Archives: Quiz

1) Polka Corporation exchanges 100,000 shares of newly issued $1 par value common stock with a fair market value of $20 per share for all of the outstanding $5 par value common stock of Spot Inc. and Spot is then […]

1) Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussi’s book value. The excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of the outstanding common stock […]

1) In reference to the probate process, which of the following statements is correct? A) The personal representative of the deceased can file a petition with the appropriate probate court requesting that an existing will be probated B) The Uniform […]

1) On December 31, 2010, Parminter Corporation owns an 80% interest in the common stock of Sanchez Corporation and an 80% interest in Sanchez’s preferred stock. On December 31, 2010, Sanchez’s stockholders’ equity was as follows: 10% preferred stock, cumulative, […]

1) According to the liquidity premium theory, a yield curve that is flat means that A) bond purchasers expect interest rates to rise in the future B) bond purchasers expect interest rates to stay the same C) bond purchasers expect […]

1) The ________ of the term structure of interest rates states that the interest rate on a long-term bond will equal the average of short-term interest rates that individuals expect to occur over the life of the long-term bond, and […]

1) The following are transactions for the city of Greenville. a.Issued $50,000 10-year bonds. b.Used $30,000 of the cash to buy a truck. c.Sold the truck that was replaced which had cost $28,000, for $2,000. The old truck was fully […]

1) Paglia Corporation owns 80% of Aburn Corporation and has separate net income of $200,000 for 2010 . Aburn Corporation has separate net income of $100,000 and owns 70% of the outstanding stock of Badley Corporation. Badley Corporation has separate […]

1) Anthony and Cleopatra create a joint venture to distribute artifacts. Anthony contributes 70% and Cleopatra 30% of the cash for assets purchased from Tomb Company. How would Anthony report information about Cleopatra on Anthony’s financial statements? A) Not at […]

1) How does GAAP view interim accounting periods? A) As discrete units for which net income may be separately determined B) As integral units of the entire year for which each interim period is an essential part of an annual […]

1) Pardo Corporation paid $140,000 for a 70% interest in Spedeal Inc. on January 1, 2011, when Spedeal had Capital Stock of $50,000 and Retained Earnings of $100,000. Fair values of identifiable net assets were the same as recorded book […]

1) Earth Company, Fire Incorporated, and Wind Incorporated created a joint venture to market their products on the internet. Earth owns 40% of the stock, Fire owns 45% of the stock and Wind owns the remaining 15%. Which firms should […]

1) The financial statements of a proprietary fund are similar to those of a business enterprise except for A) proprietary funds do not report income taxes on the operating statement B) proprietary funds do not have paid-in capital or capital […]

1) A parent corporation owns 55% of the outstanding voting common stock of one domestic subsidiary. The parent has control over the subsidiary. Which of the following statements is correct? A) The parent corporation must prepare consolidated financial statements for […]

1) Which of the following phrases is frequently used to refer to estate or trust accounting? A) Non-profit accounting B) Testamentary accounting C) Fiduciary accounting D) All of the above phrases are used to refer to estate or trust accounting. […]

1) An inverted yield curve predicts that short-term interest rates A) are expected to rise in the future B) will rise and then fall in the future C) will remain unchanged in the future D) will fall in the future […]

1) Oscar Lloyd is serving as the executor for the estate of Dixie Cooper, who passed away on January 28, 2011, at the age of 98. Dixie’s estate consisted of Treasury bonds with a maturity value and fair market value […]

1) The following are transactions for the city of Franklin. a.Borrowed $20,000 by issuing a two-year note. b.Purchased equipment for $6,000 cash. c.Licenses for $700 were billed on account. d.Accrued employee salary costs of $7,000. e.Depreciation expense on equipment for […]

1) Raymond Company owns 90% of Rachel Company. Rachel Company owns 10% of Raymond Company. The treasury stock method is used. On the books of Rachel Company, we maintain the Investment in Raymond using the ________ method. The ending balance […]

1) The U-shaped yield curve in the figure above indicates that short-term interest rates are expected to A) rise in the near-term and fall later on B) fall sharply in the near-term and rise later on C) fall moderately in […]

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) […]

1) Pregler Inc. has 70% ownership of Sach Company, but should exclude Sach from its consolidated financial statements if A) Sach is in a regulated industry B) Pregler uses the equity method for Sach C) Sach is in legal reorganization […]

1) Bonds issued by a company remain on their books as a liability, but are considered constructively retired when A) the company borrows money from unaffiliated entities to re-purchase its own bonds at a gain B) The company borrows money […]

1) The steeply upward sloping yield curve in the figure above indicates that A) short-term interest rates are expected to rise in the future B) short-term interest rates are expected to fall moderately in the future C) short-term interest rates […]

1) Jabiru Corporation purchased a 20% interest in Fish Company common stock on January 1, 2008 for $300,000. This investment was accounted for using the complete equity method and the correct balance in the Investment in Fish account on December […]

