Special Topics in Accounting Test Preparation
Course Introduction
Special Topics in Accounting explores advanced and emerging issues within the accounting field that go beyond the scope of traditional financial and managerial accounting courses. Students will engage with contemporary topics such as forensic accounting, sustainability reporting, accounting for digital assets, and the implications of evolving regulatory frameworks. Through case studies, research projects, and interactive discussions, this course encourages critical thinking and equips students with the analytical tools necessary to address complex accounting challenges in a dynamic business environment.
Recommended Textbook
Advanced Accounting 11th Edition by Joe Ben Hoyle
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19 Chapters
1785 Verified Questions
1785 Flashcards
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Chapter 1: The Equity Method of Accounting for Investments
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Sample Questions
Q1) Atlarge Inc. owns 30% of the outstanding voting common stock of Ticker Co. and has the ability to significantly influence the investee's operations and decision making. On January 1, 2011, the balance in the Investment in Ticker Co. account was $402,000. Amortization associated with the purchase of this investment is $8,000 per year. During 2011, Ticker earned income of $108,000 and paid cash dividends of $36,000. Previously in 2010, Ticker had sold inventory costing $28,800 to Atlarge for $48,000. All but 25% of this merchandise was consumed by Atlarge during 2010. The remainder was used during the first few weeks of 2011. Additional sales were made to Atlarge in 2011; inventory costing $33,600 was transferred at a price of $60,000. Of this total, 40% was not consumed until 2012. What was the balance in the Investment in Ticker Co. account at the end of 2011?
A) $401,136.
B) $413,872.
C) $418,840.
D) $412,432.
E) $410,148.
Answer: B
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Chapter 2: Consolidation of Financial Information
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Sample Questions
Q1) For acquisition accounting, why are assets and liabilities of the subsidiary consolidated at fair value?
Answer: The acquisition transaction is assumed to occur through an orderly transaction between market participants at the measurement date of the acquisition. Thus identified assets and liabilities acquired have been assigned fair value for the transfer to the acquirer and this is a relevant and faithful representation for consolidation.
Q2) Which of the following is a not a reason for a business combination to take place?
A) Cost savings through elimination of duplicate facilities.
B) Quick entry for new and existing products into domestic and foreign markets.
C) Diversification of business risk.
D) Vertical integration.
E) Increase in stock price of the acquired company.
Answer: E
Q3) What term is used to refer to a business combination in which only one of the original companies continues to exist?
Answer: The appropriate term is statutory merger.
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4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) Hanson Co. acquired all of the common stock of Roberts Inc. on January 1, 2010, transferring consideration in an amount slightly more than the fair value of Roberts' net assets. At that time, Roberts had buildings with a twenty-year useful life, a book value of $600,000, and a fair value of $696,000. On December 31, 2011, Roberts had buildings with a book value of $570,000 and a fair value of $648,000. On that date, Hanson had buildings with a book value of $1,878,000 and a fair value of $2,160,000.
Required:
What amount should be shown for buildings on the consolidated balance sheet dated December 31, 2011?
Answer: 11ea8f9b_5ae8_7d88_b161_6becc6480f4f_TB4176_00
Q2) When consolidating a subsidiary under the equity method, which of the following statements is true?
A) Goodwill is never recognized.
B) Goodwill required is amortized over 20 years.
C) Goodwill may be recorded on the parent company's books.
D) The value of any goodwill should be tested annually for impairment in value.
E) Goodwill should be expensed in the year of acquisition.
Answer: D
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) Which of the following statements is false regarding multiple acquisitions of a subsidiary's existing common stock?
A) The parent recognizes a larger percent of subsidiary income.
B) A step acquisition resulting in control may result in a parent recognizing a gain on revaluation.
C) The book value of the subsidiary will increase.
D) The parent's percent ownership in subsidiary will increase.
E) Non-controlling interest in subsidiary's net income will decrease.
Q2) When Jolt Co. acquired 75% of the common stock of Yelts Corp., Yelts owned land with a book value of $70,000 and a fair value of $100,000. What is the amount of excess land allocation attributed to the non-controlling interest at the acquisition date?
A) $0.
B) $30,000.
C) $22,500.
D) $7,500.
