Suppose the direct foreign exchange rates in U.S. dollars are as follows:
1 Swiss franc = $1.0371
1 Swedish krona = $0.1526
Based on the information given above, how many Swiss francs are required to purchase
goods costing $5,000 U.S.?
A. 32,785
B. 5,186
C. 4,821
D. 763
Home Care, Inc. (Home Care), a nongovernmental voluntary health and welfare
organization, received two contributions in 20X3. One contribution of $250,000 was
restricted for use as general support in 20X4. The other contribution of $200,000
carried no donor restrictions. What amount should Home Care report as temporarily
restricted contributions in its 20X3 statement of activities?
A. $200,000
B. $450,000
C. $250,000
D. $0
Zeus Corporation has determined that it has 15 reportable operating segments. In order
to comply with the standard for segment disclosures, Zeus Corporation should do which
of the following?
A. Report 10 reportable segments and disclose the remaining 5 segments as other
operating segments.
B. Report 10 reportable segments by combining the most closely related segments.
C. Report 15 reportable segments as long as the 75 percent revenue test has been
satisfied.
D. Report 12 reportable segments and show all other operating segments in a column
labeled “Other Operating Segments.”
On December 31, 20X9, Add-On Company acquired 100 percent of Venus
Corporation’s common stock for $300,000. Balance sheet information Venus just prior
to the acquisition is given here:
At the date of the business combination, Venus’s net assets and liabilities approximated
fair value except for inventory, which had a fair value of $60,000, land which had a fair
value of $125,000, and buildings and equipment (net), which had a fair value of
$250,000.
Based on the information provided, what amount of goodwill will be included in the
consolidated balance sheet immediately following the acquisition?
A. $30,000
B. $15,000
C. $85,000
D. $45,000
Mortar Corporation acquired 80 percent of Granite Corporation’s voting common stock
on January 1, 20X7. On January 1, 20X8, Mortar received $350,000 from Granite for
equipment Mortar had purchased on January 1, 20X5, for $400,000. The equipment is
expected to have a 10-year useful life and no salvage value. Both companies depreciate
equipment on a straight-line basis.
Based on the preceding information, in the preparation of consolidation entries related
to the equipment transfer for the 20X9 consolidated financial statements, net effect on
accumulated depreciation will be:
A. a decrease of $110,000.
B. an increase of $110,000.
C. an increase of $100,000.
D. a decrease of $100,000.
Parent Company purchased 100 percent of Son Inc. on January 1, 20X2 for $420,000.
Son reported earnings of $82,000 and declared dividends of $4,000 during 20X2.
Based on the preceding information and assuming Parent uses the cost method to
account for its investment in Son, what is the balance in Parent’s Investment in Son
account on December 31, 20X2, prior to consolidation?
A. $416,000
B. $420,000
C. $424,000
D. $498,000
Albee Township’s fiscal year ends on June 30. Albee uses encumbrance accounting. On
April 5, 20X5, an approved $1,000 purchase order was issued for supplies. Albee
received these supplies on May 2, 20X5, and the $1,000 invoice was approved for
payment. What journal entry should Albee make on April 5, 20X5, to record the
approved purchase order?
A. Debit: ENCUMBRANCES CONTROL $1,000
Credit: BUDGETARY FUND BALANCE $1,000
B. Memorandum entry only.
C. Debit: Supplies $1,000
Credit: Vouchers payable $1,000
D. Debit: ENCUMBRANCES CONTROL $1,000
Credit: APPROPRIATIONS CONTROL $1,000
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 the local currency of the country in which
Perth Company is located is the functional currency, what are the translated amounts for
the items below in U.S. dollars?
A. Option A
B. Option B
C. Option C
D. Option D
Companies issuing stock to the public have to aware of certain terms. Using complete
sentences define the following:
a) Comment Letter
b) Preliminary Prospectus.
c) Shelf Registration.
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 assets will be reported in the
consolidated balance sheet prepared on December 31, 20X4?
