1) For a Voluntary Health and Welfare Organization, what entry is prepared when the
restriction on a cash donation is met?
A) Debit Unrestricted Net Assets, Credit Restricted Net Assets
B) Debit Unrestricted Fund Balance, Credit Restricted Fund Balance
C) Debit Restricted Fund Balance, Credit Unrestricted Fund Balance
D) Debit Temporarily Restricted Net Assets – Reclassifications out, Credit Unrestricted
Net Assets – Reclassifications in
2) The acquisition of treasury stock by a subsidiary from noncontrolling shareholders at
a price above book value
A) decreases the parent’s share of subsidiary book value and decreases the parent’s
ownership percentage
B) decreases the parent’s share of subsidiary book value and increases the parent’s
ownership percentage
C) increases the parent’s share of subsidiary book value and decreases the parent’s
ownership percentage
D) increases the parent’s share of subsidiary book value and increases the parent’s
ownership percentage
3) Approved or authorized expenditures that provide legislative control over the
expenditure budget are referred to as
A) appropriations
B) allotments
C) allocations
D) encumbrances
4) Everything else held constant, if the tax-exempt status of municipal bonds were
eliminated, then
A) the interest rates on municipal bonds would still be less than the interest rate on
Treasury bonds
B) the interest rate on municipal bonds would equal the rate on Treasury bonds
C) the interest rate on municipal bonds would exceed the rate on Treasury bonds
D) the interest rates on municipal, Treasury, and corporate bonds would all increase
5) US government bonds have no default risk because
A) they are backed by the full faith and credit of the federal government
B) the federal government can increase taxes to pay its obligations
C) they are backed with gold reserves
D) they can be exchanged for silver at any time
6) An enterprise has eight reporting segments. Five segments show an operating profit
and three segments show an operating loss. In determining which segments are
classified as reporting segments under the operating profits test, which of the following
statements is correct?
A) The test value for all segments is 10% of consolidated net profit
B) The test value for profitable segments is 10% or more of those segments reporting a
profit, and the test value for loss segments is 10% or more of those segments reporting a
loss
C) The test value for loss segments is 10% of the greater of (a) the absolute value of the
sum of those segments reporting losses, or (b) 10% of consolidated net profit
D) The test value for all segments is 10% of the greater of (a) the absolute value of the
sum of those segments reporting profits, or (b) the absolute value of the sum of those
segments reporting losses
7) Under the Uniform Probate Code, the personal representative must inform the heirs
and devisees of his or her appointment and provide other selected information within
how many days of the appointment?
A) 10 days
B) 20 days
C) 30 days
D) 60 days
8) Differences in ________ explain why interest rates on Treasury securities are not all
the same
A) risk
B) liquidity
C) time to maturity
D) tax characteristics
9) On October 4, 2010, Sooty Corporation borrowed 250,000 British pounds from a
London bank, evidenced by an interest-bearing note payable due in one year. The note
was payable in pounds. Exchange rates for pounds were:
October 4, 2010$1.59
December 31, 2010$1.55
October 4, 2011$1.61
What exchange gain or loss appeared on Sooty’s 2011 income statement?
A) a loss of $15,000
B) a loss of $5,000
C) a gain of $15,000
D) a gain of $5,000
10) The following are transactions for the city of Salem.
a.Incurred salaries of $44,000 to be paid next month.
b.Tax bills totaling $500,000 mailed to city residents.
c.Paid salaries above.
d.Computer equipment received in the amount of $11,000, to be paid in 30 days.
Required:
Analyze the above transactions by using the accounting equation for a governmental
fund.
11) Parnaby has 25,000 common stock shares outstanding and its 100%-owned
subsidiary Sandal has 5,000 common stock shares outstanding. Parnaby and Sandal do
not have any potentially dilutive securities outstanding. The separate net incomes for
Parnaby and Sandal is $150,000 and $75,000 respectively. Diluted EPS for the
consolidated company is
A) $5.00
B) $6.00
C) $7.50
D) $9.00
12) According to FASB Statement 141R, which one of the following items may not be
accounted for as an intangible asset apart from goodwill?
A) A production backlog
B) A talented employee workforce
C) Noncontractual customer relationships
D) Employment contracts
13) Which of the following statements is true?
A) A liquid asset is one that can be quickly and cheaply converted into cash
B) The demand for a bond declines when it becomes less liquid, decreasing the interest
rate spread between it and relatively more liquid bonds
C) The differences in bond interest rates reflect differences in default risk only
D) The corporate bond market is the most liquid bond market
14) Anthony Company declared and paid $20,000 of dividends during 2011 . The
schedule of dividends follows:
Date Dividend Declared & Paid Amount Paid
March 31, 2011$5,000
June 30, 2011$5,000
September 30, 2011$5,000
December 31, 2011$5,000
Anthony Company was acquired on June 1, 2011 by Google Company. Google
acquired 100 percent of Anthony Company. Both companies have a December 31 fiscal
year end. What is the amount of preacquisition dividends in 2011?
