Professional Accounting Practice
Test Bank
Course Introduction
Professional Accounting Practice is designed to bridge academic learning and real-world application in the field of accounting. This course focuses on the principles, standards, and ethical considerations essential to the practice of accounting, emphasizing the preparation, analysis, and interpretation of financial reports in accordance with regulatory frameworks such as IFRS and GAAP. Students will develop practical skills in audit processes, tax compliance, financial statement analysis, and client advisory, while also exploring contemporary issues facing accountants in dynamic business environments. Through case studies, simulations, and engagement with industry professionals, learners gain insights into the professional responsibilities and decision-making required for effective accounting practice in diverse organizational contexts.
Recommended Textbook
Advanced Accounting 11th Edition by Joe Ben Hoyle
Available Study Resources on Quizplus
19 Chapters
1785 Verified Questions
1785 Flashcards
Source URL: https://quizplus.com/study-set/3906 Page 2
Chapter 1: The Equity Method of Accounting for Investments
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/77773
Sample Questions
Q1) Aqua Corp. purchased 30% of the common stock of Marcus Co. by paying $500,000. Of this amount, $50,000 is associated with goodwill.
Required:
Prepare the journal entry to record Aqua's investment.
Answer: 11ea8f9b_5aff_1263_b161_851747c64e80_TB4176_00
Q2) All of the following would require use of the equity method for investments except:
A) material intra-entity transactions.
B) investor participation in the policy-making process of the investee.
C) valuation at fair value.
D) technological dependency.
E) significant control.
Answer: C
Q3) What argument could be made against the equity method?
Answer: An argument could be made against the recognition of income under the equity method. The investor is required to recognize its share of the investee's income even when it is unlikely that the investor will ever receive the entire amount in cash dividends.
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Consolidation of Financial Information
Available Study Resources on Quizplus for this Chatper
118 Verified Questions
118 Flashcards
Source URL: https://quizplus.com/quiz/77772
Sample Questions
Q1) How are direct combination costs, contingent consideration, and a bargain purchase reflected in recording an acquisition transaction?
Answer: The acquisition method embraces a fair value concept as measured by the fair value of consideration transferred. (1) Direct combination costs are expensed as incurred; (2) Contingent consideration obligations are recognized at their present value of the potential obligation as part of the acquisition consideration transferred; (3) When a bargain purchase occurs, the acquirer measures and recognizes the fair values of each of the assets acquired and liabilities assumed at the date of the combination, and as a result a gain on the bargain purchase is recognized at the acquisition date.
Q2) Peterman Co. owns 55% of Samson Co. Under what circumstances would Peterman not be required to prepare consolidated financial statements?
Answer: Peterman would not be required to prepare consolidated financial statements if control of Samson is temporary or if, despite majority ownership, Peterman does not have control over Samson. A lack of control might exist if Samson is in a country that imposes restrictions on Peterman's actions.
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
Available Study Resources on Quizplus for this Chatper
121 Verified Questions
121 Flashcards
Source URL: https://quizplus.com/quiz/77771
Sample Questions
Q1) Fesler Inc. acquired all of the outstanding common stock of Pickett Company on January 1, 2010. Annual amortization of $22,000 resulted from this transaction. On the date of the acquisition, Fesler reported retained earnings of $520,000 while Pickett reported a $240,000 balance for retained earnings. Fesler reported net income of $100,000 in 2010 and $68,000 in 2011, and paid dividends of $25,000 in dividends each year. Pickett reported net income of $24,000 in 2010 and $36,000 in 2011, and paid dividends of $10,000 in dividends each year.
Assume that Fesler's reported net income includes Equity in Subsidiary Income. If the parent's net income reflected use of the equity method, what were the consolidated retained earnings on December 31, 2011?
Answer: 11ea8f9b_5ae8_cbaa_b161_c1a6cf7b5765_TB4176_00
Q2) For an acquisition when the subsidiary retains its incorporation, which method of internal recordkeeping is the easiest for the parent to use?
Answer: The initial value method is the easiest to use.
Q3) From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?
Answer: The parent can choose from among the initial value method, equity method, and partial equity method.
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Consolidated Financial Statements and Outside Ownership
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/77770
Sample Questions
Q1) Jax Company uses the acquisition method for accounting for its investment in Saxton Company. Jax sells some of its shares of Saxton such that neither control nor significant influence exists. Which of the following statements is true?