A. $425,000
B. $525,000
C. $650,000
D. $630,000
A private, not-for-profit hospital received the following restricted contributions and
other receipts during the year ended September 30, 20X5:
For research $250,000
For equipment acquisitions $400,000
Income from endowment to be used for new addition to hospital plant $875,000
None of the contributions or other receipts was expended during the year ended
September 30, 20X5. For the year ended September 30, 20X5, what amount would be
reported on the hospital’s statement of changes in net assets as an increase in
temporarily restricted net assets?
A. $250,000
B. $650,000
C. $1,275,000
D. $1,525,000
Senior Corporation acquired 80 percent of Junior Company’s voting shares on January
1, 20X8, at underlying book value. On Dec. 31, 20X8, it also purchased $500,000 par
value 8 percent Junior bonds, which had been issued on January 1, 20X5 to Partner
Corporation (unaffiliated with either Senior or Junior) at a $45,000 premium. The bonds
were originally issued with a 12-year maturity and pay interest annually on December
31. During preparation of the consolidated financial statements for December 31, 20X8,
the following consolidating entry was included in the consolidation worksheet:
Based on the information given above, what was the carrying amount of the bonds on
Junior’s books on the date of purchase?
A. $533,769
B. $516,875
C. $500,000
D. $550,644
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 $280,000, how much
should F receive upon liquidation?
A. $44,000
B. $50,000
C. $76,000
D. $90,000
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
The following information pertains to revenue earned by Timm Co.’s industry segments
for the year ended December 31st:
In conformity with the revenue test, Timm’s reportable segments were
A. Only Dil
B. Only Bix and Dil
C. Only Alo, Bix, and Dil
D. Alo, Bix, Cee, and Dil
Information concerning the unexpected resignation of one or more of the registrant’s
directors would be disclosed on which of the following forms?
I. Form 8-Q
II. Form 8-K
A. I
B. II
C. Both I and II
D. Neither I nor II
Partners Dennis and Lilly have decided to liquidate their business. The following
information is available:
Dennis and Lilly share profits and losses in a 3:2 ratio. During the first month of
liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable
is paid. During the second month, the rest of the inventory is sold for $45,000, and the
remaining accounts payable are paid. Cash is distributed at the end of each month, and
the liquidation is completed at the end of the second month.
Refer to the information provided. Assume instead that the remaining inventory was
sold for $10,000 in the second month. What payments will be made to Dennis and Lilly
at the end of the second month?
A. Option A
B. Option B
C. Option C
D. Option D
Which of the following observations concerning claims by general unsecured creditors
is NOT true?
A. They are paid only after secured creditors and unsecured creditors with priority are
satisfied to the extent of any legal limits.
B. They often receive less than the full amount of their claim.
C. They are entitled to “preference payments” at the discretion of the debtor’s
management.
D. The amounts to be paid to them are usually stated as a percentage of the total claim.
The City of Ames uses the consumption method to report its inventory of supplies on its
general fund balance sheet. What account is debited in the general fund when Ames
acquires supplies?
A. Expenditures
B. Inventory of Supplies
C. Supplies Expense
D. Fund Balance—Nonspendable
On January 1, 20X6, Polka Co. (Polka) and Strauss Co. (Strauss) had condensed
balance sheets as follows:
On January 2, 20X6, Polka borrowed $90,000 and used the proceeds to acquire 90% of the
outstanding common shares of Strauss. This debt is payable in ten equal annual principal
and accrued interest payments beginning December 30, 20X6. On the acquisition date, the
fair value of Strauss was $100,000, and the excess cost of the investment over Strauss’s
carrying amount of acquired net assets should be allocated 60% to inventory and 40% to
goodwill.
Noncurrent assets on the January 2, 20X6, consolidated balance sheet should be:
A. $130,000
B. $150,000
C. $134,000
D. $136,000
On January 1, 20X8, Gulfstream Corporation acquired 40 percent of the voting shares
of Hunter Company for $65,000. Hunter reported net income of $45,000 and paid
dividends of $10,000 in 20X8. Gulfstream reported operating income of $50,000 for the
year. There is 80 percent exemption of intercompany dividends and the effective tax
rate is 35 percent. Assume that the equity method is being used.
Based on the preceding information, what amount would Gulfstream report as net
income (after taxes) for the year?
