Advanced Accounting
Exam Answer Key
Course Introduction
Advanced Accounting explores complex financial accounting topics beyond the introductory level, focusing on areas such as business combinations, consolidations, partnerships, foreign currency transactions, and segment and interim reporting. The course addresses current accounting standards and practices related to mergers, acquisitions, intercompany transactions, multinational operations, and government or nonprofit accounting. Emphasis is placed on the preparation and analysis of consolidated financial statements, application of relevant accounting principles, and understanding regulatory requirements, equipping students with the knowledge needed for high-level accounting roles in diverse organizational settings.
Recommended Textbook
Advanced Accounting 9th Edition by Joe Ben Hoyle
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19 Chapters
1679 Verified Questions
1679 Flashcards
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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118 Verified Questions
118 Flashcards
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Sample Questions
Q1) What was the balance in the Investment in Nicole Corp.account at December 31,2006?
Answer: [$503,000 + $36,660 - ($40,000 x .4)] = $523,660
Q2) How should a permanent loss in value of an investment using the equity method be treated?
A)The equity in investee income is reduced.
B)A loss is reported the same as a loss in value of other long-term assets.
C)The investor's stockholders' equity is reduced.
D)No adjustment is necessary.
E)An extraordinary loss would be reported.
Answer: B
Q3) What amount of equity income would Anderson recognize in 2008 from its ownership interest in Barney?
A)$12,000 income.
B)$12,000 loss.
C)$16,000 loss.
D)$28,000 income.
E)$28,000 loss.
Answer: E
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Page 3
Chapter 2: Consolidation of Financial Information
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123 Flashcards
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Sample Questions
Q1) Assume that Bullen issued 12,000 shares of common stock with a $5 par value and a $47 fair value to obtain all of Vicker's outstanding stock.In this transaction (which is not a pooling of interests),how much goodwill should be recognized?
A)$144,000.
B)$104,000.
C)$64,000.
D)$60,000.
E)$0.
Answer: B
Q2) Assume that Bellington paid cash of $2.8 million.No stock is issued.An additional $50,000 is paid in direct combination costs.
Required:
For Goodwill,determine what balance would be included in a February 1,2008 consolidation.
Answer: SHAPE \* MERGEFORMAT
11ea88ab_df3e_5298_bb89_f377e6a8e173_TB4174_00
Q3) How are direct combination costs accounted for in an acquisition transaction?
Answer: In an acquisition,direct combination costs are expensed in the period of the acquisition.
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Page 4
Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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122 Verified Questions
122 Flashcards
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Sample Questions
Q1) If the parent's net income reflected use of the initial value method,what were the consolidated retained earnings on December 31,2010?
Answer: SHAPE \* MERGEFORMAT
11ea88ab_df38_37ed_bb89_2149c314f39d_TB4174_00
Q2) If Cale Corp.had net income of $444,000,exclusive of the investment,what is the amount of consolidated net income?
A)$568,400.
B)$570,000.
C)$571,000.
D)$566,400.
E)$444,000.
Answer: C
Q3) 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.
Q4) What accounting method requires a subsidiary to record acquisition fair value allocations and the amortization of allocations in its accounting records?
Answer: The appropriate method is termed push-down accounting.
Page 5
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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51 Verified Questions
51 Flashcards
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Sample Questions
Q1) In consolidation at December 31,2009,what adjustment is necessary for Hogan's Equipment account?
A)$3,000 increase
B)$3,000 decrease
C)$2,700 increase
D)$2,700 decrease
E)No change
Q2) What is the dollar amount of non-controlling interest which should appear on a balance sheet prepared immediately after consolidation according to the acquisition method per SFAS 141(R)?
A)$350,000
B)$300,000
C)$400,000
D)$370,000
E)$0
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6
Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) What is the consolidated gain or loss on equipment for 2009?
A)$0.
B)$9,000 gain.
C)$9,000 loss.
D)$21,000 gain.
E)$21,000 loss.
Q2) An intercompany sale took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year following the sale?
A)A worksheet entry is made with a debit to retained earnings for an upstream transfer.
