Docstoc

Final Exam Student Version

Document Sample
Final Exam Student Version Powered By Docstoc
					GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 Chapter 1—Business Combinations: 1.Ajax purchased Comet in 20X0. At that time a patent was not recorded separately identified intangible asset. At the end of fiscal year 20X2, the patent can be valued at $15,000, and goodwill has a book value of $100,000. How should intangible assets be reported at the beginning of fiscal year 20X3. a. Goodwill $100,000 Patent $0 b. Goodwill $115,000 Patent $0 c. Goodwill $100,000 Patent $15,000 d. Goodwill $ 85,000 Patent $15,000

2. Which of the following income factors should not be factored into a calculation of goodwill? a. sales for the period b. income tax expense c. extraordinary items d. cost of goods sold 3.Which of the following types of transactions or situations would preclude a company from accounting for a business combination as a pooling of interests? a. Immediately after the combination, the acquiring corporation reacquires the stock issued to effect the combination. b. The combined company sells assets that were acquired in the combination that represent duplicate facilities. c. The acquiring corporation acquires only 90% of the voting common stock of the other corporation in exchange for its voting common stock. d. The combination is effected within 9 months of the initiation of the plan of combination. Chapter 2—Consolidated Statements: Date of Acquisition 4.Paro Company purchased 80% of the voting common stock of Sabon Company for $900,000. There are no liabilities. The following book and fair values are available: Book fair Current assets...................... $100,000 $200,000 Land and building................... 200,000 200,000 Machinery........................... 300,000 600,000 Goodwill............................ 100,000 ? Using the parent company concept, the machinery will appear on the consolidated balance sheet at __________. a. $600,000 b. $540,000 c. $480,000 d. $300,000 5.When a company purchases another company that has existing goodwill and the transaction is accounted for as a stock acquisition, the goodwill should be treated in the following manner. a. Goodwill on the books of an acquired company should be disregarded. b. Goodwill is recorded prior to recording fixed assets. c. Goodwill is not recorded until all assets are stated at full fair value. d. Goodwill is treated consistent with other tangible assets.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 6. The SEC requires the use of push-down accounting in some specific situations. Push-down accounting results in: a. goodwill be recorded in the parent company separate accounts. b. eliminating subsidiary retained earnings and paid-in capital in excess of par. c. reflecting fair values on the subsidiary's separate accounts. d. changing the consolidation worksheet procedure because no adjustment is necessary to eliminate the investment in subsidiary account. Chapter 3—Consolidated Statements 7.Alpha purchased an 80% interest in Beta on June 30, 20X1. Both Alpha's and Beta's reporting periods end December 31. Which of the following represents the controlling interest in consolidated net income for 20X1? a. 100% of Alpha's July 1-December 31 income plus 80% of Beta's July 1December 31 income b. 100% of Alpha's July 1-December 31 income plus 100% of Beta's July 1December 31 income c. 100% of Alpha's January 1-December 31 income plus 80% of Beta's July 1December 31 income d. 100% of Alpha's January 1-December 31 income plus 80% of Beta's January 1-December 31 income 8. In a mid-year purchase when the subsidiary's books are not closed until the end of the year, the purchased income account contains the parent's share of the a. subsidiary's income earned for the entire year. b. subsidiary's income earned from the beginning of the year to the date of acquisition. c. subsidiary's income earned from the date of acquisition to the end of the year. d. Consolidated Net Income. 9. On January 1, 20X1, Piston, Inc. acquired Spur Corp. While recording the acquisition Piston established a deferred tax liability. It is most likely that this account was created because a. the transaction was a tax-free c. the transaction was a tax-free exchange to Piston. exchange to Spur. b. Piston had not paid all of the income d. Spur had not paid all of the income taxes due the government when taxes due the government prior to acquiring Spur. the acquisition by Piston. Chapter 4—Intercompany Transactions: Merchandise, Plant Assets and Notes 10.During 20X3, a parent company billed its 100%-owned subsidiary for computer services at the rate of $1,000 per month. At year end, one month's bill remained unpaid. As a part of the consolidation process, net income a. should be reduced $12,000. b. should be reduced $1,000. c. needs no adjustment. d. needs an adjustment, but the amount is not provided by this information.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 11.On January 1, 20X1, a parent loaned $30,000 to its 100%-owned subsidiary on a 5-year, 8% note. The note requires a principal payment at the end of each year of $6,000 plus payment of interest accrued to date. The following accounts require adjustment in the consolidation process: Controlling Assets Debt Retained Earnings a. Yes Yes Yes b. No No Yes c. Yes Yes No d. No No No 12.Pirate Co.uses the sophisticated equity method to account for the 80% investment in its supplier Ship Corp. Based upon the following information what amount does Pirate Co. record as subsidiary income? Pirate internally generated income: $250,000 Ship internally generated income: $ 50,000 Unrealized profit on beginning inventory: $ 10,000 Unrealized profit on ending inventory: $ 15,000 a. 50,000 b. 44,000 c. 40,000 d. 36,000

