International Accounting Test Bank
Course Introduction
International Accounting explores the principles, standards, and practices of accounting in a global context. The course examines the impact of international financial reporting standards (IFRS), the role of regulatory bodies, and the complexities of consolidating multinational operations. Students gain an understanding of foreign currency translation, international taxation, transfer pricing, and comparative accounting systems, while analyzing real-world cases of global corporations. Emphasis is placed on the challenges and opportunities faced by accountants working across borders, including cultural, ethical, and legal considerations in international financial reporting and decision-making.
Recommended Textbook
Advanced Accounting 11th Edition by Floyd
A. Beams
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Page 2
Chapter 1: Business Combinations
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Q1) Durer Inc.acquired Sea Corporation in a business combination and Sea Corp went out of existence.Sea Corp developed a patent listed as an asset on Sea Corp's books at the patent office filing cost.In recording the combination,
A) fair value is not assigned to the patent because the research and development costs have been expensed by Sea Corp.
B) Sea Corp's prior expenses to develop the patent are recorded as an asset by Durer at purchase.
C) the patent is recorded as an asset at fair market value.
D) the patent's market value increases goodwill.
Answer: C
Q2) According to FASB Statement No.141, liabilities assumed in an acquisition will be valued at the ________.
A) estimated fair value
B) historical book value
C) current replacement cost
D) present value using market interest rates
Answer: A
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Chapter 2: Stock Investments Investor Accounting and Reporting
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Q1) Pond Corporation uses the fair value method of accounting for its investment in Swan Company.Which one of the following events would affect the Investment in Swan Co.account?
A) Investee losses
B) Investee dividend payments
C) An increase in the investee's share price from last period
D) All of the above would affect the Investment in Swan Co. account.
Answer: C
Q2) Jacana Corporation paid $200,000 for a 25% interest in Lilypad Corporation's common stock on January 1, 2010, but was not able to exercise significant influence over Lilypad.During 2011, 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 2011 and paid dividends of $20,000.Jacana should report net income for 2011 in the amount of
A) $115,000.
B) $120,000.
C) $125,000.
D) $130,000.
Answer: C
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Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) Pregler Inc.has 70% ownership of Sach Company, but should exclude Sach from its consolidated financial statements if
A) Sach is in a regulated industry.
B) Pregler uses the equity method for Sach.
C) Sach is in legal reorganization.
D) Sach is in a foreign country and records its books in a foreign currency.
Answer: C
Q2) Pardo Corporation paid $140,000 for a 70% interest in Spedeal Inc.on January 1, 2011, when Spedeal had Capital Stock of $50,000 and Retained Earnings of $100,000.Fair values of identifiable net assets were the same as recorded book values.During 2011, Spedeal had income of $40,000, declared dividends of $15,000, and paid $10,000 of dividends.On December 31, 2011, the consolidated financial statements will show
A) investment in Spedeal account of $170,000.
B) investment in Spedeal account of $165,000.
C) consolidated goodwill of $50,000.
D) consolidated dividends receivable of $5,000.
Answer: C
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Page 5
Chapter 4: Consolidated Techniques and Procedures
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Q1) What amount of total liabilities will be reported?
A) $206,000
B) $278,400
C) $319,600
D) $348,000
Q2) Pigeon Corporation acquired an 80% interest in Statue Company on January 1, 2011, for $90,000 cash when Statue had Capital Stock of $60,000 and Retained Earnings of $40,000.The fair value/book value differential was attributable to equipment with a 10-year (straight-line)life.Statue suffered a $10,000 net loss in 2011 and paid no dividends.At year-end 2011, Statue owed Pigeon $18,000 on account.Pigeon's separate income for 2011 was $150,000.Controlling interest share of consolidated net income for 2011 was
A) $140,000.
B) $141,000.
C) $142,000.
D) $150,000.
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Chapter 5: Intercompany Profit Transactions - Inventories
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Q1) A parent company regularly sells merchandise to its 70%-owned subsidiary.Which of the following statements describes the computation of noncontrolling interest share?
A) The subsidiary's net income times 30%
B) (The subsidiary's net income × 30%) + unrealized profits in the beginning inventoryunrealized profits in the ending inventory
C) (The subsidiary's net income + unrealized profits in the beginning inventoryunrealized profits in the ending inventory) × 30%
D) (The subsidiary's net income + unrealized profits in the ending inventory - unrealized profits in the beginning inventory) × 30%
Q2) If the intercompany sale was an upstream sale, the total amount of consolidated cost of goods sold for 2012 will be
A) $300,000.
B) $430,000.
