Financial Reporting and Analysis
Question Bank
Course Introduction
Financial Reporting and Analysis focuses on the principles and practices involved in preparing, presenting, and interpreting financial statements for external stakeholders. The course covers accounting standards, measurement of assets and liabilities, revenue recognition, and the disclosure requirements for publicly listed companies. Students learn techniques for analyzing financial statements to assess a companys performance, profitability, liquidity, and solvency. Emphasis is placed on the use of financial information in decision making by investors, creditors, and management, as well as the ethical considerations and regulatory framework governing financial reporting.
Recommended Textbook
Advanced Financial Accounting 8th Edition by Richard Baker
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20 Chapters
1041 Verified Questions
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Page 2
Chapter 1: Intercorporate Acquisitions and Investments in Other Entities
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Sample Questions
Q1) The fair value of net identifiable assets of a reporting unit of Y Company is $270,000.The carrying value of the reporting unit's net assets on Y Company's books is $320,000,including $50,000 goodwill.If the reported goodwill impairment for the unit is $10,000,what would be the fair value of the reporting unit?
A)$320,000
B)$310,000
C)$270,000
D)$290,000
Answer: B
Q2) 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
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3
Chapter 2: Reporting Intercorporate Interests
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Sample Questions
Q1) Based on the preceding information,what amount would William Company receive as dividends from eGate for the year?
A)$62,000
B)$21,600
C)$18,600
D)$54,000
Answer: C
Q2) Based on the preceding information,income tax expense for Denver for the year 2008 will be:
A)$67,000
B)$64,600
C)$64,000
D)$66,400
Answer: D
Q3) Based on the preceding information,during 2007,Firewire will report:
A)an increase in the investment account balance of $15,500.
B)a decrease in the investment account balance of $20,000.
C)an increase in the investment account balance of $36,000.
D)a decrease in the investment account balance of $31,500.
Answer: A
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Chapter 3: The Reporting Entity and Consolidated Financial Statements
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Sample Questions
Q1) Based on the preceding information,what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the parent company approach?
A)$350,000
B)$340,000
C)$280,000
D)$300,000
Answer: B
Q2) Based on the preceding information,what amount of total assets did Beta report in its balance sheet immediately after the acquisition?
A)$500,000
B)$650,000
C)$750,000
D)$900,000
Answer: B
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Chapter 4: Consolidation of Wholly Owned Subsidiaries
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Sample Questions
Q1) Based on the preceding information,what amount will be reported for total accounts payable in the consolidated balance sheet for the year 2008?
A)$56,000
B)$46,000
C)$60,000
D)$42,000
Q2) Based on the information provided,what amount will be included as investment in Venus Corporation in the consolidated balance sheet immediately following the acquisition?
A)$0
B)$395,000
C)$255,000
D)$300,000
Q3) What portion of the balances of subsidiary stockholders' equity accounts are eliminated in preparing the consolidated balance sheet?
A)Common stock
B)Additional paid-in capital
C)Retained Earnings
D)All of the balances are eliminated
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Page 6
Chapter 5: Consolidation of Less-Than-Wholly Owned Subsidiaries
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Sample Questions
Q1) Based on the preceding information,what is the amount of comprehensive income attributable to the controlling interest for 2008?
A)$123,750
B)$118,750
C)$119,000
D)$104,000
Q2) Based on the preceding information,what is the amount of write-off of differential associated with this acquisition recorded by Melkor during 2009?
A)$0
B)$32,500
C)$26,000
D)$20,000
Q3) Based on the preceding information,what amount of consolidated retained earnings will be reported?
A)$205,000
B)$120,000
C)$325,000
D)$310,000
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Chapter 6: Intercompany Transfers of Services and
Noncurrent Assets
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Sample Questions
Q1) A parent sold land to its partially owned subsidiary during the year at a loss.The subsidiary continues to hold the land at the end of the year.The amount to be reported as consolidated net income for the year should equal:
A)the parent's separate operating income,plus the intercompany loss.
B)the parent's separate operating income,plus the intercompany loss,plus the subsidiary's net income.
C)the parent's separate operating income,minus the intercompany loss.
D)the parent's separate operating income,minus the intercompany loss,plus the subsidiary's net income.
Q2) Based on the preceding information,in the preparation of the 2008 consolidated financial statements,equipment will be:
A)debited for $50,000.
B)debited for $40,000.
C)credited for $70,000.
D)debited for $25,000.
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Chapter 7: Intercompany Inventory Transactions
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Sample Questions
Q1) Based on the information given above,what will be the consolidated net income for 2006?
A)$357,500
B)$375,000
C)$490,000
D)$317,750
Q2) Based on the information given above,what will be the income to controlling interest for 2008?
A)$615,375
B)$686,250
C)$690,000
D)$694,000
Q3) Based on the information given above,what balance will be reported for inventory in the consolidated balance sheet for December 31,2008?
