International Accounting Test Questions
Course Introduction
International Accounting explores the principles and practices of accounting in a global context, examining how cultural, legal, economic, and political factors influence accounting standards and financial reporting across different countries. The course covers key topics such as International Financial Reporting Standards (IFRS), the convergence and divergence of accounting systems, foreign currency transactions, international taxation, and issues related to multinational corporations. Students gain an understanding of the challenges and opportunities in international accounting environments and develop skills to analyze and interpret financial information from a global perspective.
Recommended Textbook Fundamentals of Advanced Accounting 6th Edition by Hoyle
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Q1) Wathan Inc. sold $180,000 in inventory to Miller Co. during 2012, for $270,000. Miller resold $108,000 of this merchandise in 2012 with the remainder to be disposed of during 2013.
Required:
Assuming Wathan owns 25% of Miller and applies the equity method, prepare the journal entry Wathan should have recorded at the end of 2012 to defer the unrealized intra-entity inventory profit.
Answer: 11ea6ea4_764b_9c8c_8f54_af0d03996d98_TB2413_00
Q2) An upstream sale of inventory is a sale:
A)between subsidiaries owned by a common parent.
B)with the transfer of goods scheduled by contract to occur on a specified future date.
C)in which the goods are physically transported by boat from a subsidiary to its parent.
D)made by the investor to the investee.
E)made by the investee to the investor.
Answer: E
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Chapter 2: Consolidation of Financial Information
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Q1) Bale Co. acquired Silo Inc. on December 31, 2013, in an acquisition business combination transaction. Bale's net income for the year was $1,400,000, while Silo had net income of $400,000 earned evenly during the year. Bale paid $100,000 in direct combination costs, $50,000 in indirect costs, and $30,000 in stock issue costs to effect the combination.
Required:
What is consolidated net income for 2013?
Answer: \(\begin{array}{lr}
\text { Bale's net income for } 2013 & \$ 1,400,000 \\ \text { Less: direct combination costs } & 100,000 \\ \text { Less: indirect combination costs } & 50,000 \\ \text { Consolidated net income for } 2013 & \$ 1,250,000 \end{array}\) Note: Silo's net income does not affect consolidated net income until after the date of acquisition. The combination costs belong to Bale only.
Q2) How are stock issuance costs accounted for in an acquisition business combination?
Answer: Stock issuance costs reduce the balance in the acquirer's Additional Paid-In Capital in an acquisition business combination.
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Chapter
3: Consolidations-Subsequent to the Date of Acquisition
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Q1) Red Co. acquired 100% of Green, Inc. on January 1, 2012. On that date, Green had inventory with a book value of $42,000 and a fair value of $52,000. This inventory had not yet been sold at December 31, 2012. Also, on the date of acquisition, Green had a building with a book value of $200,000 and a fair value of $390,000. Green had equipment with a book value of $350,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2012 related to the acquisition allocations of Green?
A)$43,000.
B)$33,000.
C)$5,000.
D)$15,000.
E) 0
Answer: D
Q2) From which methods can a parent choose for its internal recordkeeping related to the operations of a subsidiary?
Answer: The parent can choose from among the initial value method, equity method, and partial equity method.
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) McGuire Company acquired 90 percent of Hogan Company on January 1, 2014, for $234,000 cash. This amount is reflective of Hogan's total fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following: \[\begin{array} { l c c } & \text { Book Value } & \text { Fair Value } \\
\text { Buildings (10-year life) } & \$ 10,000 & \$ 8,000 \\
\text { Equipment (4-year life) } & 14,000 & 18,000 \\
\text { Land } & 5,000 & 12,000
\end{array}\] Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years. In consolidation at December 31, 2015, what adjustment is necessary for Hogan's Buildings account?
A)$1,440 increase.
B)$1,440 decrease.
C)$1,600 increase.
D)$1,600 decrease.
E)No adjustment is necessary.
Q2) Where should a non-controlling interest appear on a consolidated balance sheet?
Q3) What is preacquisition income?
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Chapter 5: Consolidated Financial Statementsintra-Entity
Asset Transactions
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Q1) Which of the following statements is true concerning an intra-entity transfer of a depreciable asset?
A)Non-controlling interest in subsidiary's net income is never affected by a gain on the transfer.
B)Non-controlling interest in subsidiary's net income is always affected by a gain on the transfer.
C)Non-controlling interest in subsidiary's net income is affected by a downstream gain only.
D)Non-controlling interest in subsidiary's net income is affected only when the transfer is upstream.
E)Non-controlling interest in subsidiary's net income is increased by an upstream gain in the year of transfer.
Q2) What is meant by unrealized inventory gains, and how are they treated on a consolidation worksheet?
Q3) Fraker, Inc. owns 90 percent of Richards, Inc. and bought $200,000 of Richards' inventory in 2013. The transfer price was equal to 30 percent of the sales price. When preparing consolidated financial statements, what amount of these sales is eliminated?
Q4) How is the gain on an intra-entity transfer of a depreciable asset realized?
