1) Which of the following statements concerning Form 10-Q is NOT true?
A.It is filed for all four quarters
B.It is the quarterly report to the SEC
C.It contains an update on significant matters occurring since the last quarter
D.It includes comparative financial statements prepared in accordance with APB 28
2) A donor agrees to contribute $5,000 per year at the end of each of the next five years
to a voluntary health and welfare organization. The donor did not place any use
restrictions on the amount pledged. The stream of the payments is discounted at 6
percent. The first payment of $5,000 is received at the end of the first year. The present
value factor for a five-payment annuity due on June 30, 20X9, at 6 percent is 4.2124.
Based on the preceding information, at the end of the first year, the pledge increased
unrestricted net assets by:
A.$25,000
B.$21,062
C.$4,212
D.$5,000
3) Griffin and Rhodes formed a partnership on January 1, 20X9. Griffin contributed
cash of $120,000 and Rhodes contributed land with a fair value of $160,000. The
partnership assumed the mortgage on the land which amounted to $40,000 on January
1. Rhodes originally paid $90,000 for the land. On July 31, 20X9, the partnership sold
the land for $190,000. Assuming Griffin and Rhodes share profits and losses equally,
how much of the gain from sale of land should be credited to Griffin for financial
accounting purposes?
A.$0
B.$15,000
C.$35,000
D.$45,000
4) Which of the following financial statements would not be prepared for an enterprise
fund?
A.A statement of cash flows
B.A statement of revenues, expenses, and changes in fund net assets
C.A balance sheet
D.A statement of revenues, expenditures, and changes in fund balance
5) What does an underwriter typically require from an accountant which indicates that
the company has fulfilled all the accounting requirements in the registration process?
A.A comment letter
B.An audit opinion
C.A “red herring” prospectus
D.A comfort letter
6) ABC, a holder of a $400,000 XYZ Inc. bond, collected the interest due on June 30,
20X8, and then sold the bond to DEF Inc. for $365,000. On that date the bond issuer,
XYZ, a 90 percent owner of DEF, had a $450,000 carrying amount for this bond.
Based on the information given above, what amount of gain or loss on bond retirement
was recorded?
A.No gain or loss
B.$85,000 gain
C.$85,000 loss
D.$35,000 loss
7) Note: This is a Kaplan CPA Review Question
The Board of Commissioners of Vane City adopted its budget for the year ending July
31, comprising estimated revenues of $30,000,000 and appropriations of $29,000,000.
Vane formally integrates its budget into the accounting records. What entry should be
made for budgeted revenues?
A.Memorandum entry only
B.Debit ESTIMATED REVENUES CONTROL, $30,000,000
C.Debit ESTIMATED REVENUES RECEIVABLE CONTROL, $30,000,000
D.Credit ESTIMATED REVENUES CONTROL, $30,000,000
8) On January 1, 20X1, Washington City received 200,000 from an estate with the
stipulation that the money be invested and the income be used to provide maintenance
to the city cemetery. The money was invested in 7% governmental securities at 90 to
yield an effective interest rate of 10%. The following journal entry would be made to
account for the accrued interest of the permanent fund:
A.Option A
B.Option B
C.Option C
D.Option D
9) On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock
of Perth Company for $3,100,000. Any excess cost over book value is attributable to a
patent with a 10-year remaining life. At the date of acquisition, Perth’s balance sheet
contained the following information:
Perth’s income statement for 20X8 is as follows:
The balance sheet of Perth at December 31, 20X8, is as follows:
Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at
various dates for 20X8 follow:
Assume Perth’s revenues, purchases, operating expenses, depreciation expense, and
income taxes were incurred evenly throughout 20X8.
Refer to the above information. Assuming Perth’s local currency is the functional
currency, what is the amount of translation adjustments that result from translating
Perth’s trial balance into U.S. dollars at December 31, 20X8?
A.$396,500 debit
B.$285,000 credit
C.$405,000 credit
D.$411,000 credit
10) Master Corporation owns 85 percent of Servant Corporation’s voting shares. On
January 1, 20X8, Master Corporation sold $200,000 par value 8 percent bonds to
Servant for $245,000. The bonds mature in 10 years and pay interest semiannually on
January 1 and July 1.
