Special Topics in Accounting Solved Exam
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Course Introduction
Special Topics in Accounting explores advanced and emerging issues within the field of accounting, focusing on current trends, regulatory developments, and specialized areas such as forensic accounting, international accounting standards, environmental and social accounting, and accounting for mergers and acquisitions. This course is designed to provide students with analytical tools and critical perspectives necessary to understand complex accounting practices and adapt to the evolving financial reporting environment. Emphasis is placed on case studies, practical applications, and discussion of real-world issues to enhance students' problem-solving skills and prepare them for professional challenges in the accounting sector.
Recommended Textbook
Advanced Accounting 9th Edition by Joe Ben Hoyle
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Chapter 1: The Equity Method of Accounting for Investments
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Q1) When applying the equity method,how is the excess of cost over book value accounted for?
A)The excess is allocated to the difference between fair value and book value multiplied by the percent ownership of current assets.
B)The excess is allocated to the difference between fair value and book value multiplied by the percent ownership of total assets.
C)The excess is allocated to the difference between fair value and book value multiplied by the percent ownership of net assets.
D)The excess is allocated to goodwill.
E)The excess is ignored.
Answer: C
Q2) How much goodwill is associated with this investment?
A)$(500,000).
B)$0.
C)$650,000.
D)$1,000,000.
E)$2,000,000.
Answer: C
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Chapter 2: Consolidation of Financial Information
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Q1) How would you account for in-process research and development acquired in a business combination accounted for as an acquisition?
Answer: In-Process Research and Development is capitalized as an asset of the combination and reported as intangible assets with indefinite lives subject to impairment reviews.
Q2) What amount will be reported for consolidated additional paid-in capital?
A)$165.
B)$150.
C)$160.
D)$175.
E)$145.
Answer: B
Q3) What term is used to refer to a business combination in which only one of the original companies continues to exist?
Answer: The appropriate term is statutory merger.
Q4) 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.
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Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Q1) Determine the amortization expense related to the combination at the year-end date of 12/31/09.
Answer: 11ea88ab_df39_4974_bb89_770415547c4c_TB4174_00
Q2) What is the balance in Cale's investment in subsidiary account at the end of 2009?
A)$1,099,000.
B)$1,020,000.
C)$1,096,200.
D)$1,098,000.
E)$1,144,400.
Answer: A
Q3) If Goehler applies the partial equity method in accounting for Kenneth,what is the consolidated balance for the Equipment account as of December 31,2010?
A)$1,080,000.
B)$1,104,000.
C)$1,100,000.
D)$1,468,000.
E)$1,475,000.
Answer: B
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) All of the following statements regarding the sale of subsidiary shares are true except which of the following?
A)The use of specific identification based on serial number is acceptable
B)The use of the FIFO assumption is acceptable
C)The use of the averaging assumption is acceptable
D)The use of specific LIFO assumption is acceptable
E)The parent company must determine whether consolidation is still appropriate for the remaining shares owned
Q2) In consolidation at December 31,2010,what adjustment is necessary for Hogan's Equipment account?
A)$2,000 increase
B)$2,000 decrease
C)$1,800 increase
D)$1,800 decrease
E)No change
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Chapter 5: Consolidated Financial StatementsIntercompany Asset Transactions
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Q1) What is the consolidated total for inventory at December 31,2009?
A)$336,000.
B)$280,000.
C)$364,000.
D)$347,200.
E)$349,300.
Q2) On January 1,2009,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 2009 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 2009 would have been
A)$144,000.
B)$148,375.
C)$109,000.
D)$134,000.
E)$139,625.
Q3) How is the gain on an intercompany transfer of a depreciable asset realized?
Q4) How is the gain on an intercompany transfer of land realized?
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Chapter 6:
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Q1) When Ryan's new percent ownership is rounded to a whole number,what adjustment is needed for Ryan's investment in Chase account?
A)$16,000 decrease.
B)$60,000 decrease.
C)$64,000 increase.
D)$64,000 decrease.
E)No adjustment is necessary.
Q2) Net cash flow from financing activities was:
A)$(61,000).
B)$(96,000).
C)$(100,000).
D)$(80,000).
E)$(99,000).
Q3) What adjustment is needed for Webb's investment in Jones account?
A)$180,000 increase.
B)$180,000 decrease.
C)$30,000 increase.
D)$30,000 decrease.
E)No adjustment is necessary.
Q4) Describe how this transaction would affect Panton's books.
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Q1) Prescott Corp.owned 90% of Bell Inc. ,while Bell owned 10% of the outstanding common shares of Prescott.No goodwill or other allocations were recognized in connection with either of these acquisitions.Prescott reported operating income of $266,000 for 2009 whereas Bell earned $98,000 during the same period.No investment income was included within either of these income totals.How would the 10% investment in Prescott owned by Bell be presented on the consolidated balance sheet?
A)The 10% investment would be eliminated and the amount would not be shown on the consolidated balance sheet.
B)The 10% investment would be reclassified on Bell's balance sheet as Treasury Stock before the consolidation process begins.
