Intermediate Accounting II
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Course Introduction
Intermediate Accounting II delves deeper into the principles and applications of financial accounting, building on foundational concepts introduced in earlier coursework. This course emphasizes the recognition, measurement, and disclosure of key elements in corporate financial statements, including liabilities, equity, investments, revenue recognition, pensions, leases, and income taxes. Students will analyze complex accounting issues and apply relevant accounting standards to ensure transparent and accurate financial reporting. Through case studies, problem-solving exercises, and the examination of current regulations, the course prepares students to interpret and construct detailed financial reports in compliance with generally accepted accounting principles (GAAP).
Recommended Textbook
Fundamentals of Advanced Accounting 7th Edition by Joe Ben Hoyle
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Chapter 1: The Equity Method of Accounting for Investments
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Q1) A company has been using the fair-value method to account for its investment.The company now has the ability to significantly influence the investee and the equity method has been deemed appropriate.Which of the following statements is true?
A)A cumulative effect change in accounting principle must occur.
B)A prospective change in accounting principle must occur.
C)A retrospective change in accounting principle must occur.
D)The investor will not receive future dividends from the investee.
E)Future dividends will continue to be recorded as revenue.
Answer: B
Q2) What amount of equity income would Atlarge have recognized in 2018 from its ownership interest in Ticker?
A)$19,792.
B)$27,640.
C)$22,672.
D)$24,400.
E)$21,748.
Answer: C
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Chapter 2: Consolidation of Financial Information
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Q1) Compute the amount of consolidated equipment at date of acquisition.
A)$480.
B)$580.
C)$559.
D)$570.
E)$560.
Answer: B
Q2) What is the difference in consolidated results between a business combination whereby the acquired company is dissolved,and a business combination whereby separate incorporation is maintained?
Answer: There is no difference in consolidated results.
Q3) Compute consolidated inventory immediately following the acquisition.
A)$1,650.
B)$1,810.
C)$1,230.
D)$ 580.
E)$1,830.
Answer: B
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Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Sample Questions
Q1) The 2017 total excess amortization of fair-value allocations is calculated to be
A)$4,000.
B)$6,400.
C)($2,400).
D)($1,000).
E)$3,800.
Answer: D
Q2) What will Harrison record as its Investment in Rhine on January 1,2017?
A)$400,000.
B)$403,142.
C)$406,000.
D)$409,142.
E)$416,500.
Answer: B
Q3) Dutch Co.has loaned $90,000 to its subsidiary,Hans Corp. ,which retains separate incorporation.How would this loan be treated on a consolidated balance sheet?
Answer: The loan represents an intra-entity payable for Hans,and a receivable for Dutch.Each receivable and payable would be eliminated in preparing a consolidated balance sheet.
Page 5
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Sample Questions
Q1) Determine the value assigned to the noncontrolling interest as of the date of the acquisition.
Q2) What is the dollar amount of noncontrolling interest that should appear in a consolidated balance sheet prepared at the date of acquisition?
A)$350,000.
B)$300,000.
C)$400,000.
D)$370,000.
E)$0.
Q3) What amount would Femur Co.report as consolidated net income for 2019?
A)$440,000.
B)$500,000.
C)$1,500,000.
D)$1,940,000.
E)$2,000,000.
Q4) Where should a noncontrolling interest appear on a consolidated balance sheet?
Q5) Prevatt,Inc.owns 80% of Franklin Company.During the current year,a portion of the investment in Franklin is sold.Prior to recording the sale,Prevatt adjusts the carrying value of its investment.What is the purpose of the adjustment?
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Q1) On January 1,2018,Payton Co.sold equipment to its subsidiary,Starker Corp. ,for $115,000.The equipment had cost $125,000,and the balance in accumulated depreciation was $45,000.The equipment had an estimated remaining useful life of eight years and $0 salvage value.Both companies use straight-line depreciation.On their separate 2018 income statements,Payton and Starker reported depreciation expense of $84,000 and $60,000,respectively.The amount of depreciation expense on the consolidated income statement for 2018 would have been:
A)$144,000.
B)$148,375.
C)$109,000.
D)$134,000.
E)$139,625.
Q2) When is the gain on an intra-entity transfer of land recognized in consolidated net income?
Q3) Prepare journal entries for Virginia and Stateside to record the sales/purchases during 2017.
Q4) 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?
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Q1) On January 1,2019,Cocker issued 10,000 additional shares of common stock for $21 per share.Popper did not acquire any of this newly issued stock.How would this transaction affect the additional paid-in capital of the parent company?
A)$0.
B)Decrease it by $23,240.
C)Decrease it by $68,250.
D)Decrease it by $45,060.
E)Decrease it by $64,720.
Q2) How do outstanding subsidiary stock warrants affect the calculation of 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.
Q3) What is the amount of goodwill resulting from this acquisition?
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) What amount will Coyote Corp.report in its 2018 income statement for Sales?