A) The difference between selling price and acquisition value is recorded as a realized gain or loss.
B) The difference between selling price and acquisition value is recorded as an unrealized gain or loss.
C) The difference between selling price and carrying value is recorded as a realized gain or loss.
D) The difference between selling price and carrying value is recorded as an unrealized gain or loss.
E) The difference between selling price and carrying value is recorded as an adjustment to retained earnings.
Q2) On January 1, 2010, Glenville Co. acquired an 80% interest in Acron Corp. for $500,000. There is no active trading market for Acron's stock. The fair value of Acron's net assets was $600,000 and Glenville accounts for its interest using the acquisition method.
Determine the amount of goodwill to be recognized in this acquisition.
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
Available Study Resources on Quizplus for this Chatper
127 Verified Questions
127 Flashcards
Source URL: https://quizplus.com/quiz/77769
Sample Questions
Q1) How do upstream and downstream inventory transfers differ in their effect in a year-end consolidation?
Q2) Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for $80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000, $180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land purchased from Stark in 2010 for $92,000 in 2012. Compute income from Stark reported on Parker's books for 2010.
A) $205,000.
B) $200,000.
C) $180,000.
D) $175,500.
E) $184,500.
Q3) How is the gain on an intra-entity transfer of a depreciable asset realized?
Q4) What is the impact on the non-controlling interest of a subsidiary when there are downstream transfers of inventory between the parent and subsidiary companies?
Q5) When is the gain on an intra-entity transfer of land realized?
Q6) How does a gain on an intra-entity sale of equipment affect the calculation of a non-controlling interest?
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Intercompany Debt, Consolidated Statement of
Cash Flows, and Other Issues
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/77768
Sample Questions
Q1) Fargus Corporation owned 51% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price.
On January 1, 2010, Sanatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on January 1, 2012, for 95% of the face value. Both companies utilized the straight-line method of amortization.
What balances would need to be considered in order to prepare the consolidation entry in connection with these intra-entity bonds at December 31, 2012, the end of the first year of the intra-entity investment? Prepare schedules to show numerical answers for balances that would be needed for the entry.
Q2) Danbers Co. owned seventy-five percent of the common stock of Renz Corp. How does the issuance of a five percent stock dividend by Renz affect Danbers and the consolidation process?
Q3) What documents or other sources of information would be used to prepare a consolidated statement of cash flows?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/77767
Sample Questions
Q1) What method is used in consolidation to account for a subsidiary's ownership of shares of its parent corporation?
Q2) Kurton Inc. owned 90% of Luvyn Corp.'s voting common stock. The consideration paid exceeded book value by $110,000. Of this amount, one half is attributable to a patent and is to be amortized over 5 years. Luvyn held 20% of Kurton's voting common stock which cost $28,000 more than fair value.
During the current year, Kurton reported operating income of $224,000 and dividend income from Luvyn of $37,800. At the same time, Luvyn reported operating income of $70,000 and dividend income from Kurton of $19,600.
Required:
Using the treasury stock approach, prepare a schedule to show what is reported as the non-controlling interest in Luvyn Corp.'s net income.
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) What are the benefits or advantages of filing a consolidated income tax return?
Q5) Under what conditions must a deferred income tax asset be recorded?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Segment and Interim Reporting
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/77766
Sample Questions
Q1) Which of the following items of information are required to be included in interim reports for each operating segment? (I.) Revenues from external customers (II)) Segment profit or loss (III.) Reconciliation of segment profit or loss to the enterprise's total income before taxes (IV)) Intersegment revenues
A) I and III only.
B) I and II only.
C) I, II and III.
D) II and III only.
E) I, II, III, and IV.
Q2) Which of the following is not a required disclosure in an interim financial report?
A) Sales or gross revenues.
B) Provision for income taxes.
C) Extraordinary items.
D) Gains on sales of major equipment.
E) Earnings per share.
Q3) What related items need to be disclosed in regard to total segment assets?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/77765
Sample Questions
Q1) Winston Corp., a U.S. company, had the following foreign currency transactions during 2011: (1.) Purchased merchandise from a foreign supplier on July 16, 2011 for the U.S. dollar equivalent of $47,000 and paid the invoice on August 3, 2011 at the U.S. dollar equivalent of $54,000.
(2)) On October 15, 2011 borrowed the U.S. dollar equivalent of $315,000 evidenced by a non-interest-bearing note payable in euros on October 15, 2011. The U.S. dollar equivalent of the note amount was $295,000 on December 31, 2011, and $299,000 on October 15, 2012.
