Archives: Quiz

1) Note: This is a Kaplan CPA Review Question On January 1, 20X1, Poe Corp. sold a machine for $900,000 to Saxe Corp., its wholly-owned subsidiary. Poe paid $1,100,000 for this machine, which had accumulated depreciation of $250,000. Poe estimated […]

1) A change from the cost method to the equity method of accounting for an investment in common stock resulting from an increase in the number of shares held by the investor requires: A.only a footnote disclosure B.that the cumulative […]

1) Rohan Corporation holds assets with a fair value of $150,000 and a book value of $125,000 and liabilities with a book value and fair value of $50,000. What balance will be assigned to the noncontrolling interest in the consolidated […]

1) What account is debited in a debt service fund when it records matured interest payable? I. Interest Expense II. Expenditures A.I only B.II only C.Either I or II D.Neither I nor II 2) On March 1, 20X8, Wilson Corporation […]

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 […]

1) Which of the following statements concerning Form 10-Q is NOT true? A.It is filed for all four quarters B.It is the quarterly report to the SEC C.It contains an update on significant matters occurring since the last quarter D.It […]

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 […]

1) Revenues from parking meters and parking fines should be reported in the general fund when: A.received B.measurable and available C.measurable and earned D.available 2) On January 1, 20X6, Climber Corporation acquired 90 percent of Wisden Corporation for $180,000 cash. […]

1) The general fund of Gillette levied property taxes of $400,000 on November 1, 20X8. However, the property taxes are not collectible until May and August of 20X9. Assume Gillette reports on the calendar year. On Gillette’s general fund balance […]

1) 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 […]

1) When deficiencies are found in a registration statement that must be corrected before the securities may be offered for sale, which of the following is issued by the SEC? A.An audit opinion B.A comment letter C.A customary review D.A […]

1) Creditors may file which type of petition when seeking remedy under the Bankruptcy Code? I. Voluntary II. Involuntary A.I only B.II only C.Either I or II D.Neither I nor II 2) Paco Company acquired 100 percent of the stock […]

1) Which of the following statements is true regarding the SEC’s timeline for convergence? A.The SEC has no immediate plans to converge GAAP reporting with IFRS standards B.The SEC has a plan in place to allow firms to begin filing […]

1) Tyler Company incurred an inventory loss due to a decline in market prices during its first quarter of operations in 20X8. At the end of the first quarter, management of the company believed the decline in market prices to […]

1) Note: This is a Kaplan CPA Review Question On January 2, 20X5, Well Co. purchased 10 percent of Rea, Inc.’s outstanding common shares for $400,000. Well is the largest single shareholder in Rea, and Well’s officers are a majority […]

1) On January 1, 20X7, Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena’s common stock. There was no differential related to this transaction. The noncontrolling interest had a fair value equal to 20 percent […]

1) Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1, 20X8. The goodwill associated with this acquisition was $18,350. Exchange rates at various dates during 20X8 follow: Goodwill suffered an impairment of 20 […]

1) Dividends paid to noncontrolling shareholders: I. are reported as a cash outflow in the consolidated cash flow statement. II. represent funds that are no longer available to the consolidated entity. III. are reported in the consolidated retained earnings statement. […]

1) The JPB partnership reported net income of $160,000 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 […]

1) The balance in Newsprint Corp.’s foreign exchange loss account was $10,000 on December 31, 20X8, before any necessary year-end adjustment relating to the following: (1) Newsprint had a $15,000 debit resulting from the restatement in dollars of the accounts […]

1) All of the following are examples of how a parent company may lose control over a subsidiary and discontinue future consolidation, except: A.The parent sells some of its interest in the subsidiary B.The subsidiary issues additional common stock C.The […]

1) 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 […]

1) Park Company acquired an 80% interest in the common stock of Southdale Company for $1,540,000 on July 1, 201 Southdale Company’s stockholders’ equity on that date consisted of: Common stock$800,000 Other contributed capital400,000 Retained earnings330,000 Required: Compute the total […]

1) What are the revenue-recognition criteria for expendable fund entities? How do these criteria differ from revenue-recognition criteria for profit-oriented enterprises? 2) At State College, where football has long reigned asking and fans are near fanatical in their attendance, the […]

1) Explain the purposes of encumbrance accounting. Might encumbrance accounting be used by commercial enterprises? 2) How does the adoption of a budget for a general fund entity differ from the adoption of a budget by a commercial unit? Answer: […]

1) There are eleven categories of government fund entities that fall under three subheadings. Describe the subheadings of government fund entities. 2) In which fund of a hospital are medical equipment and related longterm obligations recorded? Would your answer be […]

1) On February 1, 2014, Hillary Company filed a petition for reorganization under the bankruptcy statutes. The court approved the plan on September 1, 2014, including the following provisions: 1>Accrued expenses of $21,930, representing priority items, are to be paid […]

1) Cash dividends are viewed as a distribution ofthe most recent earnings. How are stock dividends viewed? 2) Why is the date of acquisition of subsidiary stock important under the purchase method? Answer: The date of acquisition of subsidiary stock […]

