Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Pursuing an inorganic growth strategy, Wilson Company acquired Venus Company's net
assets and assigned them to four separate reporting divisions. Wilson assigned total
goodwill of $134,000 to the four reporting divisions as given below:
Based on the preceding information, what amount of goodwill will be reported for Beta
at year-end?
A. $0
B. $14,000
C. $34,000
D. $50,000
An investor uses the equity method to account for its 30% investment in common stock
of an investee. Amortization of the investor's share of the excess of fair value over book
value of depreciable assets should be reported in the investor's income statement as part
of
A. Amortization of goodwill.
B. Other expense.
C. Depreciation expense.
D. Income from investee.
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 changes in net assets prepared for
the year ended December 31, 20X8, the events described would
A. increase temporarily restricted net assets by $10,000.
B. decrease temporarily restricted net assets by $10,000
C. increase unrestricted net assets by $10,000.
D. decrease unrestricted net assets by $10,000.
Fike Hospital, a private, not-for-profit institution, receives an unrestricted gift of
common stock with a fair value of $100,000. The donor had paid $40,000 for the stock
five years earlier. The gift should be recorded as an
A. Increase in unrestricted net assets of $40,000.
B. Increase in temporarily restricted net assets of $100,000.
C. Increase in temporarily restricted net assets of $40,000.
D. Increase in unrestricted net assets of $100,000.
Parent Company owns 70% of Son Company’s outstanding stock. During 20X1 Son
Company sold land to Parent Company for a gain of $25,000. Parent company held the
land all of 20X1. The gain on the sale to Parent should be:
A. recorded on Son’s books as a gain of $25,000 and then eliminated during the
consolidation process.
B. deferred by Son until Parent sells the land to an outside party.
C. recorded on Son’s books as a gain of $17,500 and eliminated during the
consolidation process.
D. recorded on Parent’s book as a gain of $17,500 and eliminated during the
consolidation process.
The Town of Pasco has no supplies inventory in its general fund on January 1, 20X8.
During 20X8, Pasco incurred expenditures of $200,000 for the acquisition of supplies.
On December 31, 20X8, Pasco's inventory of supplies amounted to $30,000. Assume
Pasco uses the purchase method of accounting for supplies in its general fund and that
the village reports on the calendar year. On December 31, 20X8, the general fund of
Pasco should credit:
A. Expenditures for $170,000.
B. Fund Balance—Unassigned for $170,000.
C. Fund Balance—Nonspendable for $30,000.
D. Expenditures for $30,000.
Ponca City issued general obligation bonds to finance construction of a new city hall. In
the city hall capital projects fund, the proceeds of the general obligation bonds should
be credited to:
A. Revenue-General Obligation Bonds.
B. General Obligation Bonds Payable.
C. Deferred Revenue-General Obligation Bonds.
D. Other Financing Sources-Bond Issue Proceeds.
On January 1, 20X8, Blake Company acquired all of Frost Corporation's voting shares
for $280,000 cash. On December 31, 20X9, Frost owed Blake $5,000 for services
provided during the year. When consolidated financial statements are prepared for
20X9, which entry is needed to eliminate intercompany receivables and payables in the
consolidation worksheet?
A. Option A
B. Option B
C. Option C
D. Option D
The consolidation process consists of all the following except:
A. Combining the financial statements of two or more legally separate companies.
B. Eliminating intercompany transactions and holdings.
C. Closing the individual subsidiary’s revenue and expense accounts into the parent’s
retained earnings.
D. Combining the accounts of separate companies, creating a single set of financial
statements.
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 preceding information, what is the portion of First's retained earnings
assignable to its preferred shareholders on January 1, 20X9?
A. $40,000
B. $50,000
C. $60,000
D. $70,000
Which of the following statements best describes the reporting process for profit
seeking and governmental entities?
A. In profit-seeking enterprises the measurement focus is on the flow of all economic
resources of the firm, whereas the focus for governmental funds is on current financial
resources
B. In profit-seeking enterprises the measurement focus is on the flow of current
financial resources, whereas the focus for government funds is on all economic
resources.
C. Both Profit-seeking enterprises and governmental entities have an objective to
measure profitability.
D. Both Profit-seeking enterprises and governmental entities use the accrual or cash
basis of accounting to record and report transactions.
Which system helps the SEC accomplish its primary purpose of increasing the
efficiency and fairness of the securities markets by expediting the receipt, acceptance,
dissemination, and analysis of time-sensitive data filed with it?
A. EDI
B. ESEC
C. EDGAR
D. EMMA
Small-Town Retail owns 70 percent of Supplier Corporation's common stock. For the
current financial year, Small-Town and Supplier reported sales of $450,000 and
$300,000 and expenses of $290,000 and $240,000, respectively.
Based on the preceding information, what is the amount of net income to be reported in
the consolidated income statement for the year under the entity theory approach?
A. $210,000
B. $202,000
C. $160,000
D. $220,000
Which combination of accounts and exchange rates is correct for the remeasurement of
a foreign entity's financial statements from its local currency to U.S. dollars?
A. Option A
B. Option B
C. Option C
D. Option D
According to UPA 1997, during partnership liquidation, loans the partners have made to
the partnership have the same status as loans from third-party creditors. As a practical
matter, most loans from partners:
A. are subordinated to third-party creditors.
B. have the same status as loans from third-party creditors.
C. are paid prior to third-party creditors.
D. None of the above.
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
On July 1, 20X9, Link Corporation paid $340,000 for all of Tinsel Company's
outstanding common stock. On that date, the costs and fair values of Tinsel's recorded
assets and liabilities were as follows:
Based on the preceding information, the differential reflected in a consolidation
worksheet to prepare a consolidated balance sheet immediately after the business
combination is:
A. $0.
B. $25,000.
C. $70,000.
D. $45,000.
Heavy Company sold metal scrap to a Brazilian company for 200,000 Brazilian reals on
December 1, 20X8, with payment due on January 20, 20X9. The exchange rates were:
December 1, 20X8 1 real = $0.5435
December 31, 20X8 1 real = 0.5192
January 20, 20X9 1 real = 0.5305
Based on the preceding information, what is the Heavy's overall net gain or net loss
from its foreign currency exposure related to this transaction?
