ASC 958 requires that an “other not-for-profit entity” (ONPO) provide three financial
statements. Which of the following is NOT one among them?
A. A statement of functional expenses
B. A statement of financial position
C. A statement of activities
D. A statement of cash flows
An internal service fund had the following transactions during the year ended June 30,
20X9, its first year of existence:
(1) Received $1,000,000 contribution from the general fund.
(2) Acquired fleet of cars for $950,000, paying cash.
(3) Billed departments in other funds $500,000 for using cars.
(4) Incurred operating costs, exclusive of depreciation, of $240,000.
(5) Depreciation expense amounted to $250,000.
Refer to the above information. On the internal service fund’s balance sheet at June 30,
20X9, net assets-unrestricted should be reported at:
A. $260,000.
B. $310,000.
C. $550,000.
D. $1,250,000.
Janet Corporation holds 75 percent of Slider Corporation’s voting common stock,
acquired at book value. The fair value of the noncontrolling interest at the date of
acquisition was equal to 25 percent of the book value of Slider Corporation. On
December 31, 20X8, Slider Corporation acquired 25 percent of Janet Corporation’s
stock. Slider records dividends received from Janet as nonoperating income. In 20X9,
Janet reported operating income of $100,000 and paid dividends of $40,000. During the
same year, Slider reported operating income of $75,000 and paid $20,000 in dividends.
Based on the information provided, what amount will be reported as consolidated net
income for 20X9 under the treasury stock method?
A. $150,000
B. $100,000
C. $75,000
D. $175,000
A private college received an offer from a CPA who is an alumnus to teach a
one-semester advanced accounting course at no cost. ASC 958 prescribes that this
contribution of service:
A. need only be disclosed in the footnotes to the financial statements.
B. be recorded as an asset with an equivalent amount recorded in the unrestricted fund
balance.
C. be recorded as a revenue with an equivalent amount recorded as an expenditure.
D. need not be recorded if the service is for a period less than one academic year.
On January 1, 20X7, Yang Corporation acquired 25 percent of the outstanding shares of
Spiel Corporation for $100,000 cash. Spiel Company reported net income of $75,000
and paid dividends of $30,000 for both 20X7 and 20X8. The fair value of shares held
by Yang was $110,000 and $105,000 on December 31, 20X7 and 20X8 respectively.
Based on the preceding information, what amount will be reported by Yang as income
from its investment in Spiel for 20X8, if it used the equity method of accounting?
A. $7,500
B. $11,250
C. $18,750
D. $26,250
During its inception, Devon Company purchased land for $100,000 and a building for
$180,000. After exactly 3 years, it transferred these assets and cash of $50,000 to a
newly created subsidiary, Regan Company, in exchange for 15,000 shares of Regan’s
$10 par value stock. Devon uses straight-line depreciation. Useful life for the building
is 30 years, with zero residual value. An appraisal revealed that the building has a fair
value of $200,000.
Based on the preceding information, Regan Company will report
A. additional paid-in capital of $0.
B. additional paid-in capital of $150,000.
C. additional paid-in capital of $162,000.
D. additional paid-in capital of $180,000.
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 stockholders’ equity was reported
in the consolidated balance sheet immediately after acquisition?
A. $220,000
B. $150,000
C. $370,000
D. $350,000
Which of the following statements concerning the management discussion and analysis
(MD&A) of a company’s financial condition is true?
I. It should cover the financial statements and other statistical data for the most recent
three-year time span.
II. It should make year-to-year comparisons of material changes in the line items.
III. Management need not explain the cause(s) of the material changes.
IV. Disclosure of material off-balance sheet transactions, arrangements, and obligations
is required in each annual and each quarterly report.
A. I, II, and IV
B. II and III
C. I, III, and IV
D. I, II, III, and IV
A private, not-for-profit hospital received contributions of $50,000 from donors on June
15, 20X9. The donors stipulated that their contributions be used to purchase equipment
for the hospital. As of June 30, 20X9, the end of the hospital’s fiscal year, $12,000 of
the contributions had been spent on equipment acquisitions. In the hospital’s general
fund, what account would be credited to recognize the release of the restrictions on the
temporarily restricted contributions used to acquire equipment?
