner has a deficit balance in their respective capital account.Assuming all assets from the partnership have been liquidated, and all of the liabilities have been paid, how should any additional cash coming into the partnership be distributed to the partners?
Q6) Why is a preliminary distribution of partnership assets prepared?
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Chapter 16: Accounting for State and Local Governments,
Part I
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Q1) Property taxes of 1,500,000 are levied for Miner County.All except 5% of the taxes are expected to be collected within 60 days of year-end.
Required:
Prepare the required journal entry and identify the fund in which it is recorded.
Q2) The government has just voted to repair the parking garages to all federal building and estimate the cost to be $750,000.The government discloses this decision by debiting which account?
A) Committed
B) Nonspendable
C) Assigned
D) Unassigned
E) Restricted
Q3) Which organization is responsible for establishing accounting principles for governmental entities? By whom was this organization established?
Q4) Under modified accrual accounting, when are expenditures recorded?
Q5) In governmental accounting, what term is used for a decrease in financial resources?
Q6) What is the definition of the term fund?
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Chapter 16: A: Accounting for State and Local Governments,
Part I
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Q1) Under modified accrual accounting, when should an expenditure be recorded to recognize interest on long-term debt?
A) At the end of each accounting period.
B) When payment is due within one fiscal year.
C) When it reduces current financial resources.
D) When cash is available to pay the interest.
E) When the interest is incurred.
Q2) What are the five types of governmental funds?
Q3) Which group of government financial statements reports all revenues and all costs as well as all assets and liabilities of the governmental entity?
A) GAAP-based Financial Statements
B) Fund financial Statements.
C) Governmental fund financial statements.
D) Government-wide financial statements.
E) General fund financial statements.
Q4) What are the four fiduciary fund types?
Q5) What assets would be included in the accounting records of a city's general fund?
Page 35
Q6) Under modified accrual accounting, when are expenditures recorded?
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Chapter 17: Accounting for State and Local Governments,
Part II
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Q1) What are the three broad sections of a state or local government's CAFR?
Q2) Over the years, four alternatives have been suggested for constructing the financial statements for public colleges and universities.These alternatives include all of the following except:
A) Adopt FASB's requirements so that all colleges and universities (public and private) prepare comparable financial statements.
B) Apply a more traditional model focusing on fund financial statements and the wide variety of funds that such schools often have to maintain.
C) Create an entirely new set of financial statements designed specifically to meet the unique needs of public colleges and universities.
D) Adopt the requirements issued by the Private Company Council (PCC) of the FASB.
E) Adopt the same reporting model for public schools that has been created for state and local governments.
Q3) Prepare the journal entry/entries for the two transactions for the purposes of preparing the governmental fund financial statements.
Q4) What is meant by the term legally independent?
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Chapter 17: A: Accounting for State and Local Governments,
Part II
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Q1) Which statement is false regarding the Statement of Revenues, Expenditures, and Other Changes in Fund Balance when it is included with government-wide financial statements?
A) The Statement of Revenues, Expenditures, and Other Changes in Fund Balance uses the modified accrual method of accounting.
B) The Statement of Revenues, Expenditures, and Changes in Fund Balance presents revenues as either program revenues or general revenues.
C) A presentation reconciles the change in governmental fund balance to the change in net position for governmental activities.
D) Other financing sources are presented on the Statement of Revenues, Expenditures, and Other Changes in Fund Balance.
E) All non-major funds are combined and reported together.
Q2) Determine and prepare the journal entries for the City of Wetteville, on the dates mentioned for each lettered item, for the purposes of preparing the government-wide financial statements.
Q3) What three criteria must be met to identify a governmental unit as a primary government?
Q4) Prepare a Statement of Activities for the year ended December 31, 2018.
