Seminar in Financial Accounting Test Bank
Course Introduction
This course provides an in-depth exploration of advanced topics in financial accounting, emphasizing current issues, emerging trends, and complex transactions in the preparation and analysis of financial statements. Through a combination of case studies, research articles, and interactive discussions, students will critically evaluate accounting standards, contemporary reporting challenges, and ethical considerations impacting corporate transparency and decision-making. The seminar format fosters analytical thinking and professional communication skills as students present and debate solutions to real-world accounting problems, preparing them for leadership roles within the accounting profession.
Recommended Textbook
Advanced Financial Accounting 11th Edition by Theodore Christensen
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Page 2
Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Sample Questions
Q1) Which of the following situations best describes a business combination to be accounted for as a statutory merger?
A) Both companies in a combination continue to operate as separate, but related, legal entities.
B) Only one of the combining companies survives and the other loses its separate identity.
C) Two companies combine to form a new third company, and the original two companies are dissolved.
D) One company transfers assets to another company it has created.
Answer: B
Q2) Based on the preceding information,what amount will be recorded by Mercury as its investment in Jupiter if it paid $275,000 for the acquisition?
A) $250,000
B) $275,000
C) $280,000
D) $300,000
Answer: C
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Chapter 2: Reporting Intercorporate Investments and
Consolidation of Wholly Owned Subsidiaries With No
Differential
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Q1) Usually,an investment of 20 to 50 percent in another company's voting stock is reported under the:
A) Cost method
B) Equity method
C) Full consolidation method
D) Fair value method
Answer: B
Q2) A cash dividend returns assets to the stockholders while reducing corporate liquidity.Why are not all cash dividends considered to be "liquidating dividends"? In your response include a discussion of how an investor accounts for a liquidating dividend.
Answer: A dividend represents earnings of a company being returned to its shareholders. A liquidating dividend occurs when an investee declares dividends in excess of the earnings from the purchase date of the investment.An individual investor must treat a liquidating dividend associated with its investment as a return of capital and reduce the investment account accordingly.It is possible for blocks of stock acquired at different times to have different amounts associated with a potential liquidating dividend.
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Page 4
Chapter 3: The Reporting Entity and Consolidation of
Less-Than-Wholly-Owned Subsidiaries With No Differentials
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Q1) Pepper Company acquired 60 percent of the common stock of Safton Corporation on December 31,20X9.On the date of acquisition,Pepper held land with a book value of $200,000 and a fair value of $350,000; Safton held land with a book value of $150,000 and fair value of $300,000.At what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?
A) $290,000
B) $500,000
C) $590,000
D) $650,000
Answer: B
Q2) Based on the preceding information,what amount would be reported as retained earnings in the consolidated balance sheet prepared at December 31,20X9?
A) 314,000
B) 294,000
C) 150,000
D) 424,000
Answer: B
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Page 5
Chapter 4: Consolidation of Wholly Owned Subsidiaries
Acquired at More Than Book Value
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Q1) Based on the preceding information,the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:
A) $0.
B) $25,000.
C) $70,000.
D) $45,000.
Q2) Based on the preceding information,what amount of total liabilities will be reported in the consolidated balance sheet for 20X8?
A) $225,000
B) $221,000
C) $217,000
D) $137,000
Q3) Based on the preceding information,at what amount should the land be reported in the consolidated balance sheet prepared immediately after the business combination?
A) $135,000
B) $140,000
C) $150,000
D) $155,000
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Chapter 5: Consolidation of Less-Than-Wholly-Owned
Subsidiaries Acquired at More Than Book Value
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Q1) Based on the information given,what balance in accounts receivable did Y Company report at December 31,20X8?