A. Revenue released from equipment acquisition restriction
B. Other financing sources
C. Net assets released from equipment acquisition restriction
D. Unrestricted net assets released from equipment acquisition restriction
The adjusted trial balance for White River for the fiscal year ended June 30, 20X9, is
presented below.
Required:
a. Prepare a statement of revenues, expenditures, and changed in fund balance for White
River for the year ended June 30, 20X9. Assume there were no supplies or outstanding
encumbrances at the beginning of the year.
b. Prepare a balance sheet for White River at June 30, 20X9.
Sub Company sells all its output at 20 percent above cost to Par Corporation. Par
purchases its entire inventory from Sub. The incomes reported by the companies over
the past three years are as follows:
Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6,
20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000,
$157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70
percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair
value of the noncontrolling interest at the date of acquisition was equal to 30 percent of
the book value of Sub Company.
Based on the information given above, what will be the income assigned to controlling
interest for 20X7?
A. $448,375
B. $495,000
C. $486,250
D. $615,375
When one company purchases the debt of an affiliate from an unrelated party, a gain or
loss on the constructive retirement of debt is recognized by which of the following?
Partner A has a smaller capital balance than Partner L. Partner A, however, has a higher
profit-and-loss-sharing percentage than Partner L. The LA partnership has decided to
liquidate. As a result of the information given,
A. Partner L will have a smaller loss absorption power than A.
B. Partner L will receive cash only after A has received cash.
C. Partner A will have a smaller loss absorption power than L.
D. Partner A will never receive any cash from partnership liquidation.
ABC Corporation owns 75 percent of XYZ Company’s voting shares. During 20X8,
ABC produced 50,000 chairs at a cost of $79 each and sold 35,000 chairs to XYZ for
$90 each. XYZ sold 18,000 of the chairs to unaffiliated companies for $117 each prior
to December 31, 20X8, and sold the remainder in early 20X9 to unaffiliated companies
for $130 each. Both companies use perpetual inventory systems.
Based on the information given above, what amount of cost of goods sold must be
eliminated from the consolidated income statement for 20X9?
A. $187,000
B. $221,000
C. $1,422,000
D. $2,963,000
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
The fair value of net identifiable assets of a reporting unit of X Company is $300,000.
On X Company’s books, the carrying value of this reporting unit’s net assets is
$350,000, including $60,000 goodwill. If the fair value of the reporting unit as a whole
is $335,000, what amount of goodwill impairment will be recognized for this unit?
A. $0
B. $10,000
C. $25,000
D. $35,000
X Corporation owns 80 percent of Y Corporation’s common stock and 40 percent of Z
Corporation’s common stock. Additionally, Y Corporation owns 35 percent of Z
Corporation’s common stock. The acquisitions were made at book values. The
following information is available for 20X8:
Based on the information provided, what amount will be reported as dividends declared
in X Corporation’s 20X8 consolidated retained earnings statement?
A. $30,000
B. $50,000
C. $60,000
D. $0
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
Arlington has a debt service fund which it uses to pay the principal and interest on its
$2,000,000 of general long-term debt. Interest at 5 percent is due on October 1 and
April 1. On October 1, 20X8, and April 1, 20X9, Arlington’s debt service fund paid
$50,000 of interest due on its bonds. On the balance sheet prepared on June 30, 20X9,
for Arlington’s debt service fund, interest payable should be reported at:
A. $0.
B. $16,667.
C. $25,000
D. $50,000.
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.
Current assets on the January 2, 20X6, consolidated balance sheet should be:
A. $79,000
B. $120,000
C. $90,000
D. $96,000
Sub Company sells all its output at 20 percent above cost to Par Corporation. Par
purchases its entire inventory from Sub. The incomes reported by the companies over
the past three years are as follows:
Sub Company sold inventory for $300,000, $262,500 and $337,500 in the years 20X6,
20X7, and 20X8 respectively. Par Company reported ending inventory of $105,000,
$157,500 and $180,000 for 20X6, 20X7, and 20X8 respectively. Par acquired 70
percent of the ownership of Sub on January 1, 20X6, at underlying book value. The fair
value of the noncontrolling interest at the date of acquisition was equal to 30 percent of
the book value of Sub Company.