C)The 10% investment would appear as treasury stock on the consolidated balance sheet.
D)The 10% investment would be included as part of Additional Paid-In Capital because it is less than 20% and therefore indicates no significant influence is present.
E)Prescott would treat the shares owned by Bell as if they had been repurchased on the open market,and a treasury stock account would be set up recording the shares at their market value on the date of combination.
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Chapter 8: Segment and Interim Reporting
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Q1) Which of the following is reported for interim financial reports using the integral approach?
A)Bonus expense.
B)Extraordinary losses.
C)Cash basis accounting.
D)Extraordinary gains.
E)Change in accounting principle.
Q2) Assuming Baker makes the change in the first quarter of 2008,how much is reported as net income for the first quarter of 2008?
A)$492,000.
B)$494,800.
C)$500,000.
D)$505,200.
E)$527,950.
Q3) Which operating segments are reportable under the profit or loss test?
A)Rakes,Pails,and Shovels.
B)Rakes,Pails,Shovels,and Hardware.
C)Rakes,Pails,and Hardware.
D)Rakes,Pails,Shovels,Hardware,and Accessories.
E)Rakes and Accessories.
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Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) Assuming a forward contract was entered into,what would be the net impact on Car Corp.'s 2008 income statement related to this transaction? Assume an annual interest rate of 12% and a fair value hedge.The present value for one month at 12% is .9901.
A)$ 700 (gain).
B)$ 700 (loss).
C)$ 300 (gain).
D)$ 300 (loss).
E)$ 295.05 (loss).
Q2) How much Foreign Exchange Gain or Loss should Brisco record on May 31?
A)$2,520,000 gain.
B)$20,000 gain.
C)$20,000 loss.
D)$80,000 gain.
E)$80,000 loss.
Q3) What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency appreciates?
Q4) What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency depreciates?
Page 11
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Chapter 10: Translation of Foreign Currency Financial Statements
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Q1) Assume the functional currency is the euro,compute the restated amount for inventory for 2008.
A)$18,600.
B)$19,600.
C)$18,000.
D)$20,200
E)$19,000.
Q2) Under the current rate method,how would cost of goods sold be restated?
A)Beginning of the year rate.
B)Average rate.
C)Current rate.
D)Historical rate.
E)Composite amount.
Q3) What exchange rate should have been used in translating Darron's revenues and expenses for 2009?
A)$1 = §.48.
B)$1 = §.44.
C)$1 = §.46.
D)$1 = §.42.
E)$1 = §.45.
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) Which of the following is not a factor influencing a country's financial reporting practices?
A)Providers of financing.
B)Inflation.
C)Legal system.
D)Gross National Product.
E)Political and economic ties.
Q2) The financial statements of German and Japanese companies
A)usually overstate earnings.
B)usually overstate assets.
C)tend to underestimate earnings.
D)provide a realistic estimate of earnings.
E)do not include an income statement or the equivalent.
Q3) What is the amount of inventory loss shown on the income statement under IFRSs?
A)$1,000.
B)$2,000.
C)$3,000.
D)$4,000.
E)$6,000.
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Q4) How did the early IASs obtain support from a sufficient number of board members?
Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) Filings with the SEC are divided generally into two broad categories:
A)Registration statements and perpetual filings.
B)Reconciliation statements and periodic filings.
C)Registration statements and periodic filings.
D)Registration filings and reconciliation statements.
E)Reconciliation filings and perpetual filings.
Q2) Which one of the following was enacted in 1935?
A)Securities Act.
B)Securities Exchange Act.
C)Trust Indenture Act.
D)Investment Company Act.
E)Public Utility Holding Company Act.
Q3) Which one of the following is not a prescribed event for the filing of Form 8-K?
A)bankruptcy or receivership.
B)changes in control of the registrant.
C)resignation of a middle manager.
D)changes in the registrant's certified public accountants.
E)acquisitions or dispositions of assets.
Q4) When must a company file its Form 10-K?
Page 14
Q5) What is a proxy? Briefly explain the importance of a proxy solicitation.
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) In a liquidation,total free assets are calculated to be what amount?
Q2) Total unsecured liabilities are calculated to be what amount?
Q3) Assume that the company was being liquidated and that the following transactions occurred:
Accounts receivable of $23,400 were collected.
All of the company's inventory was sold for $52,000.
Additional accounts payable of $13,000 incurred for various expenses such as utilities and maintenance were discovered.
The land and building were sold for $92,300.
The note payable due to the Idaho Savings and Loan was paid.
The equipment was sold at auction for only $14,300 with the proceeds applied to the note owed to the Second National Bank.
The investments were sold for $27,300.
Administrative expenses totaled $26,000 as of July 26,2009,but no payment had yet been made.
Required:
Prepare a statement of realization and liquidation for the period from March 15 through July 26,2009 .
Q4) Compute the amount of total liabilities with priority.
Page 15
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Chapter 14: Partnerships: Formation and Operation
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Q1) Why are the terms of the Articles of Partnership important to partners?