A. $49,240
B. $68,000
C. $64,000
D. $67,500
On January 1, 20X9, Company A acquired 80 percent of the common stock and 60
percent of the preferred stock of Company B, for $400,000 and $60,000, respectively.
At the time of acquisition, the fair value of the common shares of Company B held by
the noncontrolling interest was $100,000. Company B’s balance sheet contained the
following balances:
For the year ended December 31, 20X9, Company B reported net income of $100,000
and paid dividends of $40,000. The preferred stock is cumulative and pays an annual
dividend of 10 percent.
Based on the preceding information, the consolidating entry to prepare the consolidated
financial statements for Company A as of December 31, 20X9 will include a credit to
Investment in Company B—Common Stock for:
A. 506,000
B. 440,000
C. 400,000
D. 500,000
Sky Corporation owns 75 percent of Earth Company’s stock. On July 1, 20X8, Sky sold
a building to Earth for $33,000. Sky had purchased this building on January 1, 20X6,
for $36,000. The building’s original eight-year estimated total economic life remains
unchanged. Both companies use straight-line depreciation. The equipment’s residual
value is considered negligible.
Based on the information provided, the gain on sale of the building eliminated in the
consolidated financial statements for 20X8 is:
A. $8,250.
B. $10,500.
C. $6,000.
D. $11,250.
Agency funds report:
A. only assets and liabilities.
B. assets, liabilities, fund balance, revenues, and expenditures.
C. assets, liabilities, and fund balance.
D. only revenues and expenditures.
Which of the following observations refers to the term differential?
A. Excess of consideration exchanged over fair value of net identifiable assets.
B. Excess of fair value over book value of net identifiable assets.
C. Excess of consideration exchanged over book value of net identifiable assets.
D. Excess of fair value over historical cost of net identifiable assets.
On January 1, 20X1, Poe Corp. sold a machine for $900,000 to Saxe Corp., its
wholly-owned subsidiary. Poe paid $1,100,000 for this machine, which had
accumulated depreciation of $250,000. Poe estimated a $100,000 salvage value and
depreciated the machine on the straight-line method over 20 years, a policy which Saxe
continued. In Poe’s December 31, 20X1, consolidated balance sheet, this machine
should be included in cost and accumulated depreciation as:
Cost Accumulated depreciation
A. $1,100,000 $300,000
B. $1,100,000 $290,000
C. $ 900,000 $40,000
D. $ 850,000 $42,500
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 amounts should be reported under the classifications
of temporarily and permanently restricted net assets?
A. $0 and $110,000 respectively.
B. $110,000 and $0 respectively.
C. $60,000 and $50,000 respectively.
D. $50,000 and $60,000 respectively.
Which of the following observations is NOT consistent with the use of push-down
accounting?
A. The revaluation capital account is part of the subsidiary’s stockholders’ equity.
B. No differential arises in the consolidation process.
C. Revaluation Capital account is eliminated in preparing consolidated statements.
D. Consolidating entries related to the differential are needed in the worksheets.
Estimated gross profit rates may be used to estimate a company’s cost of goods sold and
its ending inventory for:
A. quarterly but not for annual financial statements.
B. both quarterly and annual financial statements.
C. neither quarterly nor annual financial statements.
D. annual but not for quarterly financial statements.
On January 1, 20X8, Wilhelm Corporation acquired 90 percent of Kaiser Company’s
voting stock, at underlying book value. The fair value of the noncontrolling interest was
equal to 10 percent of the book value of Kaiser at that date. Wilhelm uses the equity
method in accounting for its ownership of Kaiser. On December 31, 20X9, the trial
balances of the two companies are as follows:
Based on the preceding information, what amount would be reported as income to
controlling interest in the consolidated financial statements for 20X9?
A. $168,000
B. $138,000
C. $164,000
D. $150,000
Suppose the direct foreign exchange rates in U.S. dollars are:
1 Singapore dollar = $0.7025
1 Cyprus pound = $2.5132
Based on the information given above, how many U.S. dollars must be paid for a
purchase of citrus fruits costing 10,000 Cyprus pounds?
A. $25,132
B. $15,132
C. $3,979
D. $35,775
