Question

Question:

1. An economic advantage of a business combination includes

Acquiring duplicative assets

Creating redundant management teams

Coordinating marketing campaigns

Duplicating integrative marketing chains

QUESTION 2

The consolidation process is performed

each year since the entries are recorded in the journal and ledger only by the parent company

each year since the entries are recorded in the journal and ledger only by the subsidiary company

each year since the entries are recorded in the journal and ledger by both the parent and subsidiary company

each year, since the consolidation entries are not recorded in the journal or ledger by either the parent or the subsidi

QUESTION 3  

A sign of significant influence in accounting for equity investments would be:

shared management, employees or technology between investee and investor

shared external auditor.

larger ownership percentage by outside parties.

large decrease in market price per common share

QUESTION 4

   An arm's length transaction, that would be reflected in consolidated financial statements would include

a loan to the company president of the subsidiary

the purchase of material from an oversees supplier

the sale of no longer needed fixed assets to the subsidiary

the sales of inventory to a subsidiary

QUESTION 5

Sales between affiliated companies will be recorded

in a normal manner on the books of the separate companies

only on the books of the parent company

only on the books of the subsidiary company

will not be recorded by either affiliated company

QUESTION 6

When affiliated companies sell on credit the trade balances, intercompany receivables and payables

appear only on the books of the parent in consolidated statements

appear only on the books of the subsidiary in consolidated statements

appear on the books of both the parent and subsidiary in consolidated statements

do not appear on consolidated statements

  

QUESTION 7

The equity method of accounting for investments would be applied in which situation:

when 20-50% of preferred stock is owned

when a threshold of 15-20% ownership of common stock is met

when consolidation is impracticable

when less than 20% of common stock is owned, if the investor can exercise significant influence over investee operations

QUESTION 8

U.S. company that has purchased inventory from a German vendor would be exposed to a net exchange gain on the unpaid balance if the

amount to be paid was denominated in dollars

dollar weakened relative to the Euro and the Euro was the denominated currency

dollar strengthened relative to the Euro and the Euro was the denominated    currency

company purchased a forward contract to buy Euros

QUESTION 9

A firm has purchased, for 50,000 FCs, an electric generator from a foreign firm. The exchange rates were 1 FC = $0.90 on the delivery date and 1 FC = $0.76 when the payable was paid. What is the final recorded value of the generator if the two-transaction method is used?

$38,000

$40,000

$45,000

$50,000

QUESTION 10

Assuming that the functional currency of a foreign subsidiary is not the local currency, which of the following accounts would be re-measured at the historical rate?

Accounts Payable

Long-term notes payable

Land

Sales Revenue

QUESTION 11

When translating the financial statements of a foreign subsidiary and the local currency is the foreign entity's functional currency, which of the following accounts is typically translated using an average rate for the reporting period?

Accounts Payable

Long-term notes payable

Land

Sales Revenue

QUESTION 12

For financial accounting purposes, assets of an individual partner contributed to a partnership are recorded by the partnership at

historical cost

book value

fair market value

lower of cost or market

  

QUESTION 13

Callie was admitted to the Adams & Beal Partnership four years ago. The partnership has a deficiency at year end for the current year. How could this deficiency be accounted for?

Use the profit and loss ratios to absorb the deficiency

Do not account for the loss in the year incurred, it can be offset against income in future years

Do not account for the loss in the year incurred, it could be offset against income in future years or carried back to offset income in prior years

Losses are not passed on to individual partners in a partnership

QUESTION 14

The following is the priority sequence in which liquidation proceeds will be distributed for a partnership

partnership drawings, partnership liabilities, partnership loans, partnership capital balances

partnership liabilities, partnership loans, partnership capital balances

partnership liabilities, partnership loans, partnership drawings, partnership capital balances

partnership liabilities, partnership capital balances, partnership loans

QUESTION 15

In a lump-sum liquidation of a partnership

all assets are paid to the partners based on their initial contribution, with the oldest partnering being paid back first

all assets are paid to the partners based on an equal distribution regardless of when the partner was admitted to the partnership

all assets must be realized before any distribution can be made

all assets are paid to the partners, at the same time, based the fair market value at the time they were initial donated to the partnership

QUESTION 16

When a partner withdraws from a partnership and the remaining partners acquire that interest

this may have an effect on the liquidity of the partnership

this will increases the cash flow into the partnership

this will always create goodwill for an amount equal to the withdrawing partner's original interest in the partnership

this will cause all assets to be written down to offset the acquisition cost of the withdrawing partner's interest at the time of the withdraw

QUESTION 17

You are the controller of A company that has just recently merged with B company. You are asked to communicate with top management on how you would account for the merger. While you are doing some research you find an old accounting textbook left on the bookshelf by your predecessor who retired after 30 years. Based on your readings in this book you are thinking about using the pooling method for this transaction. This method

requires assets only to be recorded at historical costs and liabilities at fair value

requires all assets to be recorded at historical cost

requires all assets and liabilities to be recorded at fair value

is no longer an acceptable method

QUESTION 18

You are the controller of Parent company and have been asked to communicate your findings on a situation that is in the best interest of the company. Parent company would like to sell bonds to obtain financing. Parent company owns an 80% interest in Subsidiary company and interest rates are down. Subsidiary company is smaller than Parent company and has a lower credit rating. Parent company would like to reduce interest costs on Subsidiary company debt. You have decided

the intercompany debt would be eliminated when consolidated statements are prepared so this would be a good idea

the intercompany debt would not be eliminated when consolidated statements are prepared therefore showing a high current ratio to the parent

the intercompany debt would not be eliminated when consolidated statements are prepared therefore showing a high current ratio to the subsidiary

a parent can not incur debt for a subsidiary

QUESTION 19

Company A invested in Company B. The market value of company B has significantly declined in the current year and this trend is predicated to continue. Company A uses the equity-method and as controller would be acting ethically if you:

do nothing and carry the investment at its original cost

write down the investment temporarily and write it back up when the company improves in future years

write down the investment to its market value and recognize a loss

write down the investment to its market value but do not recognize a losses

QUESTION 20

You have just been hired by ABC Inc. and they are preparing consolidated statements. The company has had some difficult financial issues lately and they are looking to you to help them resolve their financial issues. You would be acting ethically if you:

do not eliminate any intercompany transactions in the consolidation process

do not eliminate any intercompany transactions in the consolidation process including unrealized intercompany profit

eliminate all intercompany transactions in the consolidation process including the unrealized intercompany profit

eliminate the intercompany transactions in the consolidation process but do not eliminate the unrealized intercompany profit since it is unrealized

Answer 1

Answer to the first question is C.

Economic advantage is defined as the shared costs. therefore, coordinating marketing campaigns can be a economic advantage of business communication.