E) $17,500.
Q3) What is preacquisition income?
Q4) Where should a non-controlling interest appear on a consolidated balance sheet?
Page 6
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Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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Sample Questions
Q1) Why do intra-entity transfers between the component companies of a business combination occur so frequently?
Q2) Patti Company owns 80% of the common stock of Shannon, Inc. In the current year, Patti reports sales of $10,000,000 and cost of goods sold of $7,500,000. For the same period, Shannon has sales of $200,000 and cost of goods sold of $160,000. During the year, Patti sold merchandise to Shannon for $60,000 at a price based on the normal markup. At the end of the year, Shannon still possesses 30 percent of this inventory. Compute consolidated cost of goods sold.
A) $7,500,000.
B) $7,600,000.
C) $7,615,000.
D) $7,604,500.
E) $7,660,000.
Q3) What is the purpose of the adjustments to depreciation expense within the consolidation process when there has been an intra-entity transfer of a depreciable asset?
Q4) Throughout 2011, Cleveland Co. sold inventory to Leeward Co., its subsidiary. From a consolidated point of view, when will the gain on this transfer be earned?
Page 7
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Chapter 6: Intercompany Debt, Consolidated Statement of
Cash Flows, and Other Issues
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) How do subsidiary stock warrants outstanding affect 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.
Q2) Where do dividends paid by a subsidiary to the parent company appear in a consolidated statement of cash flows?
A) Cash flows from operating activities.
B) Cash flows from investing activities.
C) Cash flows from financing activities.
D) Supplemental schedule of noncash investing and financing activities.
E) They do not appear in the consolidated statement of cash flows.
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8
Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Sample Questions
Q1) White Company owns 60% of Cody Company. Separate tax returns are required. For 2010, White's operating income (excluding taxes and any income from Cody) was $300,000 while Cody reported a pretax income of $125,000. During the period, Cody paid a total of $25,000 in cash dividends; $15,000 (60%) to White and $10,000 to the non-controlling interest. White paid dividends of $180,000. The income tax rate for both companies is 30%. Compute Cody's undistributed earnings for 2011.
A) $62,500.
B) $125,000.
C) $87,500.
D) $100,000.
E) $70,000.
Q2) Jull Corp. owned 80% of Solaver Co. Solaver paid $250,000 for 10% of Jull's common stock. In 2011, Jull and Solaver reported operating income (not including income from the investment) of $300,000 and $80,000, respectively. Jull and Solaver paid dividends of $120,000 and $50,000, respectively.
Required:
Under the treasury stock approach, what is Jull's controlling interest in Solaver Co.'s net income?
Q3) Under what conditions must a deferred income tax asset be recorded?
Page 9
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Chapter 8: Segment and Interim Reporting
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Sample Questions
Q1) Which of the following costs require similar treatment to Property Tax Expense in an interim financial report? 1) Annual major repairs.
2) Advertising expense.
3) Bonus expense, if estimable.
4) Quantity discounts based on annual sales.
A) 1 and 2
B) 1, 2, and 3
C) 1, 2, and 4
D) 2, 3, and 4
E) 1, 2, 3, and 4
Q2) According to U.S. GAAP, which of the following would be an acceptable grouping by a U.S. company for presentation of information by geographic area?
A) France, Germany, All Other Countries.
B) United States, Europe, Canada.
C) United States, Africa, Europe, Asia.
D) United States, Canada, Mexico, Germany.
E) North America, Spain, All Other Countries.
Q3) What is meant by the term: disaggregated financial information?
Q4) What is the major objective of segment reporting?
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) Which of the following approaches is used in the United States in accounting for foreign currency transactions?
A) One-transaction perspective; defer foreign exchange gains and losses.
B) Two-transaction perspective; accrue foreign exchange gains and losses.
C) Three-transaction perspective; defer foreign exchange gains and losses.
D) One-transaction perspective; accrue foreign exchange gains and losses.
E) Two-transaction perspective; defer foreign exchange gains and losses.
Q2) Which statement is true regarding a foreign currency option?
A) A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future.
B) A foreign currency option gives the holder the obligation only sell foreign currency in the future.
C) A foreign currency option gives the holder the obligation to only buy foreign currency in the future.