A) 0
B) $5,000
C) $10,000
D) $15,000
15) Firms must conduct impairment tests more frequently than annually when
A) other shareholders hold more than 50% interest
B) a more-likely-than-not expectation exists that a reporting unit will be sold or
disposed of
C) a specific unit does not have publicly traded stock
D) using the equity method
16) Which of the following is a true statement regarding the recording of a transaction
which involves foreign currency?
A) A transaction is always settled in the currency in which it is denominated
B) A transaction is always measured in the currency in which it is denominated
C) A transaction is always settled in the currency in which it is measured
D) A transaction is always recorded in the currency in which it is denominated
17) The proper sequence of events is
A) purchase order, appropriation, encumbrance, expenditure
B) purchase order, encumbrance, expenditure, appropriation
C) appropriation, encumbrance, purchase order, expenditure
D) appropriation, purchase order, encumbrance, expenditure
18) Sandpiper Inc. acquired a 30% interest in Shore Corporation for $27,000 cash on
January 1, 2011, when Shore’s stockholders’ equity consisted of $30,000 of capital stock
and $20,000 of retained earnings. Shore Corporation reported net income of $18,000 for
2011 . The allocation of the $12,000 excess of cost over book value acquired on January
1 is shown below, along with information relating to the useful lives of the items:
Overvalued receivables (collected in 2011)$(600)
Undervalued inventories (sold in 2011)2,400
Undervalued building (6 years’ useful life remaining at January 1, 2011)3,600
Undervalued land900
Unrecorded patent (8 years’ economic life remaining at January 1, 2011)3,200
Undervalued accounts payable (paid in 2011) (300)
Total of excess allocated to identifiable assets and liabilities9,200
Goodwill 2,800
Excess cost over book value acquired$12,000
Required:
Determine Sandpiper’s investment income from Shore for 2011 .
19) Plower Corporation acquired all of the outstanding voting common stock of the
Squab Corporation several years ago when the book values and fair values of Squab’s
net assets were equal.
On April 1, 2010, Plower sold land that cost $25,000 to Squab for $40,000. Squab
resold the land for $45,000 on December 1, 2012 .
On July 1, 2012, Plower sold equipment with a book value of $10,000 to Squab for
$26,000. Squab is depreciating the equipment over a four-year period using the
straight-line method. The equipment has no salvage value.
Required:
The first two columns in the working papers presented below summarize income
statement information from the separate company financial statements of Plower and
Squab for the year ended December 31, 2012 . Fill in the consolidated working paper
columns to show how each of the items from the separate company reports will appear
in the consolidated income statement for the year ended December 31, 2012 .
20) Several years ago, Pilot International purchased 70% of the outstanding stock of
Skyway Incorporated, at a time when Skyway’s book values were equal to its fair
values. On January 1, 2009, Skyway purchased a truck for $80,000 which had no
salvage value with a useful life of 8 years, depreciated on a straight-line basis. On
January 1, 2012, Skyway sold the truck to Pilot Corporation for $28,000. The truck was
estimated to have a five-year remaining life on this date, and no salvage value. All
affiliates use the straight-line depreciation method.
Required:
Prepare all relevant entries with respect to the truck.
1>Record the journal entries on Pilot’s books for 2012 .
2>Record the journal entries on Skyway’s books for 2012 .
3>Prepare the consolidation entries required for Pilot and subsidiary for 2012 as a result
of this transaction.
21) On January 2, 2011, Power Incorporated paid $630,000 for a 90% interest in
Smallsen Company. Smallsen’s equity at that time amounted to $600,000, and their
book values for assets and liabilities recorded approximated their fair values. Smallsen
did not issue any additional stock in 2011 . At December 31, 2011, the two companies’
balance sheets are summarized as follows:
Power Incorporated and Subsidiary
Consolidated Balance Sheet Working Papers
at December 31, 2011
Required: Complete the consolidation worksheet for Power Incorporated and
Subsidiary at December 31, 2011 .
22) The Catt, Dogg, and Eustus partnership was dissolved by the partners in early
2011 . On March 1, the partners prepared the following financial statement before
commencement of final liquidation:
Cash$80,000Accounts payable$125,000
Accounts Receivable160,000Notes payable70,000
Inventory130,000Loan from Dogg5,000
Loan to Catt10,000Catt, capital (20%)130,000
Loan to Eustus15,000Dogg, capital (20%)95,000
Plant assets-net210,000Eustus, capital(60%)180,000
Total assets$605,000Total liab./equity$605,000
Liquidation events in March were as follows:
– Receivables recorded at $120,000 were collected at $110,000;
– Inventory recorded at cost of $80,000 was sold for $60,000;
– Plant assets with a book value of $100,000 were sold for $140,000.
Required:
Determine how the available cash on March 31, 2011 should be distributed.
