Consolidated Financial Statements
Study Guide Questions
Course Introduction
This course provides an in-depth exploration of the preparation and analysis of consolidated financial statements in accordance with international accounting standards. Students will learn the principles and procedures for combining the financial statements of a parent company and its subsidiaries, including topics such as the acquisition method, non-controlling interests, intercompany transactions, and the treatment of investments in associates and joint ventures. The course emphasizes practical application through case studies and problems, equipping students with the skills necessary to interpret consolidated reports and understand the impact of group structures on financial reporting.
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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Q1) Based on the preceding information,under the acquisition method,what amount relating to the business combination would be expensed?
A) $72,000
B) $19,000
C) $53,000
D) $63,000
Answer: C
Q2) Based on the preceding information,Selvick Company will report additional paid-in capital of
A) $125,000.
B) $176,000.
C) $220,000.
D) $250,000.
Answer: B
Q3) Based on the preceding information,for Gamma:
A) no goodwill should be reported at year-end.
B) goodwill impairment of $30,000 should be recognized at year-end.
C) goodwill impairment of $20,000 should be recognized at year-end.
D) goodwill of $30,000 should be reported at year-end.
Answer: A
Page 3
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Chapter 2: Reporting Intercorporate Investments and
Consolidation of Wholly Owned Subsidiaries With No
Differential
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Q1) Based on the preceding information,what amount will be reported by Yang as balance in investment in Spiel on December 31,20X8,if it used the fair value option to account for its investment in Spiel?
A) $105,000
B) $118,750
C) $100,000
D) $122,500
Answer: A
Q2) Based on the preceding information,what is the consolidated retained earnings balance on December 31,20X1?
A) $470,000
B) $585,000
C) $600,000
D) $759,000
Answer: C
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4
Chapter 3: The Reporting Entity and Consolidation of
Less-Than-Wholly-Owned Subsidiaries With No Differentials
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Q1) Based on the preceding information,what will be the amount of net income reported by Bluegrass Corporation in 20X2?
A) $45,000
B) $50,000
C) $75,000
D) $105,000
Answer: B
Q2) Based on the preceding information,what amount should be reported as noncontrolling interest in net assets in Jane Company's December 31,20X9,consolidated balance sheet?
A) $90,000
B) $54,000
C) $36,000
D) $0
Answer: C
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
Acquired at More Than Book Value
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Sample Questions
Q1) Based on the preceding information,what amount of goodwill will be reported if the acquisition price was $195,000?
A) $0
B) $40,000
C) $15,000
D) $35,000
Q2) Based on the information provided,the consolidated balance sheet of Enya and Celtic will reflect goodwill in the amount of:
A) $0.
B) $58,000.
C) $22,000.
D) $36,000.
Q3) Based on the preceding information,what amount will be present in the revaluation capital account,when consolidating entries are prepared?
A) $0
B) $65,000
C) $60,000
D) $15,000
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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 preceding information,what amount of differential would Paris amortize during 20X6 in its equity method journal entries?
A) $13,200
B) $15,000
C) $22,000
D) $30,000
Q2) Based on the preceding information,the amount of goodwill reported in the consolidated financial statements prepared immediately after the combination is:
A) $0
B) $32,500
C) $26,000
D) $20,000
Q3) Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
A) $0
B) $40,000
C) $20,000
D) $15,000
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Chapter 6: Intercompany Inventory Transactions
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Q1) Based on the information given above,what amount of cost of goods sold should be eliminated in the consolidation worksheet for 20X8?
A) $82,000
B) $70,000
C) $95,000
D) $60,000
Q2) Based on the information given above,what amount of sales will be reported in the 20X8 consolidated income statement?
A) $90,000
B) $120,000
C) $100,000
D) $67,000
Q3) 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
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8
Chapter 7: Intercompany Transfers of Services and
Noncurrent Assets
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Sample Questions
Q1) Any intercompany gain or loss on a downstream sale of land should be recognized in consolidated net income:
I.in the year of the downstream sale.
II.over the period of time the subsidiary uses the land.
III.in the year the subsidiary sells the land to an unrelated party.
A) I
B) II
C) III
D) I or II
Q2) Based on the information provided,in the preparation of the 20X8 consolidated financial statements,building will be _____ in the consolidating entries.
A) debited for $33,000
B) debited for $36,000
C) credited for $36,000
D) debited for $3,000
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Chapter 8: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of interest income will Light Corporation recognize on December 31,20X8 relative to the interest received on that day,in its separate financial statements?
A) $13,023
B) $13,096
C) $6,538
D) $6,557
Q2) Based on the information given above,what amount of interest expense will be eliminated in the preparation of the 20X5 consolidated financial statements?