B)A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C)A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D)A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E)No worksheet entry is necessary.
Q3) Assuming that Musial owned only 90% of Matin,what is consolidated net income for 2009?
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Page 7
Chapter
Statement of Cash Flows, and Other Issues
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) The consolidation entry at date of acquisition will include (referring to Smith):
A)Debit Common stock $500,000 and debit Preferred stock $120,000.
B)Debit Common stock $400,000 and debit Additional paid-in capital $160,000.
C)Debit Common stock $500,000 and debit Preferred stock $300,000.
D)Debit Common stock $500,000,debit Preferred stock $120,000,and debit Additional paid-in capital $200,000.
E)Debit Common stock $400,000,debit Preferred stock $300,000,debit Additional paid-in capital $200,000,and debit Retained earnings $500,000.
Q2) Wolff Corporation owns 70 percent of the outstanding stock of Donald,Inc.During the current year,Donald made $75,000 in sales to Wolff.How does this transfer affect the consolidated statement of cash flows?
A)Included as a decrease in the investing section.
B)Included as an increase in the operating section.
C)Included as a decrease in the operating section.
D)Included as an increase in the investing section.
E)Not reported in the consolidated statement of cash flows.
Q3) Prepare Panton's journal entry to recognize the impact of this transaction.
Q4) Describe how this transaction would affect Panton's books.
Page 8
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Required:
Using the treasury stock approach,prepare a schedule to show what is reported as the noncontrolling interest in Luvyn Corp.'s net income.
Q2) What is the total noncontrolling interest in the subsidiaries' income for 2009?
A)$55,240.
B)$66,020.
C)$67,280.
D)$76,280.
E)$76,480.
Q3) What amount should have been reported for consolidated net income?
A)$1,285,000.
B)$1,331,700.
C)$1,349,000.
D)$1,315,000.
E)$1,314,900.
Q4) Required:
Under the treasury stock approach,what is Jull's controlling interest in Solaver Co.'s net income?
Page 9
Q5) Under what conditions must a deferred income tax asset be recorded?
Q6) What are the benefits or advantages of filing a consolidated income tax return?
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Page 10
Chapter 8: Segment and Interim Reporting
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114 Flashcards
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Sample Questions
Q1) Prepare the journal entries to reflect the sales and cost of goods sold,assuming Urbanski does not expect to replace the liquidated inventory at year-end.
Q2) A company that generates reports by both geographic region and product line must consider additional criteria in identifying operating segments when there are multiple sets of reports.Which of the following statement(s)is correct?
(I) )An operating segment has a segment manager who is directly accountable to the chief operating decision maker for its financial performance.
(II) )If more than one set of organizational units exists,each organizational unit is considered an operating segment even if there is only one set for which segment managers are held responsible,.
(III. )If segment managers exist for two or more overlapping sets of organizational units,the nature of the business activities must be considered.
A)I,II,and III.
B)I and III only.
C)I and II only.
D)II and III only.
E)None of the above.
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Page 11
Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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90 Verified Questions
90 Flashcards
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Sample Questions
Q1) 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.
Q2) What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency depreciates?
Q3) How does a foreign currency forward contract differ from a foreign currency option?
Q4) Where can you find exchange rates between the U.S.dollar and most foreign currencies?
Q5) How is the fair value of a Forward Contract determined under SFAS 133?
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Chapter 10: Translation of Foreign Currency Financial Statements
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94 Verified Questions
94 Flashcards
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Sample Questions
Q1) Calculate the US$ amount allocated to the patent at January 1,2009.
A)$50,000.
B)$35,000.
C)$34,000.
D)$32,500.
E)$28,200.
Q2) Assume the functional currency is the U.S.dollar,compute the restated amount for depreciation expense for 2008.
A)$8,190.
B)$8,370.
C)$8,820.
D)$9,090.
E)$8,550.
Q3) Under the current rate method,property,plant & equipment would be restated at what rate?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.
13
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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58 Flashcards
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Sample Questions
Q1) The major providers of financing in some countries are stockholders,while other countries predominantly use banks as the main financing source.What difference does it make to accounting disclosures in comparing a company from one of each of those countries?
