1. In years subsequent to the year a 