A) $28,000
B) $48,000
C) $40,000
D) $38,000
Q2) When a parent owns less than 100% of a subsidiary,the noncontrolling interest shareholders are allocated their ownership percentage of income or net assets in all of the following consolidating entries except for:
A) The basic investment account consolidation entry
B) The excess value (differential) reclassification entry
C) The optional accumulated depreciation consolidation entry
D) The amortized excess value reclassification entry
Q3) All of the following are examples of how a parent company may lose control over a subsidiary and discontinue future consolidation,except:
A) The parent sells some of its interest in the subsidiary.
B) The subsidiary issues additional common stock.
C) The subsidiary comes under the control of the government or other regulator.
D) The subsidiary issues a stock dividend or a stock split.
Page 7
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Chapter 6: Intercompany Inventory Transactions
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Q1) Based on the information given above,what amount should be reported in the 20X8 consolidated income statement as cost of goods sold?
A) $36,000
B) $12,000
C) $48,000
D) $45,000
Q2) Based on the information given above,what amount of cost of goods sold must be eliminated from the consolidated income statement for 20X8?
A) $2,765,000
B) $1,620,000
C) $1,422,000
D) $2,963,000
Q3) Based on the information given above,what amount of inventory must be eliminated from the consolidated balance sheet for 20X8?
A) $2,400
B) $9,000
C) $12,000
D) $3,000
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8
Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Sample Questions
Q1) Based on the preceding information,in the preparation of the 20X9 consolidated income statement,depreciation expense will be:
A) Debited for $40,000 in the consolidating entries.
B) Credited for $10,000 in the consolidating entries.
C) Debited for $10,000 in the consolidating entries.
D) Credited for $40,000 in the consolidating entries.
Q2) Based on the information provided,in the preparation of the 20X4 consolidated financial statements,equipment will be ______ in the consolidation entries.
A) debited for $6,650
B) debited for $56,350
C) debited for $63,000
D) credited for $63,000
Q3) Based on the preceding information,in the preparation of the 20X8 consolidated financial statements,equipment will be:
A) debited for $1,000.
B) debited for $10,000.
C) credited for $15,000.
D) debited for $25,000.
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of investment in bonds will be eliminated in the preparation of the 20X3 consolidated financial statements?
A) $257,248
B) $300,000
C) $395,766
D) $400,784
Q2) Based on the information given above,what amount of consolidated net income should be reported for 20X8?
A) $147,240
B) $134,240
C) $149,134
D) $136,134
Q3) Based on the information given above,what amount of gain or loss on bond retirement was recorded during the consolidation process?
A) No gain or loss
B) $35,000 loss
C) $35,000 gain
D) $15,000 loss
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Chapter 8: Appendix A: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 consolidated financial statements?
A) $3,500
B) $2,800
C) $5,000
D) $2,500
Q2) Based on the information given above,what amount of interest income will be eliminated in the preparation of the 20X9 consolidated financial statements?
A) $17,000
B) $13,300
C) $18,500
D) $22,200
Q3) Based on the information given above,what amount of constructive gain will be allocated to noncontrolling interest in 20X8 consolidated financial statements?
A) $4,925
B) $5,550
C) $5,625
D) $4,625
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11
Chapter 9: Consolidation Ownership Issues
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Q1) Based on the preceding information,what was the balance in the investment account reported by Vision on January 1,20X9,before its sale of shares?
A) $225,000
B) $285,000
C) $245,000
D) $255,000
Q2) Based on the information provided,what is the book value of the common stock on January 1,20X6?
A) $390,000
B) $420,000
C) $446,000
D) $490,000
Q3) Based on the preceding information,what is the portion of First's retained earnings assignable to its preferred shareholders on January 1,20X9?
A) $40,000
B) $50,000
C) $60,000
D) $70,000
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12
Chapter 10: Additional Consolidation Reporting Issues
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Q1) Dividends paid to noncontrolling shareholders:
I.are reported as a cash outflow in the consolidated cash flow statement.
II.represent funds that are no longer available to the consolidated entity.
III.are reported in the consolidated retained earnings statement.
A) Observation I alone is true.
B) Observation III alone is true.
C) Observations I and II are true.
