1) Revenues from parking meters and parking fines should be reported in the general
fund when:
A.received
B.measurable and available
C.measurable and earned
D.available
2) On January 1, 20X6, Climber Corporation acquired 90 percent of Wisden
Corporation for $180,000 cash. Wisden reported net income of $30,000 and dividends
of $10,000 for 20X6, 20X7, and 20X8. On January 1, 20X6, Wisden reported common
stock outstanding of $100,000 and retained earnings of $60,000, and the fair value of
the noncontrolling interest was $20,000. It held land with a book value of $30,000 and a
market value of $35,000 and equipment with a book value of $50,000 and a market
value of $60,000 at the date of combination. The remainder of the differential at
acquisition was attributable to an increase in the value of patents, which had a
remaining useful life of five years. All depreciable assets held by Wisden at the date of
acquisition had a remaining economic life of five years. Climber uses the equity method
in accounting for its investment in Wisden.
Based on the preceding information, what balance would Climber report as its
investment in Wisden at January 1, 20X8?
A.$230,400
B.$180,000
C.$234,000
D.$203,400
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 the U.S. dollar is the functional currency,
what is the amount of Perth’s cost of goods sold remeasured in U.S. dollars?
3) A.$811,500
B.$843,500
C.$884,500
D.$799,500
4) Light Corporation owns 80 percent of Sound Company’s voting shares. On January
1, 20X7, Sound sold bonds with a par value of $300,000 when the market rate was 7
percent. Light purchased two thirds of the bonds; the remainder was sold to
nonaffiliates. The bonds mature in ten years and pay an annual interest rate of 6 percent.
Interest is paid semiannually on June 30 and Dec 31.
Based on the information given above, what amount of interest income will Light
Corporation recognize on December 31, 20X8 relative to the interest received on that
day, in its separate financial statements?
A.$13,023
B.$13,096
C.$6,538
D.$6,557
5) The general fund of Richmond was billed $22,000 on August 15, 20X8, for using the
services of one of its internal service funds (ISF). What accounts should be debited and
credited, respectively, in the general fund on August 15, 20X8, to record this
transaction?
A.Expenditures and Transfer Out to ISF
B.Expenditures and Due to ISF
C.Encumbrances and Due to ISF
D.Encumbrances and Transfer Out to ISF
6) All of the following statementsaccurately describe Special Purpose Entities (SPEs)
except for:
A. SPEs are corporations, trust or partnerships created for a single specified purpose
B. SPEs usually have no substantive operations and are used for financing operations
C. SPEs are used for asset securitization, risk sharing and taking advantage of tax
statues
D. A variable interest entity (VIE) is a type of SPE with a limited number of equity
investors
7) Tanner Company, a subsidiary acquired for cash, owned equipment with a fair value
higher than the book value as of the date of combination. A consolidated balance sheet
prepared immediately after the acquisition would include this difference in:
A.goodwill
B.retained earnings
C.deferred charges
D.equipment
8) A business combination in which the acquired company’s assets and liabilities are
combined with those of the acquiring company into a single entity is defined as:
A.Stock acquisition
B.Leveraged buyout
C.Statutory Merger
D.Reverse statutory rollup
9) Note: This is a Kaplan CPA Review Question
On June 30, the balance sheet for the partnership of Williams, Brown and Lowe,
together with their respective profit and loss ratios, was as follows:
Williams has decided to retire from the partnership and by mutual agreement the assets
are to be adjusted to their fair value of $360,000 at June 30. It was agreed that the
partnership would pay Williams $102,000 cash for his partnership interest exclusive of
his loan which is to be repaid in full. No goodwill is to be recorded in this transaction.
After William’s retirement, and before the loan is repaid, what are the capital account
balances of Brown and Lowe, respectively?
A.$65,000 and $150,000
B.$72,000 and $171,000
C.$73,000 and $174,000
D.$77,000 and $186,000
10) In order to reduce the risk associated with a new line of business, Conservative
Corporation established Spin Company as a wholly owned subsidiary. It transferred
assets and accounts payable to Spin in exchange for its common stock. Spin recorded
the following entry when the transaction occurred:
Based on the preceding information, what number of shares of $7 par value stock did
Spin issue to Conservative?