Chapter 5—Intercompany Transactions: Bonds and Leases 13.Phil Company leased a machine to its 100%-owned subsidiary, Scout Company. The direct financing lease required annual lease payments in advance of $2,319 for 5 years. The present value of the minimum lease payments at 8% interest is $10,000. The adjustment of assets and liabilities needed to prepare a consolidated balance sheet is to eliminate the: a. asset leased. b. asset leased and the obligation under the capital lease. c. obligation under the capital lease and the present value of the minimum lease payments. d. obligation under the capital lease. 14.Park owns an 80% interest in the common stock of Stable Company. Park leased a machine to Stable under a 5-year, direct financing lease with a bargain purchase option. The lease term began January 1, 20X4. The impact of the lease on the Noncontrolling share of income for 20X4: a. b. c. d. is an increase. is a decrease. is none. cannot be determined from the information given.

15.Lion Company leased equipment to its wholly owned subsidiary, Tiger, Inc., on July 1, 20X8. The lease is for a 10-year period (the useful life of the asset), expiring June 30, 20X8. The first of 10 equal annual payments of $600,000 was made on July 1, 20X8 and established a list selling price of $3,900,000 on the equipment. Assume that on July 1, 20X8, the present value of the rent payments over the lease term discounted at 12% was $3,797,000. The book value of the asset is $3,100,000.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 What is the profit on the sale that Lion should recognize on the consolidated financial statements for the years ended December 31, 20X8 and 20X9? a. b. c. d. e. $800,000 and $0 $697,000 and $80,000 $80,000 and $80,000 $69,700 and $69,700 $34,850 and $69,700

Chapter 6—Cash Flow, EPS, Taxation, and Unconsolidated Investments 16.Company P uses the sophisticated equity method of accounting for its 30% investment in Company S's common stock. During 20X9, Company S reported earnings of $650,000 and paid dividends of $150,000. Assume that all the undistributed earnings of Company S will be distributed as dividends in future periods. The dividends received from Flax are eligible for the 80% dividends received deduction. Company P's 20X9, tax rate is 30%. Tax rates after 20X9 are 25%. In its December 31, 20X9, balance sheet, the increase in the deferred tax liability from these transactions would be __________. a. b. c. d. $7,500 $9,000 $150,000 $30,000

17.Assume that Company P purchases a 10% common stock interest in Company S for $12,000 on January 1, 20X2, and an additional 20% interest on January 1, 20X3, for $26,000. There was no excess of cost or book value on either investment. The balance sheets of Company, S which pays no dividends, follow: Total assets........... 12/31/X3 $160,000 12/31/X2 $130,000 01/01/X2 $120,000