Page 7
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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, 2013, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances: \(\begin{array}{lr}
\text { Common stock ( } \$ 5 \text { par value) } & \$ 250,000 \\
\text { Additional paid-in capital } & 110,000 \\
\text { Retained earnings } & 330,000 \\
\text { Total stockholders' equity } & \$ 690,000 \\ \end{array}\) The balance in Riney's Investment in Garvin Co. account was $552,000, and the non-controlling interest was $138,000. On January 1, 2013, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share. Riney did not acquire any of these shares. What is the balance in Investment in Garvin Co. after the sale of the 10,000 shares of common stock?
A)$552,000.
B)$560,000.
C)$460,000.
D)$404,000.
E)$672,000.
Q2) How are intra-entity inventory transfers treated on the consolidation worksheet and how are they reflected in a consolidated statement of cash flows?
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Chapter 7: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What are the effects on net income from these transactions?
A)$16,000 Discount Expense plus a $12,000 positive Adjustment to Net Income when the merchandise is delivered.
B)$16,000 Discount Expense plus a $12,000 negative Adjustment to Net Income when the merchandise is delivered.
C)$16,000 Discount Expense plus a $20,000 negative Adjustment to Net Income when the merchandise is delivered.
D)$16,000 Discount Expense plus a $20,000 positive Adjustment to Net Income when the merchandise is delivered.
E)$16,000 Discount Expense plus an $16,000 positive Adjustment to Net Income when the merchandise is delivered.
Q2) What is meant by the spot rate?
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Chapter 8: Translation of Foreign Currency Financial Statements
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Q1) Westmore Ltd., is a British subsidiary of a U.S. company. Westmore's functional currency is the pound sterling (£). The following exchange rates were in effect during 2013: \(\begin{array}{ll}
\text { Jan. } 1 & £ 1=\$ 1.60 \\
\text { June } 30 & £ 1=\$ 1.64 \\
\text { Dec. 31 } & £ 1=\$ 1.61 \\
\text { Weighted average rate for the year } & £ 1=\$ 1.59 \end{array}\) On December 31, 2013, Westmore had accounts receivable of £280,000. What amount (rounded) would have been included for this subsidiary in calculating consolidated accounts receivable?
A)$173,913.
B)$176,100.
C)$445,200.
D)$448,000.
E)$450,800.
Q2) Under what circumstances would the remeasurement of a foreign subsidiary's financial statements be required?
Q3) Contrast the purpose of remeasurement with the purpose of translation.
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Chapter 9: Partnerships: Formation and Operation
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Q1) Which of the following statements is correct regarding the admission of a new partner?
A)A new partner must purchase a partnership interest directly from the business.
B)The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners.
C)The right to participate in management of the business cannot be conveyed without the consent of other existing partners.
D)The right to share in profits and losses can be sold to a new partner without the consent of other existing partners.
E)A new partner always pays book value.
Q2) By what methods can a person gain admittance to a partnership?
Q3) Withdrawals from the partnership capital accounts are typically not used
A)to reward partners for work performed in the business.
B)to reduce the partners' capital account balances at the end of an accounting period.
C)to record interest earned on a partner's capital balance.
D)to reduce the basic investment that has been made in the business.
E)to record the partnership's payment of a partner's personal expense such as income tax.
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Chapter 10: Partnerships: Termination and Liquidation
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Q1) Which of the following statements is true concerning the distribution of safe payments?
A)The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership.
B)Safe payments are equal to the recorded capital balances of partners with positive capital balances.
C)The distribution of safe payments may only be made after all liabilities have been paid.
D)In computing safe payments, partners with positive capital balances are assumed to absorb an equal share of any deficit balance(s).
E)There are no safe payments until the liquidation is complete.
Q2) At the start of a liquidation, this document provides guidance for all payments made to the partners throughout the liquidation.
A)Safe capital balances
B)Deficit capital balances
C)Predistribution plan
D)The schedule of liquidation
Q3) For a partnership, how should liquidation gains and losses be accounted for?
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Chapter 11: Accounting for State and Local Governments,
Part I
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Q1) What is the purpose of fund financial statements?
Q2) Governmental 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.
Q3) Which classifications may be not used for the Fund Balance of governmental funds?
A)Spendable
B)Non-Spendable
C)Assigned
D)Unassigned
E)Restricted
Q4) What are the five types of governmental funds?
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Chapter 12: Accounting for State and Local Governments,
Part II
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Q1) What information is required in the introductory section of a state or local government's CAFR?
Q2) Drye Township has received a donation of a rare painting worth $1,000,000. For Drye's government-wide financial statements, three criteria must be met before Drye can opt not to recognize the painting as an asset. Which of the following is not one of the three criteria?
(1) The painting is held for public exhibition, education, or research in furtherance of public service, rather than financial gain.
(2) The painting is scheduled to be sold immediately at auction.
(3) The painting is protected, kept unencumbered, cared for, and preserved.
A)Item 1 is not one of the three criteria.
B)Item 2 is not one of the three criteria.
C)Item 3 is not one of the three criteria.
D)All three items are required criteria.
E)None of the three items are required criteria.
Q3) What is meant by the term legally independent?
Q4) What three criteria must be met to identify a governmental unit as a primary government?
Q5) What are the three broad sections of a state or local government's CAFR?
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