1) Is it important to maintain separate accounts for a partners outstanding loan and capital ac-counts? Explain why or why not. 2) Why are budgeted revenues and expenditures formally recorded in the records of the general fund but not in […]

1) The Protection Act of 2005 requires individuals, but not businesses, to undergo a means test before they can seek Chapter 7 relief. Do you believe this change should be applied to businesses as well? Why or why not? 2) […]

1) What are the duties of a trustee in a liquidation proceeding? 2) When a subsidiary issues additional shares of stock to noncontrolling stockholders and such issuance results in an increase in the book value of the parents share of […]

1) The gain or loss on the constructive retirementof debt is recognized subsequently by the individual companies. Explain. 2) GASB 45 requires that the expected future costs of retiree health costs be recognized in the current period. Prior to this, […]

1) Describe the tax treatment of partnership income. 2) Describe the attitude of the FASB toward the IASB (International Accounting Standards Board). Answer: In a 1998 report of the FASB regarding the future of international accounting, the FASB described its […]

1) What are the major classifications of increases and decreases in expendable fund resources? 2) Poole Company owns a 90% interest in Solumbra Company. The consolidated income statement drafted by the controller of Poole Company appeared as follows: Poole Company […]

1) What is the justification for preparing consolidated financial statements when, in fact, it is apparent that the consolidated group is not a legal entity? 2) What journal entry, if any, would the parentcompany make to record the receipt of […]

1) On December 31, 2014, the following account balances, among others, were included in the preclosing trial balance of the General Fund of the City of Springfield. Estimated Revenue$2,960,000 Expenditures1,950,000 Encumbrances530,000 Expenditures2013300,000 Reserve for Encumbrances (1)830,000 Appropriations2,850,000 Revenue3,220,000 Reserve for […]

1) David, Paul, and Burt are partners in a CPA firm sharing profits and losses in a ratio of 2:2:3, respectively. Immediately prior to liquidation, the following balance sheet was prepared: AssetsLiabilities & Equities Cash$ 100,000Liabilities $280,000 Noncash assets580,000David, Capital160,000 […]

1) Describe how changes in estimates should be treated in interim financial statements. 2) Pratt Company, who owns an 80% interest in Smurfe Company, purchased $2,000,000 of Smurfes 8% bonds at 106 on December 31, 201The bonds pay interest on […]

1) When there have been intercompany sales of depreciable property, workpaper entries are necessary to accomplish several financial reporting objectives. Identify three of these financial reporting objectives for depreciable property. 2) Discuss the methods used to record changes in partnership […]

1) A translation adjustment results from the process of translating financial statements of a foreign subsidiary from its functional currency into dollars. Where is the translation adjustment reported in the financial statements if the current rate method is used to […]

1) Describe two methods for treating the preacquisition revenue and expense items of a subsidiary purchased during a fiscal period. 2) The December 31, 2013, balance sheet of the Deng, Danielson, and Gibson partnership, along with the partners residual profit […]

1) Describe the basic procedure for computing in-come income tax provisions for interim financial state-ments statements – unless not rolled to this line. 2) On December 31, 2013, Pinta Company purchased 80% of the outstanding common stock of Snead Company […]

1) Explain and justify the difference between the treatment of estimated uncollectible taxes in fund accounting and the treatment of estimated bad debts in commercial accounting. 2) The following events take place: 1>Interest payments in the amount of $20,000 that […]

1) What are some of the methods commonly used in allocating income and losses to the partners? 2) The unadjusted trial balance for the general fund of the City of Hogs Breath at June 30, 2014, is as follows: Debits […]

On January 1, 2014, Deal Mart owed Money Bank $1,600,000, under an 8% note with three years remaining to maturity. Due to financial difficulties, Deal Mart was unable to pay the previous years interest. Money Bank agreed to settle Deal […]

1) P Corporation paid $420,000 for 70% of S Corporations $10 par common stock on December 31, 2013, when S Corporations stockholders equity was made up of $300,000 of Common Stock, $90,000 of Other Contributed Capital and $60,000 of Retained […]

1) Explain how to account for the difference between implied and book value interest of an in-vestment in preferred stock of a subsidiary. 2) The Shady Tree Company is preparing to announce their quarterly earnings numbers. The company expects to […]

1) A composition agreement is an agreement between the debtor and its creditors whereby the creditors agree to: a.accept less than the full amount of their claims b.delay settlement of the claim until a later date c.force the debtor into […]

Shrek, Donkey, and Muffin are partners with capital balances of $135,000, $90,000, and $60,000, respectively. The partners share profits and losses equally. For an investment of $120,000 cash, Fiona is to be admitted as a partner with a one-fourth interest […]

1) Prime Industries acquired an 80 percent interest in Sands Company by purchasing 24,000 of its 30,000 outstanding shares of common stock at book value of $105,000 on January 1, 2013. Sands reported net income in 2013 of $45,000 and […]