A.10,000
B.7,000
C.8,000
D.25,000
11) Briefly explain the following terms associated with accounting for foreign entities:
a) Functional Currency
b) Translation
c) Remeasurement
12) Note: This is a Kaplan CPA Review Question
When the budget of a governmental unit, for which the estimated revenues exceed the
appropriations, is adopted and recorded in the general ledger at the beginning of the
year, the budgetary fund balance account is
A.Credited at the beginning of the year and debited at the end of the year
B.Credited at the beginning of the year and no entry made at the end of the year
C.Debited at the beginning of the year and no entry made at the end of the year
D.Debited at the beginning of the year and credited at the end of the year
13) The SEC administers many laws and regulations governing the information made in
files reports.
Required:
a) What is the difference in issues covered by Regulation S-X and Regulation S-K?
b) How do the issues covered by these regulations differ from the AAERs and SABs?
14) Golden Path, a labor union, had the following receipts and expenses for the year
ended December 31, 20X8:
The union’s constitution provides that 12 percent of the per capita dues be designated
for the strike insurance fund to be distributed for strike relief at the discretion of the
union’s executive board.
Based on the information provided, in Golden Path’s statement of activities for the year
ended December 31, 20X8, what amount should be reported under the classification of
program services?
A.$720,000
B.$910,000
C.$440,000
D.$760,000
15) On September 30, 20X8, Wilfred Company sold inventory to Jackson Corporation,
its Canadian subsidiary. The goods cost Wilfred $30,000 and were sold to Jackson for
$40,000, payable in Canadian dollars. The goods are still on hand at the end of the year
on December 31. The Canadian dollar (C$) is the functional currency of the Canadian
subsidiary. The exchange rates follow:
Based on the preceding information, at what dollar amount is the ending inventory
shown in the trial balance of the consolidated worksheet?
A.$45,000
B.$50,000
C.$40,000
D.$35,000
16) A private, not-for-profit hospital received a contribution of $40,000 on June 15,
20X8. The donor restricted the contribution to funding research activities currently
being performed by the hospital. For the year ended December 31, 20X8, the hospital
spent $30,000 of the contribution on research activities. The hospital expended the
remaining $10,000 on research activities in January of 20X9.
Refer to the above information. On the statement of cash flows prepared for the year
ended December 31, 20X8, the events described would increase net cash flows
provided by
A.operating activities by $40,000
B.financing activities by $40,000
C.financing activities by $10,000
D.operating activities by $10,000
17) A citizen of York purchased a truck in 20X3 for $50,000. On June 10, 20X9, she
donated the truck to York. The fair value of the truck on the date of donation was
$30,000. How should York report the truck in its government-wide Statement of Net
Assets?
A.Machinery and equipment should be increased $50,000
B.Machinery and equipment should be increased $30,000
C.Machinery and equipment should be decreased $20,000
D.No asset should be reported because no expenditures were made to acquire the truck
18) Wakefield Company uses a perpetual inventory system. In August, it sold 2,000
units from its LIFO-base inventory, which had originally cost $35 per unit. The
replacement cost is expected to be $45 per unit. The company is planning to reduce its
inventory and expects to replace only 1,500 of these units by December 31, the end of
its fiscal year. The company replaced 1,500 units in November at an actual cost of $50
per unit.
Based on the preceding information, in the entry to record the replacement of the 1,500
units in November, Cost of Goods Sold will be debited for:
A.$52,500
B.$22,500
C.$15,000
D.$7,500
19) Which of the following classes of information are included in the Form 10-K?
I. Management’s discussion and analysis
II. Audited financial statements and footnotes
III. Auditor’s opinion on the company’s internal control system
A.I and II
B.I and III
C.II and III
D.I, II, and III
20) Blue Corporation holds 70 percent of Black Company’s voting common stock. On
January 1, 20X3, Black paid $500,000 to acquire a building with a 10-year expected
economic life. Black uses straight-line depreciation for all depreciable assets. On
December 31, 20X8, Blue purchased the building from Black for $180,000. Blue
reported income, excluding investment income from Black, of $140,000 and $162,000
for 20X8 and 20X9, respectively. Black reported net income of $30,000 and $45,000
for 20X8 and 20X9, respectively.