A) $7,224
B) $7,259
C) $14,516
D) $21,775
Q3) Based on the information given above,what price did Mom pay to purchase the Daughter bonds?
A) $324,000
B) $312,098
C) $311,902
D) $300,000
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Page 10
Chapter 8: Appendix A: Intercompany Indebtedness
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Q1) Based on the information given above,what amount of gain or loss on bond retirement will be reported in the 20X8 consolidated financial statements?
A) $17,000
B) $12,800
C) $18,500
D) $22,200
Q2) Based on the information given above,what amount of interest receivable will be recorded by Light Corporation on December 31,20X8,in its separate financial statements?
A) $5,000
B) $6,500
C) $10,000
D) $6,000
Q3) Based on the information given above,what amount of interest expense does Hunter record annually?
A) $10,750
B) $9,500
C) $2,500
D) $12,000
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Chapter 9: Consolidation Ownership Issues
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Sample Questions
Q1) Based on the information provided,the equity-method income recorded by A Company is:
A) $125,000
B) $200,000
C) $170,000
D) $181,250
Q2) Based on the preceding information,what is the ending balance in noncontrolling interest in the net assets of Siena?
A) $186,000
B) $418,500
C) $523,125
D) $232,500
Q3) Based on the information provided,what amount will be reported as consolidated net income for 20X9 under the treasury stock method?
A) $150,000
B) $100,000
C) $75,000
D) $175,000
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12
Chapter 10: Additional Consolidation Reporting Issues
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Q1) Based on the information provided,what is the consolidated income to the controlling interest reported for the year 20X4?
A) $275,000
B) $280,000
C) $260,000
D) $200,000
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
Q3) Based on the information provided,what is the consolidated net income reported for the year 20X8?
A) $120,000
B) $138,000
C) $140,000
D) $192,000
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13
Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Sample Questions
Q1) Based on the information given above,the indirect exchange rates for the Swiss franc and the Swedish krona (from a U.S.perspective)are
A) 0.9642 Swiss francs and 6.5531 Swedish krona respectively.
B) 1.6893 Swiss francs and 5.2563 Swedish krona respectively.
C) 1.0371 Swiss francs and 0.1527 Swedish krona respectively.
D) 0.8372 Swiss francs and 4.2713 Swedish krona respectively.
Q2) Based on the preceding information,the entries on January 30,20X9,include a:
A) Credit to Foreign Currency Units (SFr), $184,000.
B) Credit to Cash, $180,000.
C) Debit to Foreign Currency Transaction Loss, $4,000.
D) Debit to Dollars Payable to Exchange Broker, $184,000.
Q3) Based on the information given above,how many U.S.dollars must be paid for a purchase of citrus fruits costing 10,000 Cyprus pounds?
A) $25,132
B) $15,132
C) $3,979
D) $35,775
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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) The functional currency of Nash,Inc.'s subsidiary is the French franc.Nash borrowed French francs as a partial hedge of its investment in the subsidiary.In preparing consolidated financial statements,Nash's translation loss on its investment in the subsidiary exceeded its exchange gain on the borrowing.How should the effects of the loss and gain be reported in Nash's consolidated financial statements?
A) The translation loss less the exchange gain is reported separately as other comprehensive income.
B) The translation loss less the exchange gain is reported in the income statement.
C) The translation loss is reported separately in the stockholders' equity section of the balance sheet and the exchange gain is reported in the income statement.
D) The translation loss is reported in the income statement and the exchange gain is reported separately in the stockholders' equity section of the balance sheet.
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15
Chapter 13: Segment and Interim Reporting
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Sample Questions
Q1) Which of the following characteristics would render the operating unit "reportable"?
The operating unit comprises at least:
A) 5 percent of the assets of a company as a whole.
B) 10 percent of the revenues of the company as a whole.
C) 50 percent of the long term debt of the company as a whole.
D) 20 percent of the operating profit of the company as a whole.
Q2) Which of the following observations is true of the discrete view of interim reporting?
A) An interim period is viewed as an installment of an annual period.
B) Recognition and adjustment of certain income or expense items may be affected by judgments about the expected results of the entire year's operations.
C) Each interim period is considered as a basic accounting period to be evaluated as if it were an annual accounting period.
D) One interim period would not bear the entire expense that benefits more than one interim period.
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Chapter 14: Sec Reporting
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Q1) When deficiencies are found in a registration statement that must be corrected before the securities may be offered for sale,which of the following is issued by the SEC?
A) An audit opinion
B) A comment letter
C) A customary review
D) A comfort letter
Q2) Schedule 13D is filed
A) by entities that acquire a beneficial ownership of more than 5 percent of a class of registered equity securities.
B) to broadly report material information that is being provided to securities analysts, selected institutional investors, or others.
