1) ASC 270 uses which view of interim reporting?
A.Integral
B.Discrete
C.Segmental
D.Comprehensive
2) 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.
“Red Herring” Prospectus
3) On December 5, 20X8, Texas based Imperial Corporation purchased goods from a
Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 20X9. The
transaction is denominated in Saudi riyals. Imperial’s fiscal year ends on December 31,
and its reporting currency is the U.S. dollar. The exchange rates are:
Based on the preceding information, what journal entry would Imperial make on
January 10, 20X9, to revalue foreign currency payable to equivalent U.S. dollar value?
A.Option A
B.Option B
C.Option C
D.Option D
4) A partnership is a(n):
I. accounting entity.
II. taxable entity.
A.I only
B.II only
C.Neither I nor II
D.Both I and II
5) Levin company entered into a forward contract to speculate in the foreign currency.
It sold 100,000 foreign currency units under a contract dated November 1, 20X8, for
delivery on January 31, 20X9:
In its income statement for the year ended December 31, 20X8, what amount of loss
should Levin report from this forward contract?
A.$0
B.$300
C.$200
D.$100
6) Using the fully adjusted equity method, an intercompany gain on an upstream sale of
land is:
A.recognized by the parent and the deferral is shared between the controlling and
noncontrolling stockholders of the subsidiary
B.recognized by the subsidiary and the deferral is shared between the controlling and
noncontrolling stockholders of the subsidiary
C.deferred by the subsidiary until the land is sold to an entity outside the consolidated
group
D.recognized by the subsidiary and the deferral is completely allocated to the
controlling stockholders of the subsidiary
7) Granite Company issued $200,000 of 10 percent first mortgage bonds on January 1,
20X4, at 105. The bonds mature in 10 years and pay interest semiannually on January 1
and July 1. Mortar Corporation purchased $140,000 of Granite’s bonds from the
original purchaser on December 31, 20X8, for $125,000. Mortar owns 75 percent of
Granite’s voting common stock. Granite’s partial bond amortization schedule is as
follows:
Based on the information given above, what amount of premium on bonds payable will
be eliminated in the preparation of the December 31, 20X9 consolidated financial
statements?
A.$5,097
B.$3,568
C.$5,614
D.$3,930
8) 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.
Assume that the replacement did not happen in November. In December, the company
decided not to replace any of the 1,500 units. The entry required on December 31 to
eliminate valuation accounts related to the inventory that will not be replaced will
include:
A.a debit to Excess of Replacement Cost over LIFO Cost of Inventory Liquidation for
$22,500
B.a credit to Cost of Goods Sold for $15,000
C.a debit to Inventory for $70,000
D.a debit to Inventory for $15,000
9) The transactions described in the following questions occurred in a voluntary health
and welfare organization during the year ended December 31, 20X8. For each
transaction, indicate its effect(s) on the organization’s statement of activities prepared
for the year ended December 31, 20X8. List all effects of transactions affecting more
than one class of net assets. Indicate your choice(s) by entering the letter corresponding
to the effects listed here:
Effects of Transactions on Statement of Activities
A. Increases unrestricted net assets.
B. Decreases unrestricted net assets.
C. Increases temporarily restricted net assets.
D. Decreases temporarily restricted net assets.
E. Increases permanently restricted net assets.
F. Decreases permanently restricted net assets.
G. Transaction is not reported on the statement of activities.
A gain was realized from the sale of securities which were permanently invested. The
gain is restricted as to use.
10) Bill, Page, Larry, and Scott have decided to terminate their partnership. The
partnership’s balance sheet at the time they decide to wind up is as follows:
During the winding up of the partnership, the other assets are sold for $150,000 and the
accounts payable are paid. Page and Larry are personally solvent, but Bill and Scott are
personally insolvent. The partners share profits and losses in the ratio of 3:2:1:4.
Based on the preceding information, what amount will be paid out to Scott upon
liquidation of the partnership?
