CPA Exam Preparation: Advanced Accounting Section Exam
Bank
Course Introduction
This course focuses on in-depth preparation for the Advanced Accounting section of the CPA Exam, emphasizing complex topics such as business combinations, consolidations, foreign currency transactions, partnership accounting, and segment and interim reporting. Students will engage with real-world scenarios, practice-based questions, and comprehensive problem sets that mirror the structure and rigor of the CPA Exam. The course also covers emerging accounting standards and their implications, equipping students with the knowledge and skills necessary to approach challenging exam content confidently. Valuable test-taking strategies and insights into common exam pitfalls are integrated throughout to maximize exam readiness and success.
Recommended Textbook
Fundamentals of Advanced Accounting 6th Edition by Hoyle
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12 Chapters
1199 Verified Questions
1199 Flashcards
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Chapter 1: The Equity Method of Accounting for Investments
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120 Verified Questions
120 Flashcards
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Sample Questions
Q1) On January 4, 2012, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2012, Bike reported net income of $500,000. For 2013, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years. How much income did Harley report from Bike for 2013?
A)$120,000.
B)$200,000.
C)$300,000.
D)$320,000.
E)$500,000.
Answer: D
Q2) When should an investor not use the equity method for an investment of 21% in another corporation?
Answer: When the investor does not have significant influence with regard to the investee.
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Page 3
Chapter 2: Consolidation of Financial Information
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116 Verified Questions
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Sample Questions
Q1) 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.
Q2) In an acquisition where control is achieved, how would the land accounts of the parent and the land accounts of the subsidiary be combined? \[\begin{array} { | l | l | l | }
\hline & \text { Parent } & \text { Subsidiary } \\
\hline \text { A) } & \text { Book Value } & \text { Book Value } \\
\hline \text { B) } & \text { Book Value } & \text { Fair Value } \\
\hline \text { C) } & \text { Fair Value } & \text { Fair Value } \\
\hline \text { D) } & \text { Fair Value } & \text { Book Value } \\
\hline \text { E) } & \text { Cost } & \text { Cost } \\
\hline
\end{array}\]
A)Option A
B)Option B
C)Option C
D)Option D
E)Option E
Answer: B
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Chapter
3: Consolidations-Subsequent to the Date of Acquisition
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Sample Questions
Q1) Prince Company acquires Duchess, Inc. on January 1, 2011. The consideration transferred exceeds the fair value of Duchess' net assets. On that date, Prince has a building with a book value of $1,200,000 and a fair value of $1,500,000. Duchess has a building with a book value of $400,000 and fair value of $500,000. If push-down accounting is used, what amounts in the Building account appear in Duchess' separate balance sheet and in the consolidated balance sheet immediately after acquisition?
A)$400,000 and $1,600,000.
B)$500,000 and $1,700,000.
C)$400,000 and $1,700,000.
D)$500,000 and $2,000,000.
E)$500,000 and $1,600,000.
Answer: B
Q2) Push-down accounting is concerned with the
A)impact of the purchase on the subsidiary's financial statements.
B)recognition of goodwill by the parent.
C)correct consolidation of the financial statements.
D)impact of the purchase on the separate financial statements of the parent.
E)recognition of dividends received from the subsidiary.
Answer: A
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) Tosco Co. paid $540,000 for 80% of the stock of Martz Co. when the book value of Martz's net assets was $600,000. For all of Martz's assets and liabilities, book value and fair value were approximately equal.
Required:
Using the acquisition method, what amount of goodwill should appear in a consolidated balance sheet prepared immediately after the combination?
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 amount should have been reported for the land in a consolidated balance sheet, assuming the investment was obtained prior to the date the purchase method of accounting for new business combinations was discontinued?
A)$70,000.
B)$75,000.
C)$85,000.
D)$92,500.
E)$100,000.
Q3) Where may a non-controlling interest be presented in a consolidated balance sheet?
Q4) What is preacquisition income?
Page 6
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Chapter 5: Consolidated Financial Statementsintra-Entity
Asset Transactions
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Sample Questions
Q1) Pot Co. holds 90% of the common stock of Skillet Co. During 2013, Pot reported sales of $1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of $420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's sales of merchandise to Skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity sales had the same markup as sales to outsiders. Skillet still had 40% of the intra-entity sales as inventory at the end of 2013. What are consolidated sales and cost of goods sold for 2013?
A)$1,400,000 and $952,000.
B)$1,400,000 and $966,000.
C)$1,540,000 and $1,078,000.
D)$1,400,000 and $1,022,000.
E)$1,540,000 and $1,092,000.
Q2) Why do intra-entity transfers between the component companies of a business combination occur so frequently?
Q3) On April 7, 2013, Pate Corp. sold land to Shannahan Co., its subsidiary. From a consolidated point of view, when will the gain on this transfer actually be earned?
Q4) How is the gain on an intra-entity transfer of a depreciable asset realized?
Q5) When is the gain on an intra-entity transfer of land realized?
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Sample Questions
Q1) Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia Company. On January 2, 2011, Georgia sold 7 percent bonds payable with a $5,000,000 face value maturing January 2, 2031 at a premium of $500,000. On January 1, 2013, Franklin acquired 20 percent of these same bonds on the open market at 97.66. Both companies use the straight-line method of amortization. What adjustment should be made to Franklin's 2014 beginning Retained Earnings as a result of this bond acquisition?
A)$107,100.
B)$113,400.
C)$119,700.