What amount should be included as a foreign exchange gain or loss from the two transactions for 2011?
A) $9,000 loss.
B) $9,000 gain.
C) $11,000 loss.
D) $13,000 gain.
E) $14,000 gain.
Q2) Yelton Co. just sold inventory for 80,000 euros, which Yelton will collect in sixty days. Briefly describe a hedging transaction Yelton could engage in to reduce its risk of unfavorable exchange rates.
Q3) What factors create a foreign exchange gain?
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Translation of Foreign Currency Financial Statements
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/77764
Sample Questions
Q1) Dilty Corp. owned a subsidiary in France. Dilty concluded that the subsidiary's functional currency was the U.S. dollar. What must Dilty do to ready the subsidiary's financial statements for consolidation?
A) first translate them, then remeasure them.
B) first remeasure them, then translate them.
C) state all of the subsidiary's accounts in U.S. dollars using the exchange rate in effect at the balance sheet date.
D) translate them.
E) remeasure them.
Q2) What is the justification for the remeasurement of foreign currency transactions?
Q3) Which method of remeasuring a foreign subsidiary's financial statements is correct?
A) Historical rate method.
B) Working capital method.
C) Current rate method.
D) Translation.
E) Temporal method.
Q4) Contrast the purpose of remeasurement with the purpose of translation.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/77763
Sample Questions
Q1) Which of the following is not a factor influencing a country's financial reporting practices?
A) Providers of financing.
B) Inflation.
C) Legal system.
D) Gross National Product.
E) Political and economic ties.
Q2) A company incurs research and development costs of $200,000 in 2011 of which $50,000 of these costs relate to development activities because certain criteria have been met which suggest that an intangible asset has been created. What amount should be recognized as research and development expense in 2011 using U.S. GAAP?
A) $50,000.
B) $150,000.
C) $200,000.
D) $0.
E) $250,000.
Q3) What is meant by harmonization of accounting standards?
Q4) What accounting topics were covered under the FASB short-term convergence project?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Financial Reporting and the Securities and Exchange Commission
Available Study Resources on Quizplus for this Chatper
76 Verified Questions
76 Flashcards
Source URL: https://quizplus.com/quiz/77762
Sample Questions
Q1) Which one of the following requires the maintenance of accounting records and adequate internal accounting controls?
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.
Q2) Which information is not contained in the prospectus of the registration statement?
A) financial statements reviewed by an independent CPA.
B) an explanation of the intended use of the proceeds.
C) a description of the risks associated with the securities.
D) a description of the business of the registrant.
E) a description of the properties of the registrant.
Q3) How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee?
Q4) Why is the SEC's Rule 14c-3 important to the accounting profession?
Q5) When is the SEC's Registration Form S-4 used?
Q6) What is the primary focus of the Sarbanes-Oxley Act of 2002?
Q8) What is a private placement of securities? Page 14
Q7) What is required by the Trust Indenture Act of 1939?
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 13: Accounting for Legal Reorganizations and Liquidations
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/77761
Sample Questions
Q1) How is the presentation of a balance sheet during a reorganization different from a normal balance sheet?
Q2) To what does the term Chapter 7 bankruptcy refer?
Q3) All of the following items are liabilities with priority except:
A) Obligations arising between the date an order of relief is issued and the date of final realization of assets.
B) Employee claims for contributions to benefit plans earned more than 180 days preceding the filing of a petition, limited to $11,725 per individual.
C) Government claims for unpaid taxes.
D) Claims for the return of deposits made by customers to acquire property or services, which were never delivered or provided by the debtor, limited to $2,600.
E) Claims for administrative expenses in preserving and liquidating the company.
Q4) Who must accept and confirm the Reorganization plan?
Q5) What are the four categories of debts in a Statement of Financial Affairs?
Q6) What is the difference between a liquidation and a reorganization?
Q7) What is meant by a "fully secured liability"?
Q8) What is the role of the trustee in the liquidation of a company?
Q9) What term is used for a bankruptcy forced upon a debtor by its creditors? Page 16
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 14: Partnerships: Formation and Operation
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/77760
Sample Questions
Q1) Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011. What was the remainder portion of net income allocated to Nolan for 2011?
A) $45,440
B) $58,040
C) $70,040
D) $72,000
E) $82,040
Q2) 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.