Based on the information given above, in the preparation of the 20X8 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
11) Sub Company sells all its output at 20 percent above cost to Par Corporation. Par
purchases its entire inventory from Sub. The incomes reported by the companies over
the past three years are as follows:
Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6,
20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000,
$157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70
percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair
value of the noncontrolling interest at the date of acquisition was equal to 30 percent of
the book value of Sub Company.
Based on the information given above, what will be the income to controlling interest
for 20X8?
A.$615,375
B.$686,250
C.$690,000
D.$694,000
12) Consolidated net income may include the parent’s separate operating income plus
the parent’s share of the subsidiary’s reported net income:
A.plus the unrealized profit on upstream intercompany sales of inventory made during
the current year
B.plus the profit realized this year from upstream intercompany sales of inventory made
last year
C.plus unrealized profit on downstream intercompany sales of inventory made during
the current year
D.minus the parent’s share of profit realized this year from upstream intercompany sales
of inventory made last year
13) On January 1, 20X7, Pisa Company acquired 80 percent of Siena Company by
purchasing 40,000 shares of Siena’s common stock. There was no differential related to
this transaction. The noncontrolling interest had a fair value equal to 20 percent of book
value. The book value of Siena on December 31, 20X7 was as follows:
On January 1, 20X8, Siena sold an additional 12,500 shares to a nonaffiliate for $25 per
share.
Based on the preceding information, what is Pisa’s new ownership interest?
A.84 percent
B.55 percent
C.70 percent
D.64 percent
14) Riviera Township reported the following data for its governmental activities for the
year ended June 30, 20X9:
Additional information available is as follows:
All of the long-term debt was used to acquire capital assets. Cash of $475,000 is
restricted for debt service.
Based on the preceding information, on the statement of net assets prepared at June 30,
20X9, what amount should be reported for total net assets?
A.$2,425,000
B.$4,200,000
C.$2,900,000
D.$3,625,000
15) On December 1, 20X9, the partners of Tim, Williams, and Levin, who share profits
and losses in the ratio of 4:4:2, decided to liquidate their partnership. On this date the
partnership condensed balance sheet was as follows:
On December 11, 20X9, the first cash sale of other assets with a carrying amount of
$200,000 realized $140,000. Safe installment payments to the partners were made on
the same date. How much cash should be distributed to each partner?
A.Option A
B.Option B
C.Option C
D.Option D
16) Sigma Company develops and markets organic food products to natural foods
retailers. The following information is available for the company for the year 20X8:
Based on the preceding information, what amount will be reported by the company as
cash received from customers during the year?
A.$455,000
B.$475,000
C.$450,000
D.$425,000
17) Under ASC 805, consolidation follows largely which theory approach?
A. Proprietary
B. Parent company
C. Entity
D. Variable
18) All of the following describe the International Accounting Standard Board (IASB)
except for:
A.The IASB is a privately funded accounting standards-setting body based in London
B.The mission of the IASB is to develop a single set of high-quality, understandable
and enforceable global accounting standards
C.Board members of the IASB come from diverse geographical countries that have
adopted IFRS
D.IASB members serve a five-year term subject to one reappointment
19) In the AD partnership, Allen’s capital is $140,000 and Daniel’s is $40,000 and they
share income in a 3:1 ratio, respectively. They decide to admit David to the partnership.
Each of the following question is independent of the others.
Refer to the information provided above. What amount will David have to invest to
give him one-fifth percent interest in the capital of the partnership if no goodwill or
bonus is recorded?
A.$60,000
B.$36,000
C.$50,000
D.$45,000
20) Master Corporation owns 85 percent of Servant Corporation’s voting shares. On
January 1, 20X8, Master Corporation sold $200,000 par value 8 percent bonds to
Servant for $245,000. The bonds mature in 10 years and pay interest semiannually on
January 1 and July 1.