D)$144,000.
E)$152,000.
Q2) Parent Corporation acquired some of its subsidiary's bonds on the open bond market. The remaining life of the bonds was eight years, and Parent expected to hold the bonds for the full eight years. How would the acquisition of the bonds affect the consolidation process?
Q3) When a company has preferred stock in its capital structure, what amount should be used to calculate non-controlling interest in the preferred stock of the subsidiary when the company is acquired as a subsidiary of another company?
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Sample Questions
Q1) All of the following hedges are used for future purchase/sale transactions except
A)Forward contracts used as a fair value hedge of a firm commitment.
B)Options used as a fair value hedge of a firm commitment.
C)Option contract cash flow hedge of a forecasted transaction.
D)Forward contract cash flow hedges of a forecasted transaction.
E)Forward contracts used to hedge a foreign currency denominated liability.
Q2) Belsen purchased inventory on December 1, 2012. Payment of 200,000 stickles was to be made in sixty days. Also on December 1, Belsen signed a contract to purchase §200,000 in sixty days. The spot rate was §1 = .35714, and the 60-day forward rate was §1 = $.38462. On December 31, the spot rate was §1 = .34483 and the 30-day forward rate was §1 = .38168. Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is .9901. In the journal entry to record the establishment of a forward exchange contract, at what amount should the Forward Contract account be recorded on December 1?
A)$71,428.
B)$76,924.
C)$588.
D)$582.
E)$0, since there is no cost, there is no value for the contract at this date.
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Chapter 8: Translation of Foreign Currency Financial Statements
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Sample Questions
Q1) Kennedy Company acquired all of the outstanding common stock of Hastie Company of Canada for U.S. $350,000 on January 1, 2013, when the exchange rate for the Canadian dollar (CAD) was U.S. $.70. The fair value of the net assets of Hastie was equal to their book value of CAD 450,000 on the date of acquisition. Any acquisition consideration excess over fair value was attributed to an unrecorded patent with a remaining life of five years. The functional currency of Hastie is the Canadian dollar. For the year ended December 31, 2013, Hastie's trial balance net income was translated at U.S. $25,000. The average exchange rate for the Canadian dollar during 2013 was U.S. $.68, and the 2013 year-end exchange rate was U.S. $.65.
Amortization of the patent, translated, for 2013 would be
A)$7,000.
B)$10,000.
C)$6,800.
D)$9,000.
E)$6,500.
Q2) A foreign subsidiary of a U.S. corporation purchased equipment on January 4, 2010.
(A.) How would depreciation expense on the equipment be translated for 2013?
(B.) How would depreciation expense on the equipment be remeasured for 2013?
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Chapter 9: Partnerships: Formation and Operation
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Sample Questions
Q1) Max, Jones and Waters shared profits and losses 20%, 40%, and 40% respectively and their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be $200,000. Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest after revaluation. At what amount should land be recorded on the partnership books?
A)$20,000.
B)$30,000.
C)$45,000.
D)$50,000.
E)$200,000.
Q2) Brown and Green are forming a business as partners. If they do not create a formal written partnership agreement, what risks are they exposing themselves to?
Q3) Under what circumstances does a partner's balance in his or her capital account have practical consequences for the partner?
Q4) 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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Page 11
Chapter 10: Partnerships: Termination and Liquidation
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Sample Questions
Q1) A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. \[\begin{array} { l r }
\text { Ding, capital } & \$ 60,000 \\
\text { Laurel, capital } & 67,000 \\
\text { Ezzard, capital } & 17,000 \\
\text { Tillman, capital } & 96,000
\end{array}\] Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000, what is the minimum amount that Ezzard's creditors would have received?
A)$36,000.
B)$0.
C)$2,500.
D)$38,250.
E)$67,250.
Q2) What is the role of the accountant during the liquidation process?
Q3) What is the purpose of a predistribution plan?
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12
Chapter 11: Accounting for State and Local Governments,
Part I
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Sample Questions
Q1) What are the five types of governmental funds?
Q2) What are the two groups of financial statements mandated by GASB Statement No. 34?
For each group, what are the names of the individual statements that must be produced?
Q3) On August 21, 2013, Fred City transferred $100,000 to the School System to cover repairs to a school building.
Required:
Prepare all the required journal entries and identify the fund in which each entry was recorded for the Fund Financial Statements.
Q4) 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.
Q5) In governmental accounting, what term is used for a decrease in financial resources?
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Chapter 12: Accounting for State and Local Governments,
Part II
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Sample Questions
Q1) For the purpose of government-wide financial statements, the cost of cleaning up a government-owned landfill and closing the landfill
A)Is not recognized until the costs are actually incurred.
B)Is accrued and amortized over the expected useful life of the landfill.
C)Is accrued on a pro-rated basis each period based on how full the landfill is.
D)Is accrued in full at the time the costs become estimable.
E)Is treated as an encumbrance at the time it become estimable, and then as an expenditure when it is actually paid.
Q2) The City of Nextville operates a motor pool serving all city-owned vehicles. The motor pool bought a new garage by paying $29,000 in cash and signing a note with the local bank for $280,000. Subsequently, the motor pool performed work for the police department at a cost of $17,000, which had not yet been collected. Depreciation on the garage amounted to $20,000. The first $12,000 payment made on the note included $4,800 in interest.
Required:
Prepare the journal entries for these transactions that are necessary to prepare government-wide financial statements.
Q3) What is meant by the term legally independent?
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