C) $470,000.
D) $477,000.
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Chapter 6: Intercompany Profit Transactions - Plant Assets
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Q1) Parrot Corporation acquired a 70% interest in Swifti Corp.on January 1, 2010, when Swifti's book values and fair values were equivalent.On January 1, 2011, Swifti sold a building with a book value of $60,000 to Parrot for $80,000.The building had a remaining life of five years, no salvage value, and was depreciated by the straight-line method.Swifti reported net income of $200,000 for 2011.What was the noncontrolling interest share for 2011?
A) $54,000
B) $55,200
C) $60,000
D) $128,800
Q2) Pigeon Corporation purchased land from its 60%-owned subsidiary, Seed Inc., in 2010 at a cost $50,000 greater than Seed's book value.In 2012, Pigeon sold the land to an outside entity for $20,000 more than Pigeon's book value.The 2012 consolidated income statement should report a gain on the sale of land of
A) $12,000.
B) $20,000.
C) $42,000.
D) $70,000.
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Chapter 7: Intercompany Profit Transactions - Bonds
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Q1) Platts Incorporated purchased 80% of Scarab Company several years ago when the fair value equaled the book value.On January 1, 2010, Scarab has $100,000 of 8% bonds that were issued at face value and have five years to maturity.Interest is paid annually on December 31.Both Platts and Scarab would use the straight-line method to amortize any premium or discount incurred in the issuance or purchase of bonds.On January 1, 2011, Platts purchased all of Scarab's bonds for $96,000.
Required:
1.Prepare the journal entries in 2011 that would be recorded by Platts and Scarab on their separate financial records.
2.Prepare the consolidating working paper entries required for the year ending December 31, 2011.
Q2) Using the original information, the elimination entries on the consolidation working papers prepared on December 31, 2012 included at least
A) debit to Bond Interest Expense for $360,000.
B) credit to Bond Interest Expense for $180,000 and a debit to Bond Interest Payable for $90,000.
C) credit to Bond Interest Receivable for $180,000.
D) debit to Bond Interest Revenue for $360,000.
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Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) On January 1, 2010, Starling Corporation held an 80% interest in Twig Corporation and the investment account balance was $900,000.On January 1, 2010, Twig's total stockholders' equity was $1,125,000.
During 2010, Twig uniformly earned $234,000 and paid dividends of $37,500 on April 1 and again on October 1.On August 1, 2010, Starling sold 30% of its investment in Twig for $262,500, thereby reducing its interest in Twig to 56%.
Required: Compute the following using the actual sales date assumption:
1.Gain or loss on sale.
2.Income from Twig for 2010.
3.Noncontrolling interest share for 2010.
Q2) If SOS sold the additional shares directly to Great, Great's Investment in SOS account after the sale would be
A) $1,350,000.
B) $1,395,000.
C) $1,425,000.
D) $1,500,000.
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Chapter 9: Indirect and Mutual Holdings
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Q1) The amount of income for the current year assigned to the noncontrolling shareholders of Abussi Corporation is
A) $48,000.
B) $53,200.
C) $74,000.
D) $79,200.
Q2) Paik Corporation owns 80% of Acdol Corporation and 60% of Ben Corporation.Acdol Corporation owns 10% of Ben Corporation.All subsidiary investments were acquired at book value.There are no fair value/book value differentials associated with each investment.Separate net incomes (excluding investment income)of the affiliated companies for 2011 are:
Paik: $600,000 which includes $60,000 unrealized losses on inventory items sold to Ben Acdol: $360,000
Ben: $340,000 which includes $100,000 unrealized profit on land sold to Acdol
Required:
Determine controlling interest share of consolidated net income and noncontrolling interest shares for Paik Corporation and Subsidiaries for 2011.
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Chapter 10: Subsidiary Preferred Stock, Consolidated
Earnings Per Share, and Consolidated Income Taxation
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Q1) Palm owns a 70% interest in Sable, a domestic subsidiary.Sable is not part of Palm's affiliated group.Palm will pay taxes on A) none of the dividends it receives from Sable. B) 20% of the dividends it receives from Sable. C) 66% of the dividends it receives from Sable.
D) 80% of the dividends it receives from Sable.
Q2) Pan Corporation has total stockholders' equity of $5,000,000 consisting of $1,000,000 of $10 par value Common Stock, $1,000,000 of Additional Paid-in Capital, and $3,000,000 of Retained Earnings.Pan owns 80% of Sailor Corporation's common stock purchased at book value, which equals fair value.Sailor has $900,000 of 10% cumulative preferred stock outstanding, with no preferred dividends in arrears.The preferred stock has no call price, redemption price or liquidation price.Pan acquired 60% of the preferred stock of Sailor for $500,000.After this transaction the balances in Pan's Retained Earnings and Additional Paid-in Capital accounts, respectively, are
A) $2,960,000 and $1,000,000. B) $3,000,000 and $960,000.