Based on the information given above, in the preparation of the 20X8 consolidated
financial statements, premium on bonds payable will be:
A.debited for $45,000 in the eliminating entries
B.credited for $40,500 in the eliminating entries
C.debited for $40,500 in the eliminating entries
D.credited for $45,000 in the eliminating entries
21) Unrestricted gifts and endowment income of a private university are reported as
A.increases in the unrestricted current fund balance on the statement of changes in fund
balances
B.unrestricted revenues on the statement of current funds revenues, expenditures, and
other changes
C.unrestricted revenues on the statement of activities
D.increases in the unrestricted current fund balance on the statement of activities
22) Which of the following statements best describes limited partnerships?
A.In an LLP, there must be at least one general partner that is personally liable for the
obligations of the partnership and has management responsibilities
B.There are no general or limited partners in a LP; each partner has the rights and duties
of a general partner, but limited legal liability
C.The identifier LP or LLP need not be included in the name or identification of a
limited partnership
D.If the presumption of control by the general partner can be overcome, the partner
would account for its investment using the equity method of accounting
23) On January 3, 20X9, Jane Company acquired 75 percent of Miller Company’s
outstanding common stock for cash. The fair value of the noncontrolling interest was
equal to a proportionate share of the book value of Miller Company’s net assets at the
date of acquisition. Selected balance sheet data at December 31, 20X9, are as follows:
Based on the preceding information, what amount should be reported as noncontrolling
interest in net assets in Jane Company’s December 31, 20X9, consolidated balance
sheet?
A. $90,000
B. $54,000
C. $36,000
D. $0
24) The City of Fargo issued general obligation bonds to finance construction of a new
fire station. The bonds were issued at a discount. Which of the following is true?
I. The amount expended for the improvement must be decreased.
II. The general fund must make up the difference to the face value of the bonds.
III. A debt service fund must make up the difference to the face value of the bonds.
A.I only
B.Either I or III
C.Either II or III
D.Either I or II
25) The following information was obtained from the general fund balance sheet of
Lima Village on June 30, 20X9, the close of its fiscal year:
On June 30, 20X9, what was Lima’s unassigned fund balance in its general fund?
A.$84,000
B.$44,000
C.$34,000
D.$24,000
26) During the liquidation of the FGH partnership, a cash distribution was made to all
the partners, who share profits and losses 60 percent, 20 percent, and 20 percent,
respectively. Assuming that the cash distribution referred to was made properly, how
much would G receive if an additional $60,000 was distributed?
A.$60,000
B.$20,000
C.$17,000
D.$12,000
27) Dover Company owns 90% of the capital stock of a foreign subsidiary located in
Italy. Dover’s accountant has just translated the accounts of the foreign subsidiary and
determined that a debit translation adjustment of $80,000 exists. If Dover uses the fully
adjusted equity method for its investment, what entry should Dover record in order to
recognize the translation adjustment?
A.Option A
B.Option B
C.Option C
D.Option D
28) On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company
for $220,000 cash. The trial balances for the two companies on December 31, 20X8,
included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A
total of $10,000 of the acquisition price is applied to goodwill, which was not impaired
in 20X8. Stryder’s depreciable assets had an estimated economic life of 10 years on the
date of combination.The difference between fair value and book value of tangible assets
is related entirely to buildings and equipment. Chariot used the equity method in
accounting for its investment in Stryder. Analysis of receivables and payables revealed
that Stryder owed Chariot $10,000 on December 31, 20X8.
Based on the information provided, what amount of total assets will be reported in the
consolidated balance sheet for the year?
A.$895,000
B.$801,000
C.$723,000
D.$1,111,000
29) The disclosure, “net assets released from restrictions,” is reported on which of the
following financial statements for a voluntary health and welfare organization?
I. The statement of cash flows.
II. The statement of activities.
A.I only
B.II only
C.Both I and II
D.Neither I nor II
30) All of the following are elements of the statement of financial condition for state
and local governments with the exception of:
A.Assets and Liabilities
B.Deferred inflow and outflow of resources
C.Net position
D.Inflow and outflow of resources
31) On January 1, 20X4, Plimsol Company acquired 100 percent of Shipping
Corporation’s voting shares, at underlying book value. Plimsol uses the cost method in
accounting for its investment in Shipping. Shipping’s retained earnings was $75,000 on
the date of acquisition. On December 31, 20X4, the trial balance data for the two
companies are as follows:
Based on the information provided, what amount of total liabilities will be reported in
the consolidated balance sheet prepared on December 31, 20X4?