A. $4,860 loss
B. $2,600 loss
C. $9,018 gain
D. $2,260 gain
The following condensed balance sheet is presented for the partnership of D, E, and F
who share profits and losses in the ratio of 5:3:2, respectively:
The partners agreed to liquidate the partnership after selling the other assets.
Refer to the above information. If the other assets are sold for $80,000, and all partners
are personally insolvent, how much should E receive upon liquidation?
A. $0
B. $6,000
C. $10,000
D. $20,000
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: Acquired equipment with all of the contributions received in the previous
item.
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.
On December 31, 20X8, X Company acquired controlling ownership of Y Company. A
consolidated balance sheet was prepared immediately. Partial balance sheet data for the
two companies and the consolidated entity at that date follow:
During 20X8, X Company provided consulting services to Y Company and has not yet
paid for them. There were no other receivables or payables between the companies at
December 31, 20X8.
Based on the information given, X Company and Y Company reported wages payable
of
A. $50,000 and $28,000 respectively.
B. $60,000 and $32,000 respectively.
C. $40,000 and $35,000 respectively.
D. $28,000 and $60,000 respectively.
Which of the following characteristics are emphasized in the accounting for state and
local government entities?
I. Revenues should be matched with expenditures to measure success or failure of the
government entity.
II. There is an emphasis on expendability of resources to accomplish objectives of the
governmental entity.
A. I only
B. II only
C. I and II
D. Neither I nor II
Main Manufacturing Corporation reported consolidated revenues of $50,000,000 on its
income statement for 20X8. The management of the corporation identified 3 industry
segments, M, N, and O. These segments had the following intersegment sales and
transfers during 20X8:
For Main Manufacturing Corporation, the revenue test would be satisfied if any of its
industry segments had revenue equal to or greater than which of the following?
A. $7,400,000
B. $5,740,000
C. $5,000,000
D. $4,260,000
Refer to the above information. Which statement below is correct if the old partners
receive a bonus upon the contribution of assets into the partnership by a new partner?
A. B < A and D = C - A
B. B + A and D > C + A
C. B < A and D = C + A
D. B > A and D = C + A
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 amount will be reported as the noncontrolling
interest in the consolidated balance sheet on January 1, 20X9?
A. $70,000
B. $130,000
C. $118,000
D. $142,000
Goshen City acquires $36,000 of inventory on November 1, 20X5, having held no
inventory previously. On December 31, 20X5, the end of Goshen City's fiscal year, a
physical count shows $7,000 still in stock. During 20X6, $5,000 of this inventory is
used, resulting in a $2,000 remaining balance of supplies on December 31, 20X6.
Based on the preceding information, which of the following would be the correct
account balances for 20X6 if Goshen City used the consumption method of accounting
for inventories?
Expenditures Inventory of Supplies
A. $5,000 $2,000
B. $0 $2,000
C. $0 $7,000
D. $7,000 $2,000
Selected information from the separate and consolidated balance sheets and income
statements of Pare, Inc. and its subsidiary, Shel Co., as of December 31, 20X5, and for
the year then ended is as follows:
Additional information:
During 20X5, Pare sold goods to Shel at the same markup on cost that Pare uses for all
sales.
In Pare's consolidating worksheet, what amount of unrealized intercompany profit was
eliminated?
A. $12,000
B. $6,000
C. $58,000
D. $64,000
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 patent amortization for 20X8 that results from
Johnson's acquisition of Perth's stock on January 2, 20X8. Round your answer to the
nearest dollar.
A. $11,500
B. $11,884
C. $7,667
D. $9,394
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 questions is independent of the others.
Refer to the information provided above. David invests $50,000 for a one-fifth interest.
What amount of goodwill will be recorded?
A. $20,000
B. $4,000
C. $40,000
D. $15,000
Small-Town Retail owns 70 percent of Supplier Corporation's common stock. For the
current financial year, Small-Town and Supplier reported sales of $450,000 and
$300,000 and expenses of $290,000 and $240,000, respectively.
Based on the preceding information, what is the amount of net income to be reported in
the consolidated income statement for the year under the parent company theory
approach?
A. $220,000
B. $202,000
C. $160,000
D. $200,000
Nash Company acquired Seel Corporation through an exchange of common shares. All
of Seel’s assets and liabilities were immediately transferred to Nash. Nash’s common
stock was trading at $25 per share at the time of the exchange. The total par value of
Nash’s stock outstanding before and after the acquisition was $750,000 and $840,000,
respectively. Nash’s additional paid-in capital before and after the acquisition were
$200,000 and $560,000, respectively.
Based on the preceding information, what is the par value of Nash’s common stock?
A. $1
B. $5
C. $6
D. $18
Which of the following statements is (are) correct?
I. The amount assigned to the noncontrolling interest may be affected by a constructive
retirement of bonds.
II. A constructive retirement of bonds normally results in an extraordinary gain or loss.
III. In constructive retirement, the entity would still consider the bonds outstanding,
even though they are treated as if they were retired in preparing consolidated financial
statements.
A. I
B. II
C. I and III
D. I, II, and III