Based on the preceding information, the amount to be reported as consolidated net
income for 20X9 will be:
A.$207,000
B.$202,000
C.$212,000
D.$190,000
21) Note: This is a Kaplan CPA Review Question
Clay University, a not-for-profit university, earned $300,000 from bookstore revenue
and spent $100,000 for faculty research in 20X1. The $100,000 for faculty research
came from a $150,000 research grant received in the previous year. What is the effect of
these events on unrestricted net assets in 20X1?
A.Increase $450,000
B.Increase $400,000
C.Increase $300,000
D.Increase $200,000
22) A limited liability company (LLC):
I. is governed by the laws of the state in which it is formed.
II. provides liability protection to its investors.
III. does not offer pass-through taxation benefits of partnerships.
A.Both I and III
B.III
C.Both I and II
D.I, II, and II
23) The trial balance of WM Partnership is as follows:
Wilfred and Mike decide to incorporate their partnership. The partnership’s books will
be closed, and new books will be used for W & M Corporation. The following
additional information is available:
1> The estimated fair values of the assets follow:
2> All assets and liabilities are transferred to the corporation.
3> The common stock is $10 par. Wilfred and Mike receive a total of 10,000 shares.
4> The partners share profits and losses in the ratio 7:3.
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 Mike, Capital for:
A.$38,010
B.$31,500
C.$42,000
D.$44,300
24) Note: This is a Kaplan CPA Review Question
Jay & Kay partnership’s balance sheet at December 31, 20X1, reported the following:
On January 2, 20X2, Jay and Kay dissolved their partnership and transferred all assets
and liabilities to a newly-formed corporation. At the date of incorporation, the fair value
of the net assets was $12,000 more than the carrying amount on the partnership’s books,
of which $7,000 was assigned to tangible assets and $5,000 was assigned to goodwill.
Jay and Kay were each issued 5,000 shares of the corporation’s $1 par value common
stock. Immediately following incorporation, additional paid-in capital in excess of par
should be credited for
A.$77,000
B.$68,000
C.$70,000
D.$82,000
25) On January 3, 20X9, Redding Company acquired 80 percent of Frazer
Corporation’s common stock for $344,000 in cash. At the acquisition date, the book
values and fair values of Frazer’s assets and liabilities were equal, and the fair value of
the noncontrolling interest was equal to 20 percent of the total book value of Frazer.
The stockholders’ equity accounts of the two companies at the acquisition date are:
Noncontrolling interest was assigned income of $11,000 in Redding’s consolidated
income statement for 20X9.
Based on the preceding information, what amount will be assigned to the
noncontrolling interest on January 3, 20X9, in the consolidated balance sheet?
A. $86,000
B. $44,000
C. $68,800
D. $50,000
26) Each of the following questions names an item. Select the correct description of the
item from this list. Indicate your selection by entering the letter of the description.
Descriptions
a. Provides preliminary information to investors about an upcoming issue.
b. Informs investors of an upcoming offering.
c. Required annual filing to the SEC.
d. Discloses unscheduled material events.
e. Includes amendments to the Securities Act, additional disclosure requirements, and
other current issues regarding accounting and auditing principles and standards.
f. Results in a thorough examination by the SEC of a registration statement.
g. Issued by the staff of the SEC and contains differences that must be corrected in a
registration statement before the securities may be offered or sale.
h. Quarterly report to SEC.
i. Includes new or revised administrative practices and interpretations used in reviewing
financial statements.
j. Includes the results of actions taken against accountants or other participants because
false or misleading statements were filed.
k. Includes Regulations S-X and S-K.
Form 10-K
27) In the RST partnership, Ron’s capital is $80,000, Stella’s is $75,000, and Tiffany’s is
$50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the
partnership. Each of the following question is independent of the others.
Refer to the above information. Tiffany is paid $60,000, and no goodwill is recorded.
What is the Ron’s capital balance after Tiffany withdraws from the partnership?
A.$74,000
B.$71,000
C.$75,000
D.$86,000