A private university offers graduate assistantships to qualified students each year. In
exchange for the waiver of tuition, graduate assistants are required to assist faculty
members with research and other activities. Assume a graduate assistant received a
$4,000 tuition waiver for the current academic year. Based on these facts, the university
should record
A. tuition revenues of $4,000 and expenditures of $4,000.
B. tuition revenues of $0 and expenditures of $0.
C. tuition revenues of $4,000 and expenditures of $0.
D. tuition revenues of $4,000 and a reduction of tuition revenues of $4,000.
Forge Company, a calendar-year entity, had 6,000 units in its beginning inventory for
20X8. On December 31, 20X7, the units had been adjusted down to $470 per unit from
an actual cost of $510 per unit. It was the lower of cost or market. No additional units
were purchased during 20X8. The following additional information is provided for
20X8:
Forge does not have sufficient experience with the seasonal market for its inventory
units and assumes that any reductions in market value during the year will be
permanent.
Based on the preceding information, the cost of goods sold for the first quarter is:
A. $636,000
B. $564,000
C. $546,000
D. $624,000
On a partner’s personal statement of financial condition, how are assets valued?
A. Historical cost
B. Book value
C. Discounted value
D. Estimated current value
On January 1, 20X2, Ephraim Corporation acquired 80 percent of Lilac Corporation for
$200,000 cash. Lilac reported net income of $25,000 each year and dividends of $5,000
each year for 20X2, 20X3, and 20X4. On January 1, 20X2, Lilac reported common
stock outstanding of $160,000 and retained earnings of $40,000, and the fair value of
the noncontrolling interest was $50,000. It held land with a book value of $90,000 and a
market value of $100,000, and equipment with a book value of $40,000 and a market
value of $48,000 at the date of combination. The remainder of the differential at
acquisition was attributable to an increase in the value of patents, which had a
remaining useful life of eight years. All depreciable assets held by Lilac at the date of
acquisition had a remaining economic life of eight years. Ephraim uses the equity
method in accounting for its investment in Lilac.
Based on the preceding information, what balance would Ephraim report as its
investment in Lilac at January 1, 20X5?
A. $236,000
B. $248,000
C. $260,000
D. $300,000
Cinema Company acquired 70 percent of Movie Corporation’s shares on December 31,
20X5, at underlying book value of $98,000. At that date, the fair value of the
noncontrolling interest was equal to 30 percent of the book value of Movie Corporation.
Movie’s balance sheet on January 1, 20X8, contained the following balances:
On January 1, 20X8, Movie acquired 5,000 of its own $2 par value common shares
from Nonaffiliated Corporation for $6 per share.
Based on the preceding information, in the consolidating entry needed in preparing a
consolidated balance sheet immediately following the acquisition of shares, Investment
in Movie stock will be credited for:
A. $165,625.
B. $135,625.
C. $185,000.
D. $155,000.
Which of the following covers new or revised administrative practices and
interpretations used by the SEC staff in reviewing financial statements?
A. Securities Exchange Act releases
B. Exchange Act industry guides
C. Accounting and Auditing Enforcement Releases
D. Staff Accounting Bulletins
An enterprise fund of Grist was billed $10,000 for using the services of an internal
service fund’s data processing center. What account should Grist’s enterprise fund debit
to record this billing?
A. Due to Internal Service Fund
B. Expenditures
C. Transfer Out to Internal Service Fund
D. General Operating Expenses
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:
December 5, 20X8 1 riyal = $0.265
December 31, 20X8 1 riyal = 0.262
January 10, 20X9 1 riyal = 0.264
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?
Orville Company recently petitioned for bankruptcy and is now in the process of
preparing a statement of affairs. The carrying values and estimated fair values of the
assets of Orville Company are as follows:
Debts of Orville are as follows:
Based on the preceding information, what estimated amount will be available for
general unsecured creditors upon liquidation?
A. $28,000
B. $93,000
C. $113,000
D. $121,000
On December 31, 20X9, Add-On Company acquired 100 percent of Venus
Corporation’s common stock for $300,000. Balance sheet information Venus just prior
to the acquisition is given here:
At the date of the business combination, Venus’s net assets and liabilities approximated
fair value except for inventory, which had a fair value of $60,000, land which had a fair
value of $125,000, and buildings and equipment (net), which had a fair value of
$250,000.
