1) On November 30, 2013, Piani Incorporated purchased for cash of $25 per share all
400,000 shares of the outstanding common stock of Surge Company. Surge ‘s balance
sheet at November 30, 2013, showed a book value of $8,000,000. Additionally, the fair
value of Surge’s property, plant, and equipment on November 30, 2013, was $1,200,000
in excess of its book value. What amount, if any, will be shown in the balance sheet
caption “Goodwill” in the November 30, 2013, consolidated balance sheet of Piani
Incorporated, and its wholly owned subsidiary, Surge Company?
a.$0
b.$800,000
c.$1,200,000
d.$2,000,000
2) When a truck is received by a governmental unit, it should be recorded in the
General Fund as a(n)
a.appropriation
b.encumbrance
c.expenditure
d.fixed asset
3) GASB No. 35 allows public colleges and universities to:
a.apply guidance designed for special-purpose governments
b.use FASB standards to permit consistent reporting
c.optionally follow FASB standards
d.none of the above is correct
4) On January 1, 2013 S Corporation sold equipment that cost $120,000 and had a book
value of $48,000 to P Corporation for $60,000. P Corporation owns 100% of S
Corporation and the equipment has a 4-year remaining life. What is the effect of the
sale on P Corporations Equity from Subsidiary Income account for 2014?
a.no effect
b.increase of $12,000
c.decrease of $12,000
d.increase of $3,000
5) When a new corporation is formed to acquire two or more other corporations and the
acquired corporations cease to exist as separate legal entities, the result is a statutory
a.acquisition
b.combination
c.consolidation
d.merger
6) One difference between IFRS and GAAP in valuing inventories is that
a.IFRS, but not GAAP, allows reversals so that inventories written down under
lower-of-cost-or-market can be written back up to the original cost
b.GAAP defines market value as replacement cost where IFRS defines market as the
selling price
c.GAAP strictly adheres to the historical cost concept and does not allow for
write-downs of inventory values while IFRS embraces fair value
d.IFRS, but not GAAP, requires that inventories be valued at the lower of cost or
market
7) Property, plant and equipment are valued at
a.historical cost under both IFRS and US GAAP
b.historical cost or revalued amounts under both IFRS and US GAAP
c.revalued amounts under IFRS
d.historical cost under US GAAP while IFRS allows the assets to be valued at either
historical cost or revalued amounts
8) Under the temporal method, monetary assets and liabilities are translated by using
the exchange rate existing at the:
a.beginning of the current year
b.date the transaction occurred
c.balance sheet date
d.None of these
9) On April 1, 2014, Manatee Company entered into two forward exchange contracts to
purchase 300,000 euros each in 90 days. The relevant exchange rates are as follows:
Forward Rate
Spot rateFor Aug. 1, 2014
April 1, 20141.161.17
April 30, 2014 (year-end)1.201.18
The first forward contract was to hedge a purchase of inventory on April 1, payable on
December 1. On April 30, what amount of foreign currency transaction loss should
Manatee report in income?
a.$0
b.$3,000
c.$9,000
d.$12,000
10) At December 31, 2014, Mick and Keith are partners with capital balances of
$250,000 and $150,000, and they share profits and losses in the ratio of 2:1,
respectively. On this date, Jumpin Jack invests $125,000 cash for a one-fifth interest in
the capital and profit of the new partnership. The partners agree that the implied
partnership goodwill is to be recorded simultaneously with the admission of Jumpin
Jack. The total implied goodwill of the firm is
a.$25,000
b.$20,000
c.$45,000
d.$100,000
11) SFAS No.162, the Accounting Standards Codification, is directed to
a.auditors
b.Boards of Directors
c.securities regulators
d.entities
12) On January 1, 2013, Poole Company purchased 75% of the common stock of
Swimmer Company. Separate balance sheet data for the companies at the combination
date are given below:
Swimmer Co.Swimmer Co.