Q2) What amount should be recognized as research and development expense in 2008 using U.S.GAAP?
A)$50,000.
B)$150,000.
C)$200,000.
D)$0.
E)$250,000.
Q3) What amount should be recognized as research and development expense in 2008 using IFRSs?
A)$50,000.
B)$150,000.
C)$200,000.
D)$0.
E)$250,000.
Q4) What are the different ways IFRSs can be used?
Q5) What are the arguments against accounting harmonization?
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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74 Verified Questions
74 Flashcards
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Sample Questions
Q1) Which one of the following requires the audit committee to be responsible for the appointment and compensation of the external auditor?
A)The Securities Act of 1933.
B)The Securities Exchange Act of 1934.
C)The Investment Company Act of 1940.
D)The Foreign Corrupt Practices Act of 1977.
E)The Sarbanes-Oxley Act of 2002.
Q2) When must Form 10-Q be filed with the SEC?
Q3) What information is required in proxy statements?
Q4) Which one of the following is not a prescribed event for the filing of Form 8-K?
A)bankruptcy or receivership.
B)changes in control of the registrant.
C)resignation of a middle manager.
D)changes in the registrant's certified public accountants.
E)acquisitions or dispositions of assets.
Q5) Briefly describe Regulation S-K.What is its purpose?
Q6) What are some of the reasons for the corporate scandals of 2001 and 2002?
Q8) What was the purpose of the Securities Exchange Act of 1934? Page 15
Q7) Why was the Public Utility Holding Company Act of 1935 created?
Q9) When must a company file its Form 10-K?
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Page 16
Chapter 13: Accounting for Legal Reorganizations and Liquidations
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82 Verified Questions
82 Flashcards
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Sample Questions
Q1) Compute the amount of unsecured liabilities without priority.
Q2) What are free assets?
A)assets for which net realizable value is greater than historical cost.
B)assets for which no market exists.
C)assets for which replacement cost is greater than historical cost.
D)assets available to be distributed for liabilities with priority and other unsecured obligations.
E)assets available to be distributed to stockholders.
Q3) Total unsecured liabilities are calculated to be what amount?
A)$44,000.
B)$51,050.
C)$76,050.
D)$85,000.
E)$194,000.
Q4) In a liquidation,total free assets are calculated to be what amount?
Q5) What is meant by a "partially secured liability"?
Q6) What are the three categories of assets in a Statement of Financial Affairs?
Q7) Compute the amount of total liabilities with priority.
Q8) In a Chapter 7 bankruptcy,total free assets are calculated to be what amount? Page 17
Q9) What is the meaning of the phrase debtor in possession?
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Page 18
Chapter 14: Partnerships: Formation and Operation
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) When the hybrid method is used to record the withdrawal of a partner,the partnership
A)revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B)revalues liabilities but not assets,and no goodwill is recorded.
C)can recognize goodwill but does not revalue assets and liabilities.
D)revalues assets but not liabilities,and records goodwill to the continuing partner but not to the withdrawing partner.
E)revalues assets and liabilities but does not record goodwill.
Q2) Jipsom and Klark were partners with capital account balances of $80,000 and $100,000,respectively.Looney paid $32,000 to Jipsom and $40,000 to Klark for 30% of their interests in the partnership.Jipsom and Klark shared income in the ratio of 2:3.They believed that revaluation of the partnership was appropriate when a new partner was admitted.
Required:
Prepare the journal entries to record the admission of Looney to the partnership.
Q3) What events cause the dissolution of a partnership?
Q4) Record the journal entry to record the net income to the capital accounts
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Page 19
Chapter 15: Partnerships: Termination and Liquidation
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Sample Questions
Q1) 1)How much cash should have been distributed safely to partners at this time?
2)How much cash should each partner have received at this time?
Q2) Jones,Marge,and Tate LLP decided to dissolve and liquidate the partnership on September 31,2009.After realization of a portion of the noncash assets,the capital account balances were Jones $50,000;Marge $40,000;and Tate $15,000.Cash of $35,000 and other assets with a carrying amount of $100,000 were on hand.Creditors' claims totaled $30,000.Jones,Marge,and Tate shared net income and losses in a 2:1:1 ratio,respectively.