Q3) By what methods can a person gain admittance to a partnership?
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 15: Partnerships: Termination and Liquidation
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/77759
Sample Questions
Q1) Gonda, Herron, and Morse is considering possible liquidation because partner Morse is personally insolvent. The partners have the following capital balances: $60,000, $70,000, and $40,000, respectively, and share profits and losses 30%, 45%, and 25%, respectively. The partnership has $200,000 in noncash assets that can be sold for $150,000. The partnership has $10,000 cash on hand, and $40,000 in liabilities. What is the minimum that partner Morse's creditors would receive if they have filed a claim for $50,000?
A) $0.
B) $27,500.
C) $45,000.
D) $47,500.
E) $50,000.
Q2) What accounting transactions are not recorded by an accountant during partnership liquidation?
A) The conversion of partnership assets into cash.
B) The allocation of gains and losses from sales of assets.
C) The payment of liabilities and expenses.
D) The initiation of legal action by creditors of the partnership.
E) Write-off of remaining unpaid debts.
Q3) What is the purpose of a predistribution plan?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 16: Accounting for State and Local Governments
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/77758
Sample Questions
Q1) Which statement is not correct?
A) Governmental funds account for expenditures of financial resources rather than matching revenues and expenses.
B) The Fund Balance Reserved for Encumbrances account is not closed at the end of a fiscal year.
C) Revenues from licenses and permit fees are recognized when received in cash if using the modified accrual basis of accounting for governmental funds.
D) A fund is an independent accounting entity composed of cash and other financial resources, segregated for the purpose of carrying on specific activities and objectives.
E) Commitments for purchase orders are recorded as expenses.
Q2) Property taxes of 1,500,000 are levied for Miner County. The county expects that 5% will be uncollectible.
Required:
Prepare the required journal entry and identify the fund in which it is recorded.
Q3) Under modified accrual accounting, when should revenues be reported by a governmental-type fund?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Accounting for State and Local Governments
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/77757
Sample Questions
Q1) The employees of the City of Raymond earn vacation compensation that totals $1,500 per week. During 2011, $30,000 in vacation time was taken and $48,000 is expected to be used during the latter part of next year. On fund financial statements, what liability should be reported at the end of 2011?
A) $0.
B) $1,500.
C) $30,000.
D) $48,000.
E) $78,000.
Q2) What are the three broad sections of a state or local government's CAFR?
A) Introductory, financial, and statistical.
B) Financial statements, notes to the financial statements, and component units.
C) Introductory, statistical, and component units.
D) Component units, financial, and statistical.
E) Financial statements, notes to the financial statements, and statistical.
Q3) What is meant by the term legally independent?
Q4) What information is required in the introductory section of a state or local government's CAFR?
Q5) What is meant by the term fiscally independent?
Q6) What are the three broad sections of a state or local government's CAFR?
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 18: Accounting for Not-For-Profit Organizations
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/77756
Sample Questions
Q1) For not-for-profit organizations, what is the difference in identification of "control" between a merger and an acquisition?
Q2) In accruing patient charges for the current month, which one of the following accounts should a hospital credit?
A) Accounts Payable.
B) Deferred Revenue.
C) Unearned Revenue.
D) Patient Service Revenues.
E) Accounts Receivable.
Q3) For the month of December 2011, patient charges at Northfield Hospital (a not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000. In this month, there were several patients that had no health insurance and due to their low income level, the hospital decided that $85,000 of receivables would not be collectible.
Required:
Prepare the necessary journal entry to reflect the decision to consider the $85,000 as charity care.
Q4) Give several examples of voluntary health and welfare organizations.
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 19: Accounting for Estates and Trusts
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/77755
Sample Questions
Q1) What is a remainderman of trust property?
Q2) A gift that is specified in a will as "I leave my collection of baseball cards to my son" is a
A) general legacy.
B) specific legacy.
C) demonstrative legacy.
D) residual legacy.
E) devise.
Q3) For which type of trust is the income taxed in the grantor's individual income tax return?
A) Inter vivos trust.
B) Grantor trust.
C) Revocable living trust.
D) Family trust.
E) Irrevocable life insurance trust.
Q4) What choices does an executor of an estate have in determining the values of assets included in the estate for tax purposes?
Q5) What is meant by estate accounting?
Q6) What are the three goals of probate laws?
Q7) In settling an estate, what is the meaning of the term devise?
To view all questions and flashcards with answers, click on the resource link above. Page 23