A.$0
B.$2,500
C.$5,000
D.$6,429
11) A loss on the constructive retirement of a parent’s bonds by a subsidiary is
effectively recognized in the individual accounting records of the parent and its
subsidiary:
I. at the date of constructive retirement.
II. over the remaining term of the bonds.
A.I
B.II
C.Both I and II
D.Neither I nor II
12) The general fund of Caldwell had the following operating budget for the fiscal year
beginning July 1, 20X9:
When the general fund records its operating budget on July 1, 20X9, Budgetary Fund
BalanceUnassigned should be
A.credited for $600,000
B.debited for $900,000
C.debited for $600,000
D.credited for $900,000
13) Assume that a private university collects tuition and fees at the beginning of
summer school, in which two weeks are offered in the first fiscal year and the
remaining six weeks are offered in the second fiscal year. According to the approach
recommended by the National Association of College and University Business Officers
(NACUBO), the university would:
A.record the collections as a debit to Cash and a credit to Deferred Revenue for the
entire amount of the collections
B.record the collections as a debit to Cash and a credit to Restricted current revenue for
the entire amount of the collections
C.account for the entire tuition and fees as revenue in the first fiscal period
D.recognize revenue in the first fiscal period for two-eighths of the tuition and fees and
record six-eighths of the collections as a deferred revenue
14) If 1 British pound can be exchanged for 180 cents of U.S. currency, what fraction
should be used to compute the indirect quotation of the exchange rate expressed in
British pounds?
A.1/180
B.1/.56
C.1.8/1
D.1/1.8
15) Heavy Company sold metal scrap to a Brazilian company for 200,000 Brazilian
reais on December 1, 20X8, with payment due on January 20, 20X The exchange rates
were:
Based on the preceding information, which of the following is true of dollar’s
movement vis–vis Brazilian real during the period?
A.Option A
B.Option B
C.Option C
D.Option D
16) The DEF partnership reported net income of $130,000 for the year ended December
31, 20X8. According to the partnership agreement, partnership profits and losses are to
be distributed as follows:
How should partnership net income for 20X8 be allocated to D, E, and F?
A.Option A
B.Option B
C.Option C
D.Option D
17) Push Company owns 60% of Shove Company’s outstanding common stock.
Intra-entity sales are as follows:
Assume Shove sold the inventory to Push. Using the fully adjusted equity method, what
journal entry would be recorded by Push to defer the unrealized gross profit on
inventory sales to Shove in 20X1?
A.Option A
B.Option B
C.Option C
D.Option D
18) The general fund of Sun City was billed $7,000 for using the services of one of its
internal service funds. The general fund should account for this transaction as a(n)
A.interfund transfer
B.interfund loan
C.interfund service
D.interfund reimbursement for services rendered
19) Denver Corporation owns 25 percent of the voting shares of Alamos Corporation.
In 20X8, Alamos reported net income of $120,000 and paid dividends of $30,000.
Denver uses the equity method to account for this investment. Denver reported taxable
income of $160,000 on its separate operations and has an effective tax rate of 40
percent. There is an 80 percent exemption on intercompany dividends.
Based on the preceding information, income tax expense for Denver for the year 20X8
will be:
A.$67,000
B.$64,600
C.$64,000
D.$66,400
20) Xing Corporation owns 80 percent of the voting common shares of Adams
Corporation. Noncontrolling interest was assigned $24,000 of income in the 20X9
consolidated income statement. What amount of net income did Adams Corporation
report for the year?
A. $150,000
B. $96,000
C. $120,000
D. $30,000
21) Which of the following could be true of the proceedings under Chapter 11 of the
Bankruptcy Code?
A.Always administered by the bankruptcy courts
B.The debtor’s assets are sold and its liabilities extinguished
C.The company does not operate during this period
D.The debtor continues as a business after the reorganization
22) Note: This is a Kaplan CPA Review Question
The Board of Commissioners of the City of Rockton adopted its budget for the year
ending July 31, 20X2, which indicated revenues of $1,000,000 and appropriations of
$900,000. If the budget is formally integrated into the accounting records, what is the
required journal entry?
A.Option A
B.Option B
C.Option C
D.Option D
23) 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. Allen and Daniel agree that some of the
inventory is obsolete. The inventory account is decreased before David is admitted.