Prepare a working paper to compute the amount of cash that may be paid to creditors and to partners at this time,assuming that no partner is solvent.
Q3) If the noncash assets were sold for $105,000,what would have been the maximum amount of cash that Canton could have expected to receive?
Q4) Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.
Q5) Prepare a schedule to calculate the safe installment payments to be made to the partners at the end of February.
Q6) For a partnership,how should liquidation gains and losses be accounted for?
Q7) What is the role of the accountant during the liquidation process?
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Chapter 16: Accounting for State and Local Governments,
Part I
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Sample Questions
Q1) For governmental entities,the accrual basis of accounting is used for:
A)Special revenue funds.
B)Internal service funds.
C)Debt service funds.
D)General Fund.
E)Capital Projects Fund.
Q2) When should property taxes be recognized under modified accrual accounting?
Q3) Special Revenue funds are
A)Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.
B)Funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations.
C)Funds used to account for monies held by the government in a trustee capacity.
D)Funds used to account for all financial resources except those required to be accounted for in another fund.
E)Funds used to account for revenues that have been legally restricted as to expenditure.
Q4) What is a special revenue fund used to account for?
Q5) What are the two proprietary fund types?
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Chapter 17: Accounting for State and Local Governments,part II
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Sample Questions
Q1) Prepare a Statement of Net Assets
Q2) The employees of the City of Raymond earn vacation compensation that totals $1,500 per week.During 2008,$30,000 in vacation time was taken and the remainder is expected to be used next year.On the government-wide financial statements,assuming there was no beginning balance,what liability should be reported at the end of 2008?
A)$0.
B)$1,500.
C)$30,000.
D)$48,000.
E)$78,000.
Q3) Which of the following is a financial statement of a fiduciary fund?
A)Balance sheet.
B)Statement of Operations.
C)Statement of Cash Flows.
D)Statement of Fiduciary Net Assets.
E)Statement of Revenues,Expenditures,and Changes in Fund Balance.
Q4) What three criteria must be met to identify a governmental unit as a primary government?
Q5) What is meant by the term legally independent?
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Chapter 18: Accounting for Not-For-Profit Organizations
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Sample Questions
Q1) The hospital estimated that contractual adjustments would reduce the amount collected from third-party payors to $1,710,000.
Required:
Prepare the necessary journal entry to record the contractual adjustments.
Q2) How much should be reclassified on the Statement of Activities in Year Two from the Temporarily Restricted column to the Unrestricted column?
A)$2,000.
B)$5,000.
C)$7,000.
D)$10,000.
E)$12,000.
Q3) Which one of the following financial statements is not required by SFAS 117 for a voluntary health and welfare organization?
A)Statement of Financial Position.
B)Statement of Functional Expense.
C)Statement of Activities and Changes in Net Assets.
D)Statement of Cash Flows.
E)Statement of Operations.
Q4) Prepare the necessary journal entry to record the revenue and receivables.
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Chapter 19: Accounting for Estates and Trusts
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Sample Questions
Q1) Prepare the journal entry to record the sales of the Stocks and bonds for $120,000
Q2) What is the amount of the personal exemption on an estate income tax return?
A)$0.
B)$100.
C)$300.
D)$500.
E)$600.
Q3) What amount of federal income tax must be paid?
Q4) The provisions of a will currently undergoing probate are: "One thousand shares of Wal-mart stock to my son;$10,000 in cash from my savings account to my brother;$5,000 in cash to my daughter;and any remaining property divided equally between my son and daughter." At the time of death,the estate included 1,400 shares of Walmart stock and $25,000 cash in the savings account.What would the son have received from the settlement of the estate?
A)1,000 shares of Walmart stock and $15,000 in cash
B)1,000 shares of Walmart stock and $0 in cash
C)1,000 shares of Walmart stock and $10,000 in cash
D)1,200 shares of Walmart stock and $5,000 in cash
E)1,400 shares of Walmart stock and $5,000 in cash
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