Q2) What was Nolan's capital balance at the end of 2007?
A)$200,000.
B)$224,000.
C)$238,000.
D)$246,000.
E)$254,000.
Q3) Roberts retires and is paid $160,000 based on the terms of the original partnership agreement.If the goodwill method is used,what is the capital balance of Dana?
A)$20,000.
B)$60,000.
C)$110,000.
D)$120,000.
E)$230,000.
Q4) Eden contributed $124,000 in cash to the business to receive a 20% interest in the partnership.Goodwill was to be recorded.The four original partners shared all profits and losses equally.After Eden made his investment,what were the individual capital balances?
Q5) How is accounting for a partnership different from accounting for a corporation?
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) Matching
(1. )The schedule of liquidation
(2. )Deficit capital balances
(3. )Marshaling of assets
(4. )Predistribution plan
(A. )A schedule of liquidation should be produced periodically by the accountant to disclose losses and gains that have been incurred,remaining assets and liabilities,and current capital balances.
(B )At the start of a liquidation,this document provides guidance for all payments made to the partners throughout the liquidation
(C. )One or more partners may have a negative capital balance often as a result of losses incurred in disposing of assets.
(D. )Provides an equitable system for distributing assets during liquidation.
Q2) Prepare the journal entry for Donald,Chief & Berry LLP on August 1,2009,to record the realization of the other assets.
Q3) What is the role of the accountant during the liquidation process?
Q4) If the noncash assets were sold for $105,000,what would have been the maximum amount of cash that Canton could have expected to receive?
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Chapter 16: Accounting for State and Local Governments,
Part I
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Q1) Under modified accrual accounting,when should revenues be reported by a governmental-type fund?
Q2) Under modified accrual accounting,when should an expenditure to recognize interest on long-term debt be recorded?
A)at the end of each accounting period.
B)when payment is due within one fiscal year.
C)when payment is due.
D)when cash is available to pay the interest.
E)when the interest is incurred.
Q3) What are the two proprietary fund types?
(1)Internal service funds
(2)Investment trust funds
(3)Enterprise funds.
(4)Agency funds
A)1 and 2.
B)2 and 3.
C)1 and 3.
D)2 and 4.
E)1 and 4.
Q4) What is the purpose of fund-based financial statements?
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Chapter 17: Accounting for State and Local
Governments,part II
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Q1) The city of Kamen transferred $27,000 into a Pension Trust Fund.Of this amount,$19,000 was contributed by the city with the remainder coming from the employees.
Required:
For fund-based financial statements,prepare the journal entry for this transaction including the fund type in which the entry would have been recorded.
Q2) Prepare a Statement of Activities
Q3) The city of Kamen maintains a collection of paintings of a former citizen in its City Hall building.During the year,one painting was purchased by the city for $2,000 at an auction using appropriated funds in the General Fund.Also during the year,a donation of a painting valued at $3,000 was made to the city.
Required:
Prepare the journal entry(ies)for the two transactions for the purposes of preparing the fund-based financial statements.
Q4) What information is required in the financial section of a state or local government's CAFR?
Q5) What is meant by the term fiscally independent?
Page 19
Q6) What are the three broad sections of a state or local government's CAFR?
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Chapter 18: Accounting for Not-For-Profit Organizations
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Q1) Which entry would be the correct entry to record pledges of $100,000 to a public television fundraiser? The public television organization estimates that 5% of the funds will be uncollectible.
A)debit Pledges Receivable $100,000,credit unrestricted net assets-contributions $100,000.
B)debit Cash $100,000,credit unrestricted net assets-contributions $100,000.
C)debit Pledges Receivable $100,000,credit unrestricted net assets-contributions $95,000,credit allowance for uncollectible pledges $5,000.
D)debit Pledges Receivable $95,000,debit allowance for uncollectible pledges $5,000,credit unrestricted net assets-contributions $100,000.
E)debit cash $95,000,debit allowance for uncollectible pledges $5,000,credit unrestricted net assets-contributions $100,000.
Q2) For May 2008,Carlington Hospital's charges for patient services were $608,000,of which 80% was billed to third-party payors.
Required: Prepare the journal entry to accrue patient charges for the month.
Q3) Give several examples of voluntary health and welfare organizations.
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Chapter 19: Accounting for Estates and Trusts
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Q1) A gift of any remaining property is a
A)general legacy.
B)specific legacy.
C)demonstrative legacy.
D)residual legacy.
E)devise.
Q2) Additional debts of $78,000 were discovered.Debts totaling $130,000 were paid. Prepare the journal entry to record the transaction.
Q3) What choices does an administrator of an estate have in determining the values of assets included in the estate for tax purposes?
Q4) What is a remainderman?
Q5) How much would James have received from the estate?
A)$50,000.
B)$40,000.
C)$25,000.
D)$45,000.
E)$30,000.
Q6) What are the three goals of probate laws?
Q7) Prepare a Charge and Discharge Statement for the estate.
Q8) What would be the taxable income?
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