Poole Co.Book ValuesFair Values
Cash$ 24,000$206,000$206,000
Accounts receivable144,00026,00026,000
Inventory132,00038,00060,000
Land78,00032,00060,000
Plant assets700,000300,000350,000
Acc. depreciation(240,000)(60,000)
Investment in Swimmer Co. 440,000
Total assets$1,278,000$542,000$702,000
Accounts payable$206,000$142,000$142,000
Capital stock800,000300,000
Retained earnings 272,000 100,000
Total liabilities & equities$1,278,000$542,000
Determine below what the consolidated balance would be for each of the requested
accounts on January 2, 2013.
What amount of goodwill will be reported?
a.$26,667
b.$20,000
c.$42,000
d.$86,667
13) P Company owns an 80% interest in S Company. During 2014, S sells merchandise
to P for $200,000 at a profit of $40,000. On December 31, 2014, 50% of this
merchandise is included in Ps inventory. Income statements for P and S are summarized
below:
P __ S__
Sales$1,200,000$600,000
Cost of Sales (600,000) (400,000)
Operating Expenses (300,000) ( 80,000)
Net Income (2014) $300,000 $120,000
Noncontrolling interest in income for 2014 is:
a.$4,000
b.$19,200
c.$20,000
d.$24,000
14) A city should record depreciation as an expense in its
a.general fund and enterprise fund
b.internal service fund and general fund
c.enterprise fund and internal service fund
d.enterprise fund and capital projects fund
15) The defense tactic that involves purchasing shares held by the would-be acquiring
company at a price substantially in excess of their fair value is called
a.poison pill
b.pac-man defense
c.greenmail
d.white knight
16) The partnership of Mick, Keith, and Charlie has been dissolved and is in the process
of liquidation. On July 1, 2014, just before the second cash distribution, the assets and
equities of the partnership along with residual profit sharing ratios were as follows:
AssetsLiabilities & Equities
Cash$ 200,000Liabilities$ 150,000
Receivables-net50,000Mick, Capital 50%100,000
Inventories150,000Keith, Capital 30%175,000
Equipment-net 100,000Charlie, Capital 20% 75,000
Total assets$ 500,000Total Lia & Equity 500,000
Assume that Mick takes equipment with a fair value of $40,000 and a book value of
$50,000 in partial satisfaction of his equity in the partnership. If all the $200,000 cash is
then distributed, the partners should receive:
MickKeithCharlie
a.$100,000$60,000$40,000
b.25,00015,00010,000
c. – 0 45,0005,000
d. – 050,000 – 0
17) The noncontrolling interest in consolidated income when the selling affiliate is an
80% owned subsidiary is calculated by multiplying the noncontrolling minoritydelete
minority ownership percentage by the subsidiarys reported net income
a.plus unrealized profit in ending inventory less unrealized profit in beginning
inventory
b.plus realized profit in ending inventory less realized profit in beginning inventory
c.less unrealized profit in ending inventory plus realized profit in beginning inventory
d.less realized profit in ending inventory plus realized profit in beginning inventory
18) Offsetting a partner’s loan balance against his debit capital balance is referred to as
the
a.marshaling of assets
b.right of offset
c.allocation of assets
d.liquidation of assets
19) Which of the following funds frequently does not have a fund balance?
a.General fund
b.Agency fund
c.Special revenue fund
d.Capital projects fund
20) Dividends declared by a subsidiary are eliminated against dividend income
recorded by the parent under the
a.partial equity method
b.equity method
c.cost method
d.equity and partial equity methods
21) The workpaper eliminating entry for a stock dividend declared by the subsidiary
includes a
a.debit to Stock Dividends Declared – S Co
b.debit to Noncontrolling interest
c.credit to Stock Dividends Declared – S Co
d.debit to Dividend Income
22) Which of the following is not a component of other comprehensive income under
GAAP?
a.earnings
b.gains and losses that bypass earnings
c.impairment losses
d.accumulated other comprehensive income
23) If a subsidiary issues new shares of its stock to noncontrolling stockholders, the
book value of the parents interest in the subsidiary may
a.increase
b.decrease
c.remain the same
d.increase, decrease, or remain the same
24) On January 1, 2011, Panel Company acquired 90% of the common stock of
Singapore Company for $650,000. At that time, Singapore had common stock ($5 par)
of $500,000 and retained earnings of $200,000.