David invests $40,000 for a one-fifth interest. What is the amount of inventory written
down?
A.$4,000
B.$20,000
C.$15,000
D.$10,000
24) Mortar Corporation acquired 80 percent of Granite Corporation’s voting common
stock on January 1, 20X7. On December 31, 20X8, Mortar received $390,000 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 equipments on a straight-line basis.
Based on the preceding information, in the preparation of the 20X8 consolidated
financial statements, equipment will be:
A.debited for $1,000
B.debited for $10,000
C.credited for $15,000
D.debited for $25,000
25) Beta Company acquired 100 percent of the voting common shares of Standard
Video Corporation, its bitter rival, by issuing bonds with a par value and fair value of
$150,000. Immediately prior to the acquisition, Beta reported total assets of $500,000,
liabilities of $280,000, and stockholders’ equity of $220,000. At that date, Standard
Video reported total assets of $400,000, liabilities of $250,000, and stockholders’ equity
of $150,000. Included in Standard’s liabilities was an account payable to Beta in the
amount of $20,000, which Beta included in its accounts receivable.
Based on the preceding information, what amount of total assets was reported in the
consolidated balance sheet immediately after acquisition?
A.$650,000
B.$880,000
C.$920,000
D.$750,000
26) Nichols Company owns 90% of the capital stock of a foreign subsidiary located in
Ireland. As a result of translating the subsidiary’s accounts, a debit of $160,000 was
needed in the translation adjustments account so that the foreign subsidiary’s debits and
credits were equal in U.S. dollars. How should Nichols report its translation
adjustments on its consolidated financial statements?
A.As a $144,000 increase in the stockholders’ equity section of the balance sheet
B.As a $144,000 reduction in consolidated comprehensive net income
C.As a $160,000 debit in stockholders’ equity section of the balance sheet
D.As a $160,000 reduction in consolidated comprehensive net income
27) 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 eliminating entry was included in the consolidation
worksheet:
Based on the information given above and assuming a market rate of 6.346 percent,
what is the interest income that must be eliminated in preparing the 20X9 consolidated
financial statements?
A.$33,769
B.$27,957
C.$34,946
D.$16,894
Bristle Corporation acquired 75 percent of Silver Corporation’s common stock on
December 31, 20X8, for $300,000. The fair value of the noncontrolling interest at that
date was determined to be $100,000. Silver’s balance sheet immediately before the
combination reflected the following balances:
A careful review of the fair value of Silver’s assets and liabilities indicated that
inventory, land, and buildings and equipment (net) had fair values of $65,000,
$100,000, and, $300,000 respectively. Goodwill is assigned proportionately to Bristle
and the noncontrolling shareholders.
Based on the preceding information, what amount of buildings and equipment (net) will
be included in the consolidated balance sheet immediately following the acquisition?
28) A.$0
B.$50,000
C.$250,000
D.$300,000
29) Myway Company sold equipment to a Canadian company for 100,000 Canadian
dollars (C$) on January 1, 20X9 with settlement to be in 60 days. On the same date,
Alman entered into a 60-day forward contract to sell 100,000 Canadian dollars at a
forward rate of 1 C$ = $.94 in order to manage its exposed foreign currency receivable.
The forward contract is not designated as a hedge. The spot rates were:
Based on the preceding information, the entry to revalue foreign currency payable to
current U.S. dollar value on March 1 will have:
A.a credit to Foreign Currency Transaction Gain for $1,500
B.a debit to Foreign Currency Transaction Loss for $2,500
C.a debit to Foreign Currency Transaction Loss for $1,500
D.a credit to Foreign Currency Transaction Gain for $1,000
30) On January 1, 20X7, Gild Company acquired 60 percent of the outstanding
common stock of Leeds Company at the book value of the shares acquired. On that
date, the fair value of noncontrolling interest was equal to 40 percent of book value of
Leeds. At the time of purchase, Leeds had common stock of $1,000,000 outstanding
and retained earnings of $800,000.