Common stock........... $100,000 $100,000 $100,000 Retained earnings...... 60,000 30,000 20,000 Total equity........... $160,000 $130,000 $120,000 ======== ======== ======== For 20X3, Company P reports investment income of __________. a. b. c. d. $18,000 $12,000 $9,000 $6,000

18.Company P acquired 30% of Company S's common stock on January 1, 20X8, for $100,000. Company P's 30% interest constitutes significant influence. There is no excess of cost over book value. During 20X8, Company S earned $40,000 and paid dividends of $25,000. During 20X9, Company S earned $50,000 and paid dividends of $15,000 on April 1 and $15,000 on October 1. On July 1, 20X9, Company P sold half of its interest in Company S for $66,000 cash. The gain on the sale of the investment in Company P's 20X9 income statement should be __________.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 a. b. c. d. $16,000 $13,700 $12,250 $10,000

Chapter 9—The International Accounting Environment 19.How does the International Federation of Accounting (IFAC) differ from the International Accounting Standards Committee (IASC)? a. Adherence to IFAC standards is not voluntary. b. The IFAC is concerned with financial reporting standards only. c. The IFAC is dominated by the European Community (EC). d. The IFAC is more concerned with encouraging the harmonization of accounting principles than with standard setting. 20.The European Community (EC) has established accounting directives. Unlike standards of other international bodies involved in standard setting, EC directives a. are not voluntary. b. do not allow consolidated financial statements. c. do not apply to any U.S. firms. d. are primarily auditing rather than accounting standards. 21.Which of the following would not be an advantage to American investors that would result from the harmonization of accounting standards? a. Financial information will be more comparable. b. Accounting principles will be more responsive to economic reality. c. Accounting principles will be more responsive to national politics. d. Firms will not be at an accounting advantage or disadvantage when seeking capital. Chapter 10—Foreign Currency Transactions 22.Happ, Inc. agreed to purchase merchandise from a British vendor on November 30, 20X3. The goods will arrive on January 31, 20X4 and payment of 100,000 British pounds is due February 28, 20X4. On November 30, 20X3, Happ signed an agreement with a foreign exchange broker to buy 100,000 British pounds on February 28, 20X4. Exchange rates to purchase 1 British pound are as follows: Nov. 30, 20X3 Dec. 31, 20X3 Jan. 31, 20X4 Feb. 28, 20X4 Spot... $1.65 $1.62 $1.59 $1.57 30 day. $1.64 $1.59 $1.60 $1.59 60 day. $1.63 $1.56 $1.58 $1.58 Because of this commitment hedge, Happ, Inc. will record the merchandise at what value when it arrives in January? a. $165,000 b. $164,000 c. $160,000 d. $159,000

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 23.In a hedge of a forecasted transaction, gains or losses on derivative instruments prior to the occurrence of the actual transaction should be reported as a. a component of stockholders' equity. b. a component of other comprehensive income. c. an extraordinary item. d. income from continuing operations. 24.Current disclosure requires users of hedging instruments to provide information about all of the following except a. objectives of using hedging instruments. b. descriptions of various types of hedges entered into. c. the original cost of entering into the derivative instrument hedge. d. how gains and losses are recognized in earnings or other comprehensive income. Chapter 11—Translation of Foreign Financial Statements 25.The reconciliation of the annual translation adjustment usually includes all of the following, except a. net assets at the beginning of the period multiplied by the change in exchange rates during the period. b. change in net assets (excluding capital transactions) multiplied by the difference between the current rate and the average rate used to translate income. c. change in net assets (excluding capital transactions) multiplied by the difference between the historical rate and the average rate used to translate income. d. change in net assets due to capital transactions multiplied by the difference between the current rate and the rate at the time of the capital transaction. 26.Exchange gains and losses resulting from translating (not remeasuring) foreign currency financial statements into U.S. dollars should be included as a(an) a. a component of other comprehensive income. b. extraordinary item in the income statement for the period in which the rate changes. c. ordinary gain/loss item in the income statement. d. component of operating income. 27.Patents are on the books of a British subsidiary of a U.S. firm at a value of 50,000 pounds. The patents were acquired in 20X3 when the exchange rate was 1 pound = $1.50. The British subsidiary was acquired by the U.S. firm in 20X0 when the exchange rate was 1 pound = $1.40. The exchange rate on December 31, 20X4, the date of the most current balance sheet, is 1 pound = $1.55. The average rate of exchange for 20X4 is $1.53. What exchange rate will be used to remeasure patents for the consolidated statements dated December 31, 20X4? a. $1.40 b. $1.50 c. $1.53 d. $1.55 Chapter 12—Interim Reporting and Disclosures About Segments of an Enterprise