D) A foreign currency option gives the holder the right but not the obligation to buy or sell foreign currency in the future.
E) A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future at the spot rate on the future date.
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Chapter 10: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) A net asset balance sheet exposure exists and the foreign currency depreciates. Which of the following statements is true?
A) There is no translation adjustment.
B) There is a transaction loss.
C) There is a transaction gain.
D) There is a negative translation adjustment.
E) There is a positive translation adjustment.
Q2) Which accounts are remeasured using current exchange rates?
A) all revenues and expenses.
B) all assets and liabilities.
C) cash, receivables, and most liabilities.
D) all current assets and liabilities.
E) all noncurrent assets and liabilities.
Q3) Where is the disposition of a translation loss reported in the parent company's financial statements?
A) Net loss in the income statement.
B) Cumulative translation adjustment as a deferred asset.
C) Cumulative translation adjustment as a deferred liability.
D) Accumulated other comprehensive income.
E) Retained earnings.
Page 12
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) Which of the following is not a problem caused by diverse accounting practices across countries?
A) Preparation of consolidated financial statements.
B) Gaining access to foreign capital markets.
C) Lack of comparability of financial statements between companies in the same country.
D) Cost and expertise required of consolidations accounting staff.
E) Need for a company to maintain multiple sets of accounting records.
Q2) Which of the following statements is false regarding a country's legal system?
A) The two major types of legal systems are common law and codified Roman law.
B) Common law originated in the Roman jus civile.
C) Code law countries tend to have more statutes governing a wider range of human activity.
D) Accounting law is rather general in code law countries.
E) A nongovernmental organization is more likely to develop in a common law country than in a code law country.
Q3) Which two EU directives have helped harmonize accounting standards?
Q4) What are recognition differences in international reporting and what would be an example of a difference?
Page 13
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Sample Questions
Q1) What is Form 10-K?
A) a quarterly report filed with the SEC.
B) an annual report filed with the SEC.
C) a semiannual report filed with the SEC.
D) a form filed with the SEC before the company issues stock for the first time.
E) a form filed with the SEC before issuing stocks to acquire another company.
Q2) Name the two broad categories of filings with the SEC.
Q3) A wrap-around filing:
A) may be used by large companies to sell securities over a period of two years without refiling with the SEC.
B) is a simplified registration procedure for securities to be issued by small companies.
C) allows a company to simplify its form 10-K by referring to information in its annual report.
D) is a filing completed using the SEC's electronic filing system.
E) may remain in effect for a period of one to five years.
Q4) What is required by the Trust Indenture Act of 1939?
Q5) What was the purpose of the Securities Act of 1933?
Q6) What is shelf registration?
Page 14
Q7) How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee?
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) During a reorganization, cash reserves tend to grow. How should interest earned on these reserves be reported on the financial statements?
A) as an unearned revenue until the reorganization is complete.
B) as a credit directly to retained earnings.
C) on the balance sheet as a long-term liability.
D) on the income statement, but not classified as a reorganization item.
E) on the income statement as a reorganization item.
Q2) In a statement of financial affairs, assets are classified
A) according to whether they are pledged with particular creditors.
B) as current or noncurrent.
C) as monetary or nonmonetary.
D) as operating or non-operating.
E) as direct or indirect.
Q3) What is the purpose of Chapter 7 of the Bankruptcy Reform Act?
Q4) What is the meaning of the phrase debtor in possession?
Q5) What term is used for a bankruptcy forced upon a debtor by its creditors?
Q6) How is the presentation of a balance sheet during a reorganization different from a normal balance sheet?
Q7) What are duties of the creditors committee in Chapter 7 liquidation?
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Chapter 14: Partnerships: Formation and Operation
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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 Wasser's capital balance at the end of 2010?
A) $150,000.
B) $160,000.
C) $165,000.
D) $213,000.
E) $201,000.
Q2) What is the dissolution of a partnership?
Q3) For what events or conditions should the Articles of Partnership make provision?
Q4) Why are the terms of the Articles of Partnership important to partners?
Q5) How is accounting for a partnership different from accounting for a corporation?