On December 31, 20X7, Gild purchased 50 percent of Leeds’ bonds outstanding which
were originally issued on January 2, 20X4, at 99. The total bond issue has a face value
of $600,000, pays 10 percent interest annually, and has a 10-year maturity. Any
premium or discount is amortized on a straight-line basis. Gild paid $306,000 for its
investment in Leeds’ bonds and intends to hold the bonds until maturity.
Income and dividends for Gild and Leeds for 20X7 and 20X8 are as follows:
Assume Gild accounts for its investment in Leeds stock using the modified equity
method.
Required:
A) Present the worksheet elimination entries necessary to prepare consolidated financial
statements for 20X7.
B) Present the worksheet elimination entries necessary to prepare consolidated financial
statements for 20X8.
31) The capital projects fund of Hysham completed construction of a new building. The
building should be reported in the:
I. government-wide statement of net assets.
II. capital projects fund.
A.I only
B.II only
C.Either I or II
D.Neither I nor II
32) 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 was the effect of DEF’s purchase of XYZ’s
bond on the noncontrolling interest amount reported in XYZ’s June 30, 20X8,
consolidated balance sheet?
A.No effect
B.$35,000 increase
C.$8,500 decrease
D.$8,500 increase
33) An analysis of Abbey Company’s operating segments provides the following
information:
Refer to the above information. Which of the operating segments above meet the
operating profit (loss) test?
A.B and E
B.A and B
C.A, B, and E
D.A, B, C, and E
34) 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 20X8 will be:
A.$190,000
B.$170,000
C.$175,000
D.$150,000
35) The capital projects fund of Hood River completed construction of an addition to its
city hall at a cost of $4,000,000. The city council approved payment of the amount due
the general contractor, less a 10 percent retainage. How should the capital projects fund
account for the 10 percent retainage?
I. As a credit of $400,000 to Deferred Revenue-Retained Percentage.
II. As a credit for $400,000 to Contracts Payable-Retained Percentage.
A.I only
B.II only
C.Either I or II
D.Neither I nor II
36) A private, not-for-profit university should prepare which of the following financial
statements?
I. statement of financial position.
II. statement of activities.
III. statement of changes in fund balances.
IV. statement of cash flows.
V. statement of changes in financial position.
A.I, II, and III
B.II, III, and IV
C.I, II, and IV
D.II, III, and V
37) Accountants are liable for any materially false or misleading information contained
in the registration statement filed with the SEC up to:
A.the date the registration statement is filed
B.the date of the audit report
C.the effective date of the registration statement
D.the date securities are sold
38) Note: This is a Kaplan CPA Review Question
Grant, Inc. (Grant) acquired 30% of South Co.’s (South) voting stock for $200,000 on
January 1, 20X1. Grant’s 30% interest in South gave Grant the ability to exercise
significant influence over South’s operating and financial policies. On that date, South
reported assets of $500,000 and liabilities of $100,000. South had equipment with a
book value of $60,000 that was actually worth $160,000. The equipment had a
remaining useful life of five years. During 20X1, South reported net income of $80,000
and paid dividends of $50,000. What amount of income should Grant recognize in
20X1 as a result of this investment?
A.$18,000
B.$4,000
C.$15,000
D.$16,750
39) Colton Company acquired 80 percent ownership of Mota Company’s voting shares
on January 1, 2008, at underlying book value. The fair value of the noncontrolling
interest on that date was equal to 20 percent of the book value of Mota Company.
During 2008, Colton purchased inventory for $30,000 and sold the full amount to Mota
Company for $50,000. On December 31, 2008, Mota’s ending inventory included
$10,000 of items purchased from Colton. Also in 2008, Mota purchased inventory for
$80,000 and sold the units to Colton for $100,000. Colton included $30,000 of its
purchase from Mota in ending inventory on December 31, 2008. Summary income
statement data for the two companies revealed the following:
Required:
a. Compute the amount to be reported as sales in the 20X8 consolidated income
statement.
b. Compute the amount to be reported as cost of goods sold in the 20X8 consolidated
income statement.
c. What amount of income will be assigned to the noncontrolling shareholders in the
20X8 consolidated income statement?
d. What amount of income will be assigned to the controlling interest in the 20X8
consolidated income statement?