Page 37
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Chapter 18: Accounting for Not-For-Profit Entities
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Q1) Which entry would be the correct entry on the not-for-profit entity's books to record a donor's gift when the donor retains power over the assets? DEBIT CREDIT
A) Expense-charitable contribution Cash
B) Refundable advance to charity Cash
C) Cash Liability to beneficiary
D) Cash Refundable advance
E) Cash Contribution revenue
Q2) Prior to ASU 2016-14, what are the three categories of net assets required by GAAP in reporting of a not-for-profit entity?
A) Unrestricted, Temporarily Restricted, and Permanently Restricted.
B) Unrestricted, Restricted, and Fund Balance.
C) Restricted, Permanently Restricted, and Fund Balance.
D) Unrestricted, Temporarily Restricted, and Fund Balance.
E) None of these answer choices are correct.
Q3) How does a recipient not-for-profit entity record the receipt of a gift that will be transferred without restriction to another charitable entity? What if the donor retains the right to revoke or redirect the gift?
Q4) What should Dura Foundation report as supporting service expenses?
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Chapter 18: A: Accounting for Not-For-Profit Entities
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Q1) Give several examples, by name, of specific not-for-profit entities that are voluntary health and welfare entities.
Q2) Which of the following topics are not included in the Form 990 which tax-exempt entities file to maintain their tax-exempt status?
A) Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors.
B) Donor Disclosure: Identification of Every Donor by Name, Contribution Value & Contribution Type.
C) Statement of Revenue.
D) Balance Sheet.
E) Statement of Functional Expenses.
Q3) How does a not-for-profit entity account for: 1) cash contributions, and 2) donated goods that are received for operating purposes? What types of revenues are recognized by voluntary health and welfare entities?
Q4) What should Dura Foundation report as program service expenses?
Q5) What criteria must be met before a not-for-profit entity can recognize contributed services as a means of support?
Q6) What are the objectives of accounting for a not-for-profit entity?
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Chapter 19: Accounting for Estates and Trusts
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Q1) What are the goals of probate laws? (1) Gather and preserve all of the decedent's property
(2) Carry out an orderly and fair settlement of all debts
(3) Discover and follow the decedent's intent for the remaining property
A) 1 only.
B) 2 only.
C) 3 only.
D) 1 and 2.
E) 1, 2, and 3.
Q2) Executor's fees and court costs for settling an estate usually
A) Must be apportioned between the principal and the income of the estate.
B) Are adjustments to the principal of the estate.
C) Are adjustments to the income of the estate.
D) Are subtracted from life insurance proceeds.
E) Are ignored.
Q3) Assuming an additional savings account of $15,600 was located by the executor, prepare the journal entry required to record the transaction.
Q4) In settling an estate, what is the meaning of the term legacy?
Q5) Prepare the journal entry to record the property of the estate.
Q6) Prepare a Charge and Discharge Statement for the estate.
Page 40
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Chapter 19: A: Accounting for Estates and Trusts
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81 Verified Questions
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Q1) Prepare the journal entry to record ordinary repairs to the rental property of $5,000.
Q2) The trustor is the
A) Income beneficiary of the trust.
B) Ultimate recipient of the principal from the trust.
C) Fiduciary who manages the assets in the trust.
D) Person who funds the trust.
E) Person who disposes of the assets in the trust.
Q3) In settling an estate, what is the meaning of the term legacy?
Q4) Cash of $195,000 was conveyed to the appropriate beneficiary.Prepare the journal entry to record the transaction.
Q5) Assuming at the time of death the estate included 1,400 shares of Wal-Mart Stores stock and $25,000 cash in the savings account, what would the son have received from the settlement of the estate?
A) 1,000 shares of Wal-Mart stock and $15,000 cash
B) 1,000 shares of Wal-Mart stock and $0 cash
C) 1,000 shares of Wal-Mart stock and $10,000 cash
D) 1,200 shares of Wal-Mart stock and $5,000 cash
E) 1,400 shares of Wal-Mart stock and $5,000 cash
Q6) What is the purpose of the Uniform Probate Code?
Page 41
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