On January 1, 2013, Singapore issued 20,000 shares of its unissued common stock, with
a market value of $7 per share, to noncontrolling stockholders. Singapores retained
earnings balance on this date was $300,000. Any difference between cost and book
value relates to Singapores land. No dividends were declared in 2013.
Required:
A.Prepare the entry on Panels books to record the effect of the issuance assuming the
cost method.
B.Prepare the elimination entries for the preparation of a consolidated statements
workpaper on December 31, 2013 assuming the cost method.
25) All NNOs have current restricted funds and unrestricted funds except
a.colleges and universities
b.hospitals
c.VHWOs
d.ONNOs
26) ParkerCompany owns 90% of the outstanding common stock of Stagger Company.
On January 1, 2014, Stagger Company issued $500,000, 12%, ten-year bonds.
On January 1, 2013, Parker Company paid $315,000 for Stagger Company bonds with a
par value of $300,000 and a carrying value of $297,600. Both companies use the
straight-line method to amortize bond premiums and discounts. Parker Company
accounts for the investment using the cost method of accounting.
The total gain or loss on the constructive retirement of the debt to be reported in the
2013 consolidated income statement is
a.$15,000 loss
b.$15,000 gain
c.$17,400 loss
d.$17,400 gain
e.$ 2,400 loss
27) Advertising costs may be accrued or deferred to provide an appropriate expense in
each period for
InterimAnnual
ReportingReporting
a. YesNo
b.YesYes
c.NoNo
d.NoYes
28) On January 1, 2013, Lester Company purchased 70% of Stork Corporation’s $5 par
common stock for $600,000. The book value of Stork net assets was $640,000 at that
time. The fair value of Stork’s identifiable net assets were the same as their book value
except for equipment that was $40,000 in excess of the book value. In the January 1,
2013, consolidated balance sheet, goodwill would be reported at
a.$152,000
b.$177,143
c.$80,000
d.$0
29) Most property, plant and equipment transactions of hospitals are accounted for in
the
a.fund for renewals and replacements
b.general fund
c.plant replacement and expansion fund
d.unexpended plant fund
Internal Service Fund billings to government departments for services rendered is an
example of interfund30) a.reimbursements
b.transfers
c.services provided and used
d.loans
31) On January 1, 2009, Panda Company purchased 16,000 of the 20,000 outstanding
common shares of Simian Company for $760,000. On January 1, 2013, Panda
Company sold 2,000 of its shares of Simian Company on the open market for $90 per
share. Simian Companys stockholders equity on January 1, 2009, and January 1, 2013,
was as follows:
1/1/091/1/13
Common stock, $10 par value$200,000$ 200,000
Other contributed capital200,000200,000
Retained earnings 400,000 700,000
$800,000$1,100,000
The difference between implied and book value is assigned to Simian Companys land.
Assuming no other equity transactions, the amount of the difference between implied
and book value that would be added to land on a workpaper for the preparation of
consolidated statements on December 31, 2013, would be
a.$120,000
b.$115,000
c.$105,000
d.$84,000
e.None of these
32) What effect does a stock dividend have on theconsolidated statements workpaper in
the yearof declaration? In subsequent periods?
33) In what funds would you expect bonds payable to be included?
34) NNOs distinguish between restricted and un restricted funds. Why is this distinction
important?
35) The parent companys share of the fair value of the net assets of a subsidiary may
exceed acquisition cost. How must this excess be treated in the preparation of
consolidated financial statements?
36) Define currency exchange rates and distinguish between direct and indirect
quotations.
37) What segmental disclosures are required, if any, for interim reports?
38) What effect does a noncontrolling interest have on the amount of intercompany
receivables and payables eliminated on a consolidated balance sheet?