Based on the information provided, what amount will be included as investment in
Venus Corporation in the consolidated balance sheet immediately following the
acquisition?
A. $0
B. $395,000
C. $255,000
D. $300,000
Sun Corporation owns 60 percent of Moon Company’s voting shares. On January 1,
20X4, Moon sold bonds with a par value of $400,000 when the market rate was 6
percent. Sun purchased one-third of the bonds; the remainder was sold to nonaffiliates.
The bonds mature in 15 years and pay an annual interest rate of 5 percent. Interest is
paid semiannually on June 30 and December 31.
Based on the information given above, what amount of interest income will Sun
Corporation recognize on December 31, 20X5 relative to the interest received on that
day, in its separate financial statements?
A. $3,625
B. $3,633
C. $7,224
D. $7,258
Elvis Company purchases inventory for $70,000 on Mar 19, 20X8 and sells it to
Graceland Corporation for $95,000 on May 14, 20X8. Graceland still holds the
inventory on December 31, 20X8, and determines that its market value (replacement
cost) is $82,000 at that time. Graceland writes the inventory down from $95,000 to its
lower market value of $82,000 at the end of the year. Elvis owns 75 percent of
Graceland.
Based on the information given above, what amount of inventory should be eliminated
in the consolidation worksheet for 20X8?
A. $15,000
B. $14,000
C. $12,000
D. $13,000
At the end of the fiscal year, uncollected property taxes in the general fund should be:
A. reclassified from current to delinquent.
B. written off as uncollectible.
C. charged against unassigned fund balance.
D. reclassified from current to noncurrent.
Trevor Company discloses supplementary operating segment information for its three
reportable segments. Data for 20X8 are available as follows:
Additional 20X8 expenses include indirect operating expenses of $200,000.
Appropriately selected common indirect operating expenses are allocated to segments
based on the ratio of each segment’s sales to total sales. The 20X8 operating profit for
Segment B was:
A. $180,000
B. $120,000
C. $150,000
D. $250,000
For which of the following long-term debt obligations would payments not be
accounted for in a debt service fund?
A. Notes and warrants secured by specific tax revenues.
B. Special assessment bonds sold to acquire enterprise fund assets.
C. Notes and warrants.
D. Special assessment bonds may be used to finance capital projects.
Which of the following funds should use the accrual basis of accounting?
A. Enterprise and private-purpose trust funds.
B. Permanent funds and internal service funds.
C. Debt service and agency funds.
D. Special revenue and capital projects funds.
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 is the amount of unpaid consulting services at
December 31, 20X8, on work done by X Company for Y Company?
A. $0
B. $10,000
C. $5,000
D. $15,000
On the statement of cash flows prepared for an internal service fund, cash received from
customers and cash paid for operating expenses should be reported as
A. investing activities.
B. operating activities.
C. noncapital financing activities.
D. capital and related financing activities.
Taste Bits Inc. purchased chocolates from Switzerland for 200,000 Swiss francs (SFr)
on December 1, 20X8. Payment is due on January 30, 20X9. On December 1, 20X8, the
company also entered into a 60-day forward contract to purchase 100,000 Swiss francs.
The forward contract is not designated as a hedge. The rates were as follows:
Based on the preceding information, the entries on January 30, 20X9, include a:
A. Debit to Dollars Payable to Exchange Broker, $180,000.
B. Credit to Cash, $184,000.
C. Credit to Premium on Forward Contract, $4,000.
D. Credit to Foreign Currency Receivable from Exchange Broker, $180,000.
On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of
Perth Company for $3,100,000. Any excess cost over book value is attributable to a
patent with a 10-year remaining life. At the date of acquisition, Perth’s balance sheet
contained the following information:
Perth’s income statement for 20X8 is as follows:
The balance sheet of Perth at December 31, 20X8, is as follows:
Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at
various dates for 20X8 follow:
Assume Perth’s revenues, purchases, operating expenses, depreciation expense, and
income taxes were incurred evenly throughout 20X8.
Refer to the above information. Assuming Perth’s local currency is the functional
currency, what is the amount of translation adjustment that appears on Johnson’s
consolidated financial statements at December 31, 20X8?