A)$56,573
B)$23,846
C)$32,727
D)$67,000
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9
Chapter 8: Intercompany Indebtedness
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Sample Questions
Q1) Based on the information given above,what amount of interest income will be eliminated in the preparation of the 2009 consolidated financial statements?
A)$17,000
B)$13,300
C)$18,500
D)$22,200
Q2) Based on the information given above,what was the effect of DEF's purchase of XYZ's bond on the amount of retained earnings reported in XYZ's June 30,2008,consolidated balance sheet?
A)No effect
B)$85,000 increase
C)$85,000 decrease
D)$35,000 decrease
Q3) Based on the information given above,in the preparation of the 2008 consolidated financial statements,interest income will be:
A)debited for $11,500 in the eliminating entries.
B)credited for $11,500 in the eliminating entries.
C)debited for $16,000 in the eliminating entries.
D)credited for $16,000 in the eliminating entries.
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Page 10
Chapter 9: Consolidation Ownership Issues
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Sample Questions
Q1) Based on the preceding information,what is the increase in the book value of the equity attributable to the parent as a result of the repurchase of shares by Movie Corporation?
A)$19,375
B)$6,125
C)$2,625
D)$9,000
Q2) Based on the information provided,what amount of income will be assigned to the noncontrolling interest in the consolidated income statement for 2009?
A)$55,000
B)$25,000
C)$30,000
D)$43,750
Q3) Based on the information provided,what amount will be reported as income assigned to the controlling interest for 2009 under the treasury stock method?
A)$18,750
B)$156,250
C)$175,000
D)$100,000
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Chapter 10: Additional Consolidation Reporting Issues
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Sample Questions
Q1) Assume the Company A holds the land at the end of 2009.The eliminating entry relating to the intercorporate sale of land to be entered in the consolidation workpaper prepared at the end of 2009 will include a debit to Retained Earnings for:
A)$4,500.
B)$7,500.
C)$15,000.
D)$10,500.
Q2) Assume that New Life uses the direct method of computing cash flows from operating activities.Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 2009?
A)$350,000
B)$348,000
C)$312,000
D)$352,000
Q3) Using the data presented in question 38:
1)Prepare a workpaper to develop a consolidated statement of cash flows for 2008 using the direct method of computing cash flows from operations. 2)Prepare a consolidated statement of cash flows for 2008.
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Chapter 11: Multinational Accounting: Foreign Currency
Transactions and Financial Instruments
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Sample Questions
Q1) Based on the preceding information,what is the effect of the British pound speculative contract on 2008 net income?
A)$10,000 gain
B)$6,000 gain
C)$8,000 gain
D)$2,000 loss
Q2) Based on the preceding information,the entries on December 31,2008,include a:
A)Credit to Foreign Currency Payable to Exchange Broker,$4,000.
B)Debit to Foreign Currency Receivable from Exchange Broker,$6,000.
C)Debit to Foreign Currency Receivable from Exchange Broker,$186,000.
D)Debit to Foreign Currency Transaction Gain,$4,000.
Q3) Based on the preceding information,what is the overall effect of speculation on 2009 net income?
A)$1,000 loss
B)$6,000 gain
C)$3,000 loss
D)$8,000 gain
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Page 13
Chapter 12: Multinational Accounting: Issues in Financial
Reporting and Translation of Foreign Entity Statements
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Sample Questions
Q1) Which combination of accounts and exchange rates is correct for the remeasurement of a foreign entity's financial statements from its local currency to U.S.dollars?
A)Option A
B)Option B
C)Option C
D)Option D
Q2) The British subsidiary of a U.S.company reported cost of goods sold of 75,000 pounds (sterling)for the current year ended December 31.The beginning inventory was 10,000 pounds,and the ending inventory was 15,000 pounds.Spot rates for various dates are as follows: Assuming the pound is the functional currency of the British subsidiary,the translated amount of cost of goods sold that should appear in the consolidated income statement is:
A)$108,750.
B)$112,500.
C)$114,300.
D)$125,700.
Q3) Use the information given in question 52 to prepare a schedule providing a proof of the translation adjustment.
Page 14
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Chapter 13: Segment and Interim Reporting
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Sample Questions
Q1) In 2006 and 2007,each of Putney Company's four operating segments met one of the three quantitative tests for segment reporting.In 2008,Segment B failed to qualify under the prescribed tests because of abnormal financial conditions.The other three segments qualified for reporting.For 2008,Segment B:
A)should be excluded from segment disclosure but referred to in the management letter to shareholders.
B)should be distinctly separated from the other three segments and listed as a "nonqualifying" segment.
C)should be combined with one of the other three segments and reported.
D)should be included in the segment disclosures at the discretion of management.
Q2) Denver Company,a calendar-year corporation,had the following actual income before income tax expense and estimated effective annual income tax rates for the first three quarters in 2008: Denver's income tax expense in its interim income statement for the third quarter should be:
A)$126,000.
B)$68,400.
C)$62,400.
D)$54,000.