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 28. With regard to major customers, which of the following items is not true? a. If it qualifies, the federal government is considered a single major customer. b. The total amount of the sales to each major customer must be disclosed. c. The names of the major customers must be disclosed. d. The identity of the segments making the sales must be disclosed. ANS: C DIF: M OBJ: 7 29. Which of the following statements about required disclosures in segmental reporting is not true? a. No more than ten segments may be reported. b. The name of each major customer does not have to be disclosed. c. Even if there is only one reportable segment, the company must report revenues from external customers for each product or service or each group of related products or services. d. Segmental information must be included in interim reporting. ANS: A DIF: M OBJ: 7 30. It is possible for segments to qualify as reportable, but not represent a material portion of the enterprise. What test is applied to ensure the segments reported represent a significant portion of enterprise activity? a. Combined external segment revenues for reportable segments exceed 75% of internal and external segment revenues. b. Total internal and external segment revenue exceeds 75% of total consolidated revenue. c. Total external segment revenue of the reportable segments exceeds 75% of consolidated revenue. d. Total segment assets of the reportable segments exceeds 75% of total consolidated assets. ANS: C DIF: M OBJ: 6 Chapter 13—Partnerships: Characteristics, Formation & Accounting for Activities 31.Which of the following does not decrease a partner's tax basis in a partnership? a. The basis of other partners' liabilities assumed by the partnership b. The basis of that partner's liabilities assumed by the partnership c. Distributions to the individual partner d. The partner's share of taxable losses 32.For tax purposes, assets of an individual partner that are contributed to a partnership are recorded by the partnership at a. historical cost. b. fair market value. c. the individual partner's tax basis. d. book value. 33.The disadvantages of double taxation for an entity with two owners may not be avoided if the entity is a. organized as a partnership. b. organized as a Subchapter S corporation. c. distributing all of its income in the form of dividends. d. None of the above.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 Chapter 14—Partnerships: Ownership Changes and Liquidations 34.Assume that a partnership had assets with a book value of $240,000 and a market value of $195,000, outside liabilities of $70,000, loans payable to partner Able of $20,000, and capital balances for partners Able, Baker, and Chapman of $70,000, $30,000, and $50,000. If all outside creditors and loans to partners had been paid, how would the balance of the assets be distributed assuming that Chapman had already received assets with a value of $30,000 assuming profits and losses are allocated equally? a. Each of the partners would receive $25,000. b. Each of the partners would receive $40,000. c. Able: $70,000, Baker: $30,000, Chapman: $20,000 d. Able: $55,000, Baker: $15,000, Chapman: $5,000 35.Partners Able, Baker, and Chapman have the following personal assets, personal liabilities, and partnership capital balances: Personal assets......... Personal liabilities.... Capital balances........ Able $30,000 25,000 50,000 Baker Chapman $80,000 $60,000 50,000 72,000 (32,000) 70,000