Q2) How does a foreign currency forward contract differ from a foreign currency option?
Q3) Angela,Inc. ,a U.S.company,had a euro receivable from exports to Spain and a British pound payable resulting from imports from England.Angela recorded foreign exchange gain related to both its euro receivable and pound payable.Did the foreign currencies increase or decrease in dollar value from the date of the transaction to the settlement date? \(\begin{array} { cc } \quad\quad&\underline { \text { Euro} } & \underline { \text { Pound } } \\\end{array}\)
A) \(\begin{array} { cc } & \text { Increase } & \text { Increase } \\\end{array}\)
B) \(\begin{array} { cc } & \text { Increase } & \text { Decrease } \\\end{array}\)
C)\(\begin{array} { cc } & \text { Decrease } & \text { Decrease } \\\end{array}\)
D) \(\begin{array} { cc } & \text { Decrease } & \text { Increase } \\\end{array}\)
E) \(\begin{array} { cc } & \text { No change } & \text { Decrease } \\ \end{array}\)
Q4) What is the purpose of a hedge of foreign exchange risk?
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Chapter 8: Translation of Foreign Currency Financial
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Sample Questions
Q1) Compute the cost of goods sold for 2018 in U.S.dollars using the temporal method.
A)$376,650.
B)$387,750.
C)$388,800.
D)$400,950.
E)$409,050.
Q2) Assume the functional currency is the Euro;compute the U.S.balance sheet amount for equipment for 2018.
A)$81,900.
B)$90,900.
C)$83,700.
D)$88,200.
E)$85,500.
Q3) Under the current rate method,how would cost of goods sold be translated?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.
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Chapter 9: Partnerships: Formation and Operation
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Q1) Determine the balance in both capital accounts at the end of 2017.
Q2) Reed,Sharp,and Tucker were partners with capital account balances of $80,000,$100,000,and $70,000,respectively.They agreed to admit Upton to the partnership.Upton purchased 30% of each partner's interest,with payments directly to Reed,Sharp,and Tucker of $32,000,$40,000,and $28,000,respectively.Before the admission of Upton,the profit and loss sharing ratio was 2:3:2.The partners agreed to use the book value method to account for the admission of Upton to the partnership. Required:
Prepare the journal entry to record the admission of Upton to the partnership.
Q3) How is accounting for a partnership different from accounting for a corporation?
Q4) What was Wasser's capital balance at the end of 2017?
A)$150,000.
B)$160,000.
C)$165,000.
D)$213,000.
E)$201,000.
Q5) What is the dissolution of a partnership?
Q6) Determine the amount of net income allocated to each partner for 2018.(Round all calculations to the nearest whole dollar).
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Chapter 10: Partnerships: Termination and Liquidation
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Q1) What events or circumstances might force the termination of a partnership and liquidation of its assets?
Q2) Compute safe cash payments after the noncash assets have been sold and the liquidation expenses have been paid.
Q3) Which of the following could result in the termination and liquidation of a partnership?
1)Partners are incompatible and choose to cease operations.
2)There are excessive losses that are expected to continue.
3)Retirement of a partner.
A)1 only
B)1 and 2 only
C)2 and 3 only
D)3 only
E)1,2,and 3
Q4) Prepare a schedule to calculate the safe payments to be made to the partners at the end of January.
Q5) Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.
Q6) What is the role of the accountant during the liquidation process?
Page 12
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Chapter 11: Accounting for State and Local Governments,
part I
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Q1) Under modified accrual accounting,when should an expenditure be recorded to recognize interest on long-term debt?
A)At the end of each accounting period.
B)When payment is due within one fiscal year.
C)When it reduces current financial resources.
D)When cash is available to pay the interest.
E)When the interest is incurred.
Q2) A city received a grant of $5,000,000 from a private agency.The money was to be used to build a new city library.In which fund should the money be recorded for the governmental fund financial statements?
A)The General Fund.
B)An Expendable Trust Fund.
C)A Capital Projects Fund.
D)An Agency Fund.
E)A Permanent Fund.
Q3) What are the four fiduciary fund types?
Q4) Which organization is responsible for establishing accounting principles for governmental entities? By whom was this organization established?
Q5) Under modified accrual accounting,when are expenditures recorded?
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Chapter 12: Accounting for State and Local Governments, part II
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Q1) Which information must be disclosed regarding tax abatement agreements?
i.The purpose of the tax abatement program.
ii.The dollar amount of abatement and the names of recipients.
iii.The type of tax being abated.
A)i and iii.
B)i only.
C)ii only.
D)iii only.
E)i,ii,and iii.
Q2) Which one of the following is a criterion for identifying a primary government?
A)it has an appointed board of directors.
B)it is fiscally dependent.
C)it is a local government.
D)it has a separately elected governing board.
E)it must prepare financial statements.
Q3) Prepare the journal entry that should be recorded on December 31,2018 for government-wide financial statements. .
Q4) What information is required in the financial section of a state or local government's CAFR?
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