A.$525,000
B.$115,000
C.$125,000
D.$190,000
32) In the AD partnership, Allen’s capital is $140,000 and Daniel’s is $40,000 and they
share income in a 3:1 ratio, respectively. They decide to admit David to the partnership.
Each of the following question is independent of the others.
Refer to the information provided above. David invests $40,000 for a one-fifth interest
in the total capital of $220,000. The journal to record David’s admission into the
partnership will include:
A.a credit to Cash for $40,000
B.a debit to Allen, Capital for $3,000
C.a credit to David, Capital for $40,000
D.a credit to Daniel, Capital for $1,000
33) Private Not-For-Profit (NFP) Entities.
Select from this list of terms to answer the following questions.
A. Fair value
B. Unrestricted net assets
C. GASB
D. FASB
E. Statement of Revenues, Expenditures, and Changes in Fund Balance
F. Lower of cost or market
G. Accrual method
H. Statement of Activities
I. General fund, restricted fund, endowment fund
J. Modified accrual method
K. Permanently restricted net assets
L. Temporarily restricted net assets
M. Endowment fund
N. Unrestricted, temporarily restricted, permanently restricted
O. Depreciation
P. Works of art and other historical treasures
Q. General fund
R. Cost
Indicate your choice by entering the letter corresponding to the correct term. A term
may be used more than once or not at all.
“Tangible fixed assets not depreciated by a private college or university” describes
which term listed above?
34) On January 1, 20X8, Chariot Company acquired 100 percent of Stryder Company
for $220,000 cash. The trial balances for the two companies on December 31, 20X8,
included the following amounts:
On the acquisition date, Stryder reported net assets with a book value of $170,000. A
total of $10,000 of the acquisition price is applied to goodwill, which was not impaired
in 20X8. Stryder’s depreciable assets had an estimated economic life of 10 years on the
date of combination.The difference between fair value and book value of tangible assets
is related entirely to buildings and equipment. Chariot used the equity method in
accounting for its investment in Stryder. Analysis of receivables and payables revealed
that Stryder owed Chariot $10,000 on December 31, 20X8.
Based on the information provided, what amount of net income will be reported in the
consolidated financial statements for the year?
A.$226,000
B.$55,000
C.$230,000
D.$171,000
35) Winner Corporation acquired 80 percent of the common shares and 70 percent of
the preferred shares of First Corporation at underlying book value on January 1, 20X9.
At that date, the fair value of the noncontrolling interest in First’s common stock was
equal to 20 percent of the book value of its common stock. First’s balance sheet at the
time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are
four years in arrears on January 1, 20X9. All of the $5 par value preferred shares are
callable at $6 per share. During 20X9, First reported net income of $100,000 and paid
no dividends.
Based on the information provided, what is the book value of the common stock on
January 1, 20X9?
A.$410,000
B.$360,000
C.$390,000
D.$350,000
36) On January 3, 20X9, Jane Company acquired 75 percent of Miller Company’s
outstanding common stock for cash. The fair value of the noncontrolling interest was
equal to a proportionate share of the book value of Miller Company’s net assets at the
date of acquisition. Selected balance sheet data at December 31, 20X9, are as follows:
Based on the preceding information, what amount will Jane Company report as
common stock outstanding in its consolidated balance sheet at December 31, 20X9?
A. $120,000
B. $180,000
C. $156,000
D. $264,000
37) Trimester Corporation’s revenue for the year ended December 31, 20X8, was as
follows:
Trimester has a reportable operating segment if that segment’s revenue exceeds:
A.$65,500
B.$60,000
C.$64,500
D.$61,000
38) The transactions listed in the following questions occurred in a private,
not-for-profit hospital during 20X8. For each transaction, indicate its effect on the
hospital’s statement of operations for the year ended December 31, 20X8.
Transaction: Billed patients for services rendered.
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
39) Which of the following observations concerning “goodwill” is NOT correct?
A.Once written down, it may be written up for recoveries
B.It must be tested for impairment at least annually
C.Goodwill impairment losses are recognized in income from continuing operations or
income before extraordinary gains and losses
D.It must be reported as a separate line item in the balance sheet