C) to disclose material items related to asset-backed securities such as a bond issue.
D) by management to report the existence and effectiveness of the company's internal control over financial reporting.
Q3) Form 8-K
Q4) Accounting and Auditing Enforcement Releases
Q5) Staff Accounting Bulletins
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Q1) Transferable interest of a partner includes all of the following except:
A) the partner's share of the profits and losses of the partnership.
B) the right to receive distributions.
C) the right to receive any liquidating distribution.
D) the authority to transact any of the partnership's business operations.
Q2) The terms of a partnership agreement provide that one of the partners is to receive a salary allowance of $30,000,plus a bonus of 20 percent of income after deduction of the bonus and the salary allowance.If income is $150,000,the bonus should be:
A) $18,000
B) $20,000
C) $24,000
D) $30,000
Q3) Refer to the above information.Tiffany is paid $60,000,and no goodwill is recorded.What is the Ron's capital balance after Tiffany withdraws from the partnership?
A) $74,000
B) $71,000
C) $75,000
D) $86,000
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Chapter 16: Partnerships: Liquidation
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Q1) A partnership may be involved in "Dissociation" or "Dissolution."
Required:
Describe "Dissociation" and "Dissolution."
Q2) Refer to the above information.If the other assets are sold for $140,000 and all partners are personally insolvent,how much should I receive upon liquidation?
A) $0
B) $2,000
C) $6,600
D) $22,000
Q3) On a partner's personal statement of financial condition,assets and liabilities are presented:
I.As current and noncurrent.
II.In order of liquidity and maturity.
A) I
B) II
C) Both I and II
D) Neither I nor II
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Chapter 17: Governmental Entities: Introduction and General Fund Accounting
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Q1) Which of the following statements best describes the reporting process for profit seeking and governmental entities?
A) In profit-seeking enterprises the measurement focus is on the flow of all economic resources of the firm, whereas the focus for governmental funds is on current financial resources
B) In profit-seeking enterprises the measurement focus is on the flow of current financial resources, whereas the focus for government funds is on all economic resources.
C) Both Profit-seeking enterprises and governmental entities have an objective to measure profitability.
D) Both Profit-seeking enterprises and governmental entities use the accrual or cash basis of accounting to record and report transactions.
Q2) Which of the following funds are classified as governmental funds?
A) Internal service and capital projects funds.
B) Internal service and debt service funds.
C) Enterprise and agency funds.
D) The general and special revenue funds.
Q3) Briefly discuss the various types of governmental funds and proprietary funds.
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Chapter 18: Governmental Entities: Special Funds and Government-Wide Financial Statements
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Sample Questions
Q1) What account is debited in a debt service fund when it records matured interest payable?
I.Interest Expense
II.Expenditures
A) I only
B) II only
C) Either I or II
D) Neither I nor II
Q2) Which of the following financial statements would not be prepared for an enterprise fund?
A) A statement of cash flows.
B) A statement of revenues, expenses, and changes in fund net assets.
C) A balance sheet.
D) A statement of revenues, expenditures, and changes in fund balance.
Q3) Revenue and expense on a government-wide statement of activities for a municipality should be measured on a(n)
A) cash basis.
B) modified accrual basis.
C) accrual basis.
D) reconciliation basis.
Page 21
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Chapter 19: Not-For-Profit Entities
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Q1) For the year ended June 30,20X9,a private college received contributions from alumni which were restricted for faculty research stipends to be awarded during the next fiscal year.For the year ended June 30,20X9,these contributions should be disclosed on the statement of activities of the private college as an increase in:
A) the fund balance of the restricted current fund.
B) temporarily restricted net assets.
C) deferred revenues.
D) temporarily restricted fund balance.
Q2) The statement of cash flows for a private not-for-profit performing arts center should report cash flows according to which of the following classifications?
A) Operating activities, investing activities and financing activities
B) Operating activities, non-capital activities and capital activities.
C) Investing activities, capital activities and financing activities.
D) Financing activities, non-capital activities and capital activities.
Q3) "Net asset classifications per FAC 6" describes which term listed above?
Q4) "Classification of contributions restricted by purpose" describes which term listed above?
Q5) "Classification of an endowment contribution" describes which term listed above?
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Chapter 20: Corporations in Financial Difficulty
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Q1) 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
Q2) Based on the preceding information,what estimated amount will be available for general unsecured creditors upon liquidation?
A) $34,000
B) $52,000
C) $56,000
D) $75,000
Q3) Which of the following observations regarding the use of fresh start accounting is true?
A) It is always required under Chapter 11 bankruptcy proceedings.
B) Prior shareholders will have control of the emerging company.
C) It results in a new reporting entity.
D) It is used under Chapter 7 bankruptcy proceedings.
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