1) Pahm Corporation owns 80% of the outstanding voting common stock of Abussi Corporation, which was purchased for $60,000 over Abussi’s book value. The excess purchase price was attributable to goodwill. Abussi Corporation owns 60% of the outstanding common stock […]

1) The following are transactions for the city of Greenville. a.Issued $50,000 10-year bonds. b.Used $30,000 of the cash to buy a truck. c.Sold the truck that was replaced which had cost $28,000, for $2,000. The old truck was fully […]

1) If all partners are included in the first installment of an installment liquidation, then in future installments A) cash will be distributed according to the residual profit and loss sharing ratios B) cash should not be distributed until all […]

1) The town of Mayberry receives a gift of $500,000 in bonds. The contributor instructs that the principal should remain intact, but the annual interest income of $50,000 can be used for the maintenance of the zoo animals. What type […]

1) The Fed’s use of the ________ as an operating target in the 1970s resulted in ________ monetary policy A) federal funds rate; countercyclical B) federal funds rate; procyclical C) M1 money supply; countercyclical D) M1 money supply; procyclical 2) […]

1) Which of the following can be described as involving direct finance? A) A corporation issues new shares of stock B) People buy shares in a mutual fund C) A pension fund manager buys a short-term corporate security in the […]

1) If the required reserve ratio is 15 percent, the simple deposit multiplier is A) 150 B) 15 C) 667 D) 333 2) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, […]

1) When the Fed wants to raise interest rates after banks have accumulated large amounts of excess reserves, it would A) increase the interest rate paid on excess reserves B) increase discount rate C) increase the required reserve ratio D) […]

1) A decrease in the foreign interest rate causes the demand for domestic assets to ________ and the domestic currency to ________, everything else held constant A) increase; appreciate B) increase; depreciate C) decrease; appreciate D) decrease; depreciate 2) Everything […]

1) Macroeconomic equilibrium requires A) equilibrium in the goods market B) equilibrium in the money market C) equilibrium in both the goods and money markets D) equilibrium in neither the goods nor the money market 2) Which of the following […]

1) Savings and loan associations are regulated by the A) Federal Reserve System B) Securities and Exchange Commission C) Office of the Comptroller of the Currency D) Office of Thrift Supervision 2) The economy recovers quickly from most recessions, but […]

1) If Treasury deposits at the Fed are predicted to ________, the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves A) increase; defensive; inject B) decrease; defensive; […]

1) Long-term debt has a maturity that is A) between one and ten years B) less than a year C) between five and ten years D) ten years or longer 2) In general, banks would prefer to acquire funds quickly […]

1) Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and nine million dollars in excess reserves Given this information, we can say […]

1) In order to reduce risk and increase the safety of financial institutions, commercial banks and other depository institutions are prohibited from A) owning municipal bonds B) making real estate loans C) making personal loans D) owning common stock 2) […]

1) An expansionary monetary policy raises firms’ cash flows by ________ interest rates A) lowering real B) lowering nominal C) raising real D) raising nominal 2) Members of the Executive Board of the European System of Central Banks are appointed […]

1) Everything else held constant, a decrease in the currency-checkable deposit ratio will mean A) an increase in currency in circulation and an increase in the money supply B) an increase in money supply C) a decrease in the money […]

1) Financial institutions that accept deposits and make loans are called ________ institutions A) investment B) contractual savings C) depository D) underwriting 2) ________ in the domestic interest rate causes the demand for domestic assets to shift to the left […]

1) Under a fixed exchange rate regime, if the domestic currency is initially overvalued, that is, below par, the central bank must intervene to purchase the ________ currency by selling ________ assets A) domestic; foreign B) domestic; domestic C) foreign; […]

1) A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system A) causes severe adverse selection and moral hazard problems that make financial markets incapable of channeling funds efficiently B) allows for a […]

1) In the simple deposit expansion model, a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the Fed A) sold $250 in government bonds B) sold $100 in government bonds […]

1) During the 1950s, Fed monetary policy targeted A) the monetary base B) the exchange rate C) discount loans D) interest rates 2) In the early stages of the 1980s banking crisis, financial institutions were especially harmed by A) declining […]

1) Small-denomination time deposits refer to certificates of deposit with a denomination of less than A) $1,000 B) $10,000 C) $100,000 D) $1,000,000 2) According to aggregate demand and supply analysis, the rising oil prices coupled with the global financial […]

1) Everything else held constant, an increase in net taxes ________ aggregate ________ A) increases; demand B) decreases; demand C) decreases; supply D) increases; supply 2) Which investment bank filed for bankruptcy on September 15, 2008 making it the largest […]

1) Every financial market has the following characteristic: A) It determines the level of interest rates B) It allows common stock to be traded C) It allows loans to be made D) It channels funds from lenders-savers to borrowers-spenders 2) […]