C) $3,000,000 and $1,040,000. D) $3,040,000 and $1,000,000.
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Chapter
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Q1) Under parent company theory, noncontrolling interest is valued at ________ on the consolidated balance sheet.Under entity theory, noncontrolling interest is valued at ________ on the consolidated balance sheet.
A) fair value; present value
B) present value; fair value
C) book value; fair value
D) fair value; book value
Q2) Pascoe's income from Sarabet under the equity method for 2011 was A) $72,000.
B) $87,500.
C) $90,000.
D) $100,000.
Q3) Goodwill was reported in the December 31, 2011 consolidated balance sheet at A) $170,000.
B) $180,000.
C) $200,000.
D) $210,000.
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Page 13
Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) Crabby Industries, a U.S.corporation, purchased inventory from a company in Sweden on November 18, 2011 when the Swedish krona was trading at 1 krona = $0.161.The transaction was for 600,000 krona, and was to be paid in krona in 90 days.Crabby closed their books at December 31 for financial reporting purposes when the krona was trading at $0.167.On February 16, 2012, Crabby paid the invoice when the krona was trading at $0.156.
Required:
Show the journal entries recorded by Crabby on November 18, 2011, December 31, 2011, and February 16, 2012.
Q2) Gains or losses on foreign currency transactions are recorded before the related receivable or payable is settled when
A) the government cannot set an exchange rate for the foreign currency.
B) the foreign currency is unknown.
C) the fiscal year ends after the settlement of the receivable or payable.
D) the fiscal year ends before the settlement of the receivable or payable.
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Page 14
Chapter 13: Accounting for Derivatives and Hedging
Activities
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Q1) On December 18, 2011, Wabbit Corporation (a U.S.Corporation)has a Forward Contract recorded on their ledger as a debit balance of $17,500.The forward contract was related to a purchase of electronic components purchased overseas, which were going to be re-sold in the United States.On December 20, the forward contract was settled with a payment of $20,000, and the related parts which cost $118,000 were sold for $160,000 cash.The forward contract is set up to lock in the price for the electronic components when they are sold.The forward contract was settled net.Assume this is a cash flow hedge.
Required:
Prepare the journal entries required by Wabbit on December 20.
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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Page 15
Chapter 14: Foreign Currency Financial Statements
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Q1) Accounts representing an allowance for uncollectible accounts are converted into U.S.dollars at
A) historical rates when the U.S. dollar is the functional currency.
B) current rates only when the U.S. dollar is the functional currency.
C) historical rates regardless of the functional currency.
D) current rates regardless of the functional currency.
Q2) Paskin Corporation's wholly-owned Canadian subsidiary has a Canadian dollar functional currency.In translating the subsidiary's account balances into U.S.dollars for reporting purposes, which one of the following accounts would be translated at historical exchange rates?
A) Accounts Receivable
B) Notes Payable
C) Capital Stock
D) Retained Earnings
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) 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
Q2) Similar operating segments may be combined if the segments have similar economic characteristics.Which one of the following is a similar economic characteristic under GAAP?
A) The segments' management teams
B) The tax reporting law sections
C) The distribution method for products or services
D) The expected rates of return and risk for the segments' productive assets
Q3) What is the purpose of interim reporting?
A) Provide shareholders with more timely information
B) Provide shareholders with more accurate information
C) Provide shareholders with more extensive detail about specific accounts and transactions
D) Provide shareholders with more current audited information
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Page 17
Chapter 16: Partnerships - Formation, Operations, and Changes in Ownership Interests
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Q1) Drawings
A) are advances to a partnership.
B) are loans to a partnership.
C) are a function of interest on partnership average capital.
D) are the same nature as withdrawals.
Q2) How much cash must Oran invest to acquire a one-fifth interest?
A) $235,000
B) $141,000
C) $293,750
D) $301,250
Q3) In the Uniform Partnership Act, partners have I.mutual agency. II)unlimited liability.
A) I only
B) II only
C) I and II
D) Neither I nor II
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Chapter 17: Partnership Liquidation
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Q1) Using a safe payment schedule, how much cash should Lola receive in the first distribution?
A) $ 81,000
B) $ 98,000
C) $168,600
D) $202,500
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.