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Chapter 14: Sec Reporting
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Sample Questions
Q1) "Tombstone ad"
Q2) Which of the following types of securities or securities transactions are exempt from the need to be registered under the Securities Act of 1933? I.Commercial paper with a maturity of nine months or less.
II)Intrastate issues in which the securities are offered and sold only within one state.
III)Securities exchanged by an issuer exclusively with its existing shareholders with no commission charged.
A)I and II
B)II
C)I,II,and III
D)III
Q3) Regulation D of the SEC presents important exemptions from full registration requirements for:
A)private placements.
B)issuances of securities by savings and loan associations.
C)issuances of securities by common carriers regulated by the Interstate Commerce Commission.
D)foreign companies.
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Chapter 15: Partnerships: Formation,operation,and
Changes in Membership
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Sample Questions
Q1) When a new partner is admitted into a partnership and the capital of the old partners decreases,which of the following explains the reason for the decrease?
I.Undervalued liabilities were written up to their fair values.
II)Undervalued assets were written up to their fair values.
A)I only
B)II only
C)Both I and II
D)Neither I nor II
Q2) Refer to the above information.Which statement below is correct if a new partner's goodwill is recognized upon contributing assets into the partnership?
A)B = A and D > C + A
B)B < A and D < C + A
C)B > A and D = C + A
D)B > A and D > C + A
Q3) Apple and Betty are planning on beginning a new business.They plan on forming a partnership.Apple will contribute $300,000 and will not be working.Betty will be working full time.They plan on splitting profits equally.They approach you,as an accounting major,to confirm their thoughts.What do you recommend?
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Chapter 16: Partnerships: Liquidation
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Sample Questions
Q1) Based on the preceding information,what amount will be paid out to Bill upon liquidation of the partnership?
A)$0
B)$25,000
C)$11,667
D)$2,500
Q2) Based on the preceding information,the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Wilfred,Capital for:
A)$140,000.
B)$91,700.
C)$86,700.
D)$126,700.
Q3) 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
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18
Chapter 17: Governmental Entities: Introduction and General
Fund Accounting
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Sample Questions
Q1) In a town's general fund operating budget for the year,the amount of its estimated revenues exceeded the amount of its appropriations.This excess should be:
A)credited to Budgetary Fund Balance-Unreserved.
B)debited to Budgetary Fund Balance-Unreserved.
C)credited to Fund Balance-Unreserved.
D)debited to Fund Balance-Unreserved.
Q2) Based on the preceding information,which of the following would be the correct account balances for 2008 if Gotham City used the consumption method of accounting for inventories?
A)Option A
B)Option B
C)Option C
D)Option D
Q3) Which of the following funds should use the modified accrual basis of accounting?
A)Private-purpose trust and agency funds.
B)Capital projects and special revenue funds.
C)Internal service and enterprise funds.
D)Debt service and private-purpose trust 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) Agency funds report:
A)only assets and liabilities.
B)assets,liabilities,fund balance,revenues,and expenditures.
C)assets,liabilities,and fund balance.
D)only revenues and expenditures.
Q3) On the statement of revenues,expenditures,and changes in fund balance for a capital projects fund,proceeds of general obligation bonds should be reported:
A)in the revenue section of the statement.
B)as a direct addition to the beginning balance of unreserved fund balance.
C)in the other financing sources (uses)section of the statement.
D)as a subtraction from construction expenditures.
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Chapter 19: Not-For-Profit Entities
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Sample Questions
Q1) Transaction: Depreciation expense was recorded for the year. Effect on Statement of Operations:
A)Increases operating income.
B)Decreases operating income.
C)The transaction is reported on the statement of operations,but there is no effect on operating income.
D)The transaction is not reported on the statement of operations.
Q2) Based on the information provided,in Golden Path's statement of activities for the year ended December 31,2008,what amount should be reported under the classification of revenue from unrestricted funds?
A)$980,000
B)$1,100,000
C)$1,210,000
D)$1,020,000
Q3) The CFO of a "Not-for-Profit" hospital is making a presentation at your college.The presentation is for Business and Health-Science majors.During the presentation the CFO mentions assets being reported "above the line." On the way out your roommate a health-science major asks,you an accounting major,to explain what the CFO was referring to.What do you respond?
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Page 21
Chapter 20: Corporations in Financial Difficulty
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Q1) "Preference payments" made by the debtor to one creditor to the detriment of all other creditors within 90 days before the bankruptcy petition was filed:
A)is reduced from the monies available to the general unsecured creditors.
B)is usually written off.
C)may be recovered and returned to the cash available for all creditors.
D)are not recovered,as management assurances are binding.
Q2) Under the Bankruptcy Code,an insolvent corporation may be: I.Reorganized. II)Liquidated.
A)I
B)II
C)Either I or II
D)Neither I nor II
Q3) All of the following items are reported in a statement of realization and liquidation except:
A)Cash
B)Prepaid assets
C)Depreciable assets (net)
D)Receiver's expenses
Q4) Briefly explain the three classes of creditors specified in the Bankruptcy Code.
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