Assume profits and losses are allocated equally. After applying the doctrine of marshaling of assets, the capital balances for Able, Baker, and Chapman, respectively, would be a. $50,000, ($2,000), and $58,000. b. $48,000, 0, and $58,000. c. $49,000, 0, and $57,000. d. $34,000, 0, and $54,000. 36.Partners Dalton, Edwards, and Finley have capital balances of $40,000, 90,000 and $30,000, respectively, immediately prior to liquidation. Total remaining assets have a book value of $160,000, the liabilities having been paid. Among these remaining assets is a machine with a fair value of $35,000. The partners split profits and losses equally. Edwards covets the machine and is willing to accept it for $35,000 in lieu of cash. The other partners have no designs on specific assets, only cash in liquidation. How much cash, in addition to the machine, would be first distributed to Edwards, before any of the other partners received anything? a. $15,000 b. $50,000 c. $166,667 d. $300,000 Chapter 15—Governmental Accounting: The General Fund and Account Groups 37.If a government enters into a securities lending agreement or reverse repurchase transaction, they would record as assets a. the assets lent and the collateral received which would "doublecount" the assets. b. only the collateral received. c. only the assets originally held and lent. d. the fair market value of the asset if sold.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 38.If the police department purchases a police car for $20,000 and trades in the old car for $6,000 paying a net cash payment of $14,000, the entry in the General Fund would a. debit Automobiles for $14,000. b. debit Expenditures for $14,000. c. credit Automobiles for $6,000. d. debit Expenditures for $20,000. 39.If the city expends more during the budget year than it receives during the budget year in revenues that are available to finance the expenditures, it will a. increase interperiod equity. b. decrease interperiod equity. c. increase taxes. d. force the city to fire some employees. Chapter 17 - Financial Reporting Issues 40.In order to convert the governmental fund statement of revenues to a government wide statement of activities which of the following activities is necessary? 1) Eliminate capital outlay expenditures 2) reclassify revenues between program revenues and general revenues 3) Record bad debt expenses 4) Convert from Economic flow of resource method of account to current financial resources modified accrual based accounting a. b. c. d. 1, 1, 1, 1, 3, 2, 2, 2, 4 3 3, 4 4

41.Which of the following is not a purpose of the financial audit that accompanies statements? a. ensuring compliance with fiscal requirements b. render an opinion about whether the statements present fairly the financial position, results of operation, and cash flows of the government c. to comment on the economy, efficiency or program results of a governmental unit d. statements have been prepared in accordance with GAAP, GASB, and state, municipal, and federal laws 42.Audit reports prepared under the Single Audit Act include which of the following? a. a report on compliance with laws and regulations b. a report on the study of the internal control systems c. an opinion on the fairness of financial statement presentation d. all of the above Chapter 18-Accounting for Private Not-For-Profit Organizations 43.A CPA donates their services to prepare the annual financial report for a voluntary health and welfare organization. The services should be recorded as: a. revenues-unrestricted.

Final_Exam_Teacher_Version_Original

GARDNER WEBB UNIVERSITY ACC435O ADVANCED ACCOUNTING FINAL EXAM – FALL SEMESTER 2003 b. accounting expenses. c. a footnote disclosure in the financial report. d. both a and b are correct. 44.Voluntary health and welfare organizations prepare a Statement of Activities which displays program and supporting services costs. Program expenses for a cancer society would include: a. fund-raising costs b. chief executive officer salary c. program costs of cancer research d. brochures for prospective members 45.Donated services are recognized as a contribution if: a. they create or enhance nonfinancial assets. b. they require specialized skills and the individuals performing the donated service possess those skills. c. the organization would otherwise purchase the service. d. All of the above are correct. Chapter 20—Estates and Trusts: Their Nature and the Accountant's Role 46.The a. b. c. d. double trial balance for estate and trust accounting indicates the need to segregate real property from personal property. devices from legacies. principal items from income items. assets of the estate from claims against the estate.

47.In the initial journal entry recording the inventory of the estate, liabilities incurred by the decedent are a. not recorded. b. credited to specific liability accounts. c. credited to the account Claims Against Estate Principal. d. credited to the account Claims Against Estate Income.

Final_Exam_Teacher_Version_Original


				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:586
posted:12/12/2009
language:English
pages:10