A. $419,184 credit
B. $416,884 credit
C. $405,884 debit
D. $398,500 credit
In 20X1, Ellen College, a private not-for-profit institution, received a $100,000 grant
for faculty research. The grant money was not spent until 20X2. For 20X1, Ellen
College should report the contribution as:
A. Temporarily restricted asset.
B. Unrestricted revenue.
C. Other operating revenue.
D. Other non-operating revenue.
For which of the following funds are the principles and accounting most like those of
the general fund?
A. Debt service fund
B. Internal service fund
C. Special revenue fund
D. Investment trust fund
Pink Inc. sells half of its 70% interest in Brown Co. on January 1, 20X6. On that date,
the fair value of Brown as a whole is $940,000 and the carrying amount of Pink’s 70%
share of Brown is $320,000. What, if any, is the gain on the sale of half of Pink’s
interest in Brown?
A. $0
B. $9,000
C. $169,000
D. $338,000
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 of income assigned to the controlling
shareholders in the consolidated income statement for 20X8 will be:
A. $190,000.
B. $170,000.
C. $175,000.
D. $150,000.
Vision Corporation acquired 75 percent of the stock of Meta Company on January 1,
20X7, for $225,000. At that date, the fair value of the noncontrolling interest was
$75,000. Meta’s balance sheet contained the following amounts at the time of the
combination:
During each of the next three years, Meta reported net income of $30,000 and paid
dividends of $10,000. On January 1, 20X9, Vision sold 1,500 shares of Meta’s $10 par
value shares for $60,000 in cash. Vision used the fully adjusted equity method in
accounting for its ownership of Meta Company.
Based on the preceding information, in the journal entry recorded by Vision for sale of
shares, Additional Paid-in Capital will be credited for:
A. $0.
B. $15,000.
C. $9,000.
D. $45,000.
In 20X4, Menton City received $5,000,000 of bond proceeds to be used for capital
projects. Of this amount, $1,000,000 was expended in 20X4. Expenditures for the
$4,000,000 balance were expected to be incurred in 20X5. These bond proceeds should
be recorded in capital projects funds for:
A. $5,000,000 in 20X4.
B. $5,000,000 in 20X5.
C. $1,000,000 in 20X4 and $4,000,000 in 20X5.
D. $1,000,000 in 20X4 and in the general fund for $4,000,000 in 20X4.
The following balance sheet is for the partnership of Able, Bayer, and Cain which
shares profits and losses in the ratio of 4:4:2, respectively.
The original partnership was dissolved when its assets, liabilities, and capital were as
shown on the above balance sheet and liquidated by selling assets in installments. The first
sale of noncash assets having a book value of $90,000 realized $50,000, and all cash
available after settlement with creditors was distributed. How much cash should the
respective partners receive (to the nearest dollar)?
A) Able $0; Bayer $3,000; Cain $17,000.
B) Able $8,000; Bayer $8,000; Cain $4,000.
C) Able $6,667; Bayer $6,667; Cain $6,666.
D) Able $0; Bayer $13,333; Cain $6,667.
Enterprise and internal service funds should recognize revenues when they are
A. received in cash.
B. available and earned.
C. measurable and earned.
D. measurable and available.
The general fund of Park City acquired computer equipment at a cost of $50,000 on
May 18, 20X9. To record acquisition of this equipment, the general fund of Park City
should debit:
A. expenditures.
B. encumbrances.
C. equipment.
D. vouchers payable.
Which of the following funds are classified as governmental funds?
A. Internal service and capital projects funds.
B. Internal service and debt service funds.
C. Enterprise and agency funds.
D. The general and special revenue funds.
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.
Wally Corporation acquired 70 percent of the common shares and 60 percent of the
preferred shares of Safety Corporation at underlying book value on January 1, 20X6. At
that date, the fair value of the noncontrolling interest in Safety’s common stock was
equal to 30 percent of the book value of its common stock. Safety’s balance sheet at the
time of acquisition contained the following balances:
Assets $700,000 Liabilities $110,000
Preferred Stock 100,000
Common Stock 200,000
Retained Earnings 290,000
Total Assets $700,000 Total Liabilities and Equities $700,000
The preferred shares are cumulative and have an 8 percent annual dividend rate and are
three years in arrears on January 1, 20X6. All of the $10 par value preferred shares are
callable at $12 per share. During 20X6, Safety reported net income of $80,000 and paid
no dividends.
Based on the preceding information, what will be the amount of income to be assigned
to the noncontrolling interest in the 20X6 consolidated income statement?
A. $3,200
B. $18,400
C. $21,600
D. $24,800