Based on the information given above, what will be the income to controlling interest
for 20X8?
A. $615,375
B. $686,250
C. $690,000
D. $694,000
Which of the following observations is true of forward contracts?
A. Substantial margin is required to initiate a contract.
B. Must be completed either with the underlying’s future delivery or net cash
settlement.
C. Cannot be customized; for a specific amount at a specific date.
D. Usually settled with a net cash amount prior to maturity date.
Tom, Dick, and Harry are partners in an equipment leasing business that has not been
able to generate the type of revenue expected by the partners. They share profits and
losses in a ratio of 5:3:2. They have decided to liquidate the business and have sold all
the assets except for one piece of heavy machinery. All partnership liabilities have been
settled and all the partners are personally insolvent. The machinery has a book value of
$85,000, and the partners have capital account balances as follows:
Each of the following are independent cases.
Refer to the information given above. What amount of cash will each partner receive as
a liquidating distribution if the machinery is sold for 33,000 dollars?
A. Option A
B. Option B
C. Option C
D. Option D
Based on the information given above, in the preparation of the 20X3 consolidated
financial statements, interest income will be
A. credited for $15,982 in the consolidation entries.
B. debited for $15,982 in the consolidation entries.
C. debited for $21,000 in the consolidation entries.
D. credited for $21,000 in the consolidation entries.
X Corporation owns 80 percent of Y Corporation’s common stock and 40 percent of Z
Corporation’s common stock. Additionally, Y Corporation owns 35 percent of Z
Corporation’s common stock. The acquisitions were made at book values. The
following information is available for 20X8:
Based on the information provided, what amount of income will be assigned to the
noncontrolling interest in the 20X8 consolidated income statement?
A. $23,750
B. $25,000
C. $18,000
D. $33,750
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: Received contributions restricted by donors for equipment acquisition.
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.
When a new partner is admitted into a partnership and the capital of the old partners
decreases, which of the following explains the reason for the decrease?
I. Undervalued liabilities were written up to their fair values.
II. Undervalued assets were written up to their fair values.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
Earth Company owns 100 percent of the capital stock of both Mars Corporation and
Venus Corporation. Mars purchases merchandise inventory from Venus at 125 percent
of Venus’s cost. During 20X8, Venus sold inventory to Mars that it had purchased for
$25,000. Mars sold all of this merchandise to unrelated customers for $56,892 during
20X8. In preparing combined financial statements for 20X8, Earth’s bookkeeper
disregarded the common ownership of Mars and Venus.
Based on the information given above, what amount should be eliminated from cost of
goods sold in the combined income statement for 20X8?
A. $31,250
B. $25,000
C. $56,892
D. $6,250
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 expense should be
reported in the 20X8 consolidated income statement?
A. $0
B. $6,548
C. $6,511
D. $19,643
Which of the following defines a foreign-based entity that uses a functional currency
different from the local currency?
I. A U.S. subsidiary in Britain maintains its accounting records in pounds sterling, with
the majority of its transactions denominated in pounds sterling.
II. A U.S. subsidiary in Peru conducts virtually all of its business in Latin America, and
uses the U.S. dollar as its major currency.
A. I.
B. II.
C. Both I and II.
D. Neither I nor II.
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, what balance in accounts receivable did Y Company
report at December 31, 20X8?
A. $28,000
B. $48,000
C. $40,000
D. $38,000
The Jamestown Corporation (Jamestown) reported net income for the current year of
$200,000 and paid cash dividends of $30,000. The Stadium Company (Stadium) holds
22 percent of the outstanding voting stock of Jamestown. However, another corporation
holds the other 78 percent ownership and does not take Stadium’s wants and wishes
into consideration when making financing and operating decisions for Jamestown.
What investment income should Stadium recognize for the current year?
A. $6,600
B. $0
C. $44,000
D. $50,600