Q6) What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) Xygote, Yen, and Zen were partners who were liquidating their partnership. Each partner has a deficit balance in their respective capital account. All assets from the partnership have been liquidated and all of the liabilities had been paid. How should any additional cash coming into the partnership be distributed to the partners?
Q2) A partnership had the following account balances: Cash, $91,000; Other Assets, $702,000; Liabilities, $338,000; Polk, Capital (50% of profits and losses), $221,000; Garfield, Capital (30%), $143,000; Arthur, Capital (20%), $91,000. The company liquidated and $10,400 became available to the partners.
Required: Who would have received the $10,400?
Q3) What financial schedule would be prepared for a partnership that has begun liquidation but has not yet completed the process? What is the purpose of this schedule?
Q4) What events or circumstances might force the termination of a partnership and liquidation of its assets?
Q5) What is the purpose of a predistribution plan?
Q6) Why is a Schedule of Liquidation prepared?
Q7) What is the role of the accountant during the liquidation process?
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Chapter 16: Accounting for State and Local Governments
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Sample Questions
Q1) A city operates a central data processing facility. The expenses of this facility would be accounted for using
A) the General Fund
B) an Enterprise Fund
C) a Capital Projects Fund
D) an Agency Fund
E) an Internal Service Fund
Q2) Which group of governmental financial statements reports all revenues and all costs of providing services each year?
A) GAAP-Based Financial Statements
B) Fund Financial Statements.
C) Cost-Based Financial Statements.
D) Government-Wide Financial Statements.
E) General Fund Financial Statements.
Q3) For a government, what kinds of operations are accounted for using a proprietary fund? Give three examples.
Q4) What are the two proprietary fund types?
Q5) What is the purpose of fund financial statements?
Q6) What is a special revenue fund used to account for?
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Chapter 17: Accounting for State and Local Governments
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Q1) GASB Codification Section 2200.106-107 makes which of the following statements regarding Management's Discussion and Analysis?
A) MD&A is required only for Proprietary Fund Financial Statements.
B) MD&A is required for all state and local government financial statements.
C) MD&A is only required for comprehensive annual financial reports.
D) MD&A for state and local government financial statements must include an analysis of potential, untapped revenue sources.
E) MD&A is an optional inclusion for state and local government financial statements.
Q2) Which of the following is a section of the general purpose external financial statements of a state or local government? (1) Management's discussion and analysis (MD&A).
(2) Required supplementary information (other than MD&A).
(3)) Basic financial statements and notes to financial statements.
A) 1 and 2.
B) 2 and 3.
C) 1 and 3.
D) 3 only.
E) 1, 2, and 3.
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Chapter 18: Accounting for Not-For-Profit Organizations
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Q1) What are the three categories of net assets required by GAAP in reporting a not-for-profit organization?
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 the above.
Q2) What is the basis of accounting used in reporting the Statement of Activities and Changes in Net Assets?
A) Cash basis.
B) Modified accrual basis.
C) Accrual basis.
D) Either cash basis or accrual basis, depending on the type of revenue.
E) Either modified accrual basis or accrual basis, depending on the type of revenue.
Q3) What two classifications are used for the expenses incurred by voluntary health and welfare organizations?
Q4) For not-for-profit organizations, what is the difference in identification of "control" between a merger and an acquisition?
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Page 20
Chapter 19: Accounting for Estates and Trusts
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Sample Questions
Q1) A gift that is specified in a will as "I leave $5,000 in cash from my checking account to my daughter" is a
A) general legacy.
B) specific legacy.
C) demonstrative legacy.
D) residual legacy.
E) devise.
Q2) The executor of Danny Mack's estate has listed the following properties at fair value: Cash $200,000, Life Insurance Receivable $500,000, Investment in Stocks and Bonds
$50,000, Rental Property $100,000, and Personal Property $80,000. Additionally, the executor found $100,000 of various debts incurred before the decedent's death. The cost of Danny Mack's funeral was $20,000.
Prepare the journal entry to record the collection of the life insurance policy.
Q3) What is meant by estate accounting?
Q4) What is the difference between an executor and an administrator?
Q5) What is a remainderman of trust property?
Q6) What are the four levels of claims in the order of priority of the Uniform Probate Code?
Q7) What are the three goals of probate laws?
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