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19
Chapter 18: Corporate Liquidations and Reorganizations
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Q1) Trustin Corporation is in a Chapter 7 bankruptcy liquidation.For each of the following transactions, show the journal entry that would be required by the trustee of the estate.
1.An electric bill is received for $1,000 which had not yet been recorded by Trustin.
2.Inventory recorded net at $18,000 is sold for $16,000 cash.
3.Recorded patents in the amount of $7,000 are determined to be worthless and are written off.
4.Equipment recorded net at $24,000 is sold for $20,000 cash.
5.A building recorded net at $78,000 is sold for $87,000 cash.
6.Trustee fees of $2,500 are accrued.
7.The fully secured mortgage is paid in the amount of $70,000.
8.Wages payable that were recorded in the amount of $9,000 are paid.
9.An equipment lease, which was recorded as prepaid equipment lease, is cancelled and a $1,500 refund is received.
10.Accounts receivable amounting to $12,000 are collected, and an additional $3,000 is determined to be uncollectible.
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Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) Internal Service Funds differ from Enterprise Funds because Internal Service Funds
A) are a proprietary fund.
B) are intended to show a profit.
C) charge for their services.
D) provide goods and services primarily to other government agencies.
Q2) Approved or authorized expenditures that provide legislative control over the expenditure budget are referred to as
A) appropriations.
B) allotments.
C) allocations.
D) encumbrances
Q3) Governmental fund financial statements are prepared on the ________ basis of accounting.Proprietary fund financial statements are prepared on the ________ basis of accounting.
A) modified accrual; modified accrual
B) accrual; fund
C) modified accrual; accrual
D) blended; discrete
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Chapter 20: Accounting for State and Local Governmental Units
- Governmental Funds
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Q1) Governments must record a liability for uncollected taxes instead of revenues for uncollected taxes if the taxes are going to be collected
A) 30 days after the fiscal year end.
B) 45 days after the fiscal year end.
C) 60 days after the fiscal year end.
D) 120 days after the fiscal year end.
Q2) Which statement below is incorrect with respect to the Government-wide financial statements?
A) All governmental fund categories must convert to the modified accrual basis of accounting.
B) It is necessary to eliminate interfund balances within the governmental funds.
C) Capital lease liabilities associated with governmental funds must be included on the Government-wide financial statements.
D) All fixed assets and long-term debt for governmental funds must be included on the Government-wide financial statements.
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Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) Willborough County had the following transactions in 2012.
1.A central motor pool was established with a $200,000 nonreciprocal transfer from the General Fund.
2.The water and sewer authority, which provides services to residents for a fee, issued a bond offering at $750,000 par.Bonds proceeds are restricted to renovating the treatment facility.
3.Willborough received a grant from the state to be used for renovation of the courthouse amounting to $800,000.The General Fund will temporarily provide $100,000 cash, because the grant is set up on a reimbursement basis and will not be distributed until proper expenditures are documented.
4.Willborough's central motor pool bills out automobile usage to various government agencies amounting to $42,000.
5.The General Fund transfers $67,000 out of the operating budget to fund the county employees' pension plan.
Required:
Prepare the necessary journal entries for each of the above transactions for all funds affected.Be sure to identify the fund type for each entry.
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Page 23
Chapter 22: Accounting for Not-For-Profit Organizations
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Q1) In a nonprofit, nongovernmental hospital, courtesy allowances are
A) charity care services.
B) revenue deductions.
C) expenses.
D) revenues earned even if the standard charge is above or below the allowance.
Q2) For nonprofit, nongovernmental organizations, unconditional promises to give that include promises of payments due in future periods (next year or later)are reported as
A) unrestricted revenues.
B) unrestricted support.
C) deferred revenues until payment is received.
D) restricted revenues.
Q3) 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
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Chapter 23: Estates and Trusts
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Q1) Rusty Nail died in the summer of 2011.The following transactions occurred relating to Rusty's estate.
1.Rusty's estate included a $50,000 Certificate of Deposit.When Rusty died, there was $250 accrued but unpaid interest.When the check was received for the normal semiannual interest payment, it was in the amount of $1,250.
2.Rusty's will requested a specific transfer to the local playhouse in the amount of $20,000.Avery's estate should be adequate to cover all obligations and devises, and the amount is paid.
3.A fee for probate court is paid amounting to $1,400.
4.Funeral expenses are paid amounting to $13,000.
5.A bill is received from the anesthesiologist relating to Rusty's last hospital stay for $22,000.The bill is not covered by insurance, and was not included in the estate inventory.The bill is verified and paid.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.
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Page 25