D) Observations I, II, and II are true.
Q2) Based on the preceding information,what is the amount of earnings available to common shareholders reported in the consolidated financial statements for the year?
A) $89,200
B) $87,000
C) $91,000
D) $82,800
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13
Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Sample Questions
Q1) Which of the following observations is true of futures contracts?
A) Contracted through a dealer, usually a bank.
B) Customized to meet contracting company's terms and needs.
C) Typically no margin deposit required.
D) Traded on an exchange and acquired through an exchange broker
Q2) Mint Corporation has several transactions with foreign entities.Each transaction is denominated in the local currency unit of the country in which the foreign entity is located.On October 1,20X8,Mint purchased confectionary items from a foreign company at a price of LCU 5,000 when the direct exchange rate was 1 LCU = $1.20.The account has not been settled as of December 31,20X8,when the exchange rate has decreased to 1 LCU = $1.10.The foreign exchange gain or loss on Mint's records at year-end for this transaction will be:
A) $500 loss
B) $500 gain
C) $378 gain
D) $5,500 loss
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Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Sample Questions
Q1) Based on the preceding information,what amount of unrealized intercompany gross profit is eliminated in preparing the consolidated financial statements for the year?
A) $0
B) $800
C) $1,000
D) $1,300
Q2) In cases of operations located in highly inflationary economies:
A) The reporting currency of the U.S. parent-the U.S. dollar-should be used as the foreign entity's functional currency.
B) The foreign currency should be used as the functional currency with a footnote to the financials displaying what the earnings would have been using the U.S. dollar as the functional currency.
C) The foreign currency should be used as the functional currency with a single line item-foreign translation-reporting the adjustment using the U.S. dollar as the functional currency.
D) None of the above.
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15
Chapter 13: Segment and Interim Reporting
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Sample Questions
Q1) Based on the preceding information,the cost of goods sold for the first quarter is:
A) $636,000
B) $564,000
C) $546,000
D) $624,000
Q2) Interim income statements are required for Smith Orchards.Smith does most of its sales in the fall quarter of the year.These sales are both to individual and commercial customers.How do you recommend Smith report sales during the spring quarter of the year?
Q3) On June 30,20X0,Bow Corporation incurred a $150,000 net loss from disposal of a business component.Also on June 30,20X0,Bow paid $50,000 for property taxes assessed for the calendar year 20X0.What amount of the preceding items should be included in the determination of Bow's net income or loss for the six-month interim period ended June 30,20X0?
A) $100,000
B) $150,000
C) $175,000
D) $200,000
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Chapter 14: Sec Reporting
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Q1) Information concerning the unexpected resignation of one or more of the registrant's directors would be disclosed on which of the following forms?
I.Form 8-Q
II.Form 8-K
A) I
B) II
C) Both I and II
D) Neither I nor II
Q2) Which of the following forms is the most comprehensive registration statement?
A) Form S-1
B) Form F-2
C) Form S-3
D) Form S-2
Q3) Which of the following is defined as directly or indirectly having the power to vote the shares or investment power to sell the security?
A) Proxy
B) Significant influence
C) Control
D) Beneficial ownership
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) A partner's tax basis in a partnership is comprised of which of the following items?
I.The partner's tax basis of assets contributed to the partnership.
II.The amount of the partner's liabilities assumed by the other partners.
III.The partner's share of other partners' liabilities assumed by the partnership.
A) I plus II minus III
B) I plus II plus III
C) I minus II plus III
D) I minus II minus III
Q2) Refer to the information provided above.Erin invests $52,000 for a one-fifth interest.What amount of goodwill will be recorded?
A) $7,000
B) $28,000
C) $50,000
D) $80,000
Q3) The ABC partnership had net income of $100,000 for 20X9.They allocate profits and losses in the ratio 5:3:2.After closing the 12/31/20X9 books they discovered that $30,000 was spent on a piece of land in December 20X9 and was expensed.What should happen?
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Chapter 16: Partnerships: Liquidation
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Q1) Refer to the information provided above.Using a safe payments schedule,how much cash will be distributed to Lilly at the end of the second month?
A) $27,000
B) $36,000
C) $18,000
D) $0
Q2) Based on the preceding information,what amount will be paid out to Scott upon liquidation of the partnership?
A) $0
B) $2,500
C) $5,000
D) $6,429
Q3) Refer to the above information.If the other assets are sold for $80,000,and all partners are personally insolvent,how much should E receive upon liquidation?
A) $0
B) $6,000
C) $10,000
D) $20,000
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Chapter 17: Governmental Entities: Introduction and General
Fund Accounting
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Q1) The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet.What account is debited in the general fund when Ames acquires supplies?
A) Expenditures
B) Inventory of Supplies
C) Supplies Expense
D) Fund Balance-Nonspendable
Q2) When the budget of a governmental unit,for which the estimated revenues exceed the appropriations,is adopted and recorded in the general ledger at the beginning of the year,the budgetary fund balance account is
A) Credited at the beginning of the year and debited at the end of the year.
B) Credited at the beginning of the year and no entry made at the end of the year.
C) Debited at the beginning of the year and no entry made at the end of the year.
D) Debited at the beginning of the year and credited at the end of the year.
Q3) Accounting processes differ between a for-profit entity and a governmental entity.Discuss three differences between a governmental entity and a for-profit entity.
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Chapter 18: Governmental Entities: Special Funds and
Government-Wide Financial Statements
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Q1) A debt service fund for the City of Madison received $50,000 from a capital projects fund.The amount received represented the premium received from the issuance of general obligation bonds.What account should the debt service fund credit to record this receipt?
A) Revenue-General Obligation Bond Premium.
B) Matured Bonds Payable.
C) Other Financing Sources-Transfer In from Capital Projects Fund.
D) Due to Capital Projects Fund.
Q2) Upon completion of construction and full payment of all construction costs in a capital projects fund,the entry to record the transfer of any remaining cash should include a debit to:
I.Contract Payable-Retained Percentage.
II.Transfer Out to Debt Service Fund.
A) I only
B) II only
C) Either I or II
D) Neither I nor II
Q3) GASB 34 requires a Reconciliation schedule for the Statement of Net Assets.What does this schedule document?
Page 21
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Chapter 19: Not-For-Profit Entities
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Q1) Which of the following is an example of volunteer services received by a not-for-profit entity that should be recognized as revenue?
I.Services requiring specialized skills,provided by individuals with those skills,that otherwise would have to be purchased.
II.Services of lay faculty at a private university operated by a religious order.
III.Services that create or enhance non-financial assets,regardless of whether or not they require specialized skills.
A) I only
B) I and III only
C) II and III only
D) I, II, and III
Q2) Refer to the above information.On the statement of cash flows prepared for the year ended December 31,20X8,the events described would increase net cash flows provided by
A) operating activities by $40,000.
B) financing activities by $40,000.
C) financing activities by $10,000.
D) operating activities by $10,000.
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Chapter 20: Corporations in Financial Difficulty
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Q1) A reorganization value in excess of amounts assignable to identifiable assets is:
A) not reported.
B) reported as an intangible asset called Reorganization Value in Excess of Amounts Allocable to Identifiable Assets.
C) reported as Goodwill Associated with Exit or Disposal Activities.
D) passed on to prior shareholders of the company.
Q2) As defined by the Bankruptcy Code,creditors with priority:
I.have collateral claim against specific assets.
II.are unsecured creditors who have priority over other unsecured creditors.
III.are the first to be paid from any proceeds available to unsecured creditors.
A) I only
B) II only
C) I, II and II
D) Both II and III
Q3) Briefly explain the three classes of creditors specified in the Bankruptcy Code.
Q4) What are the conditions necessary for using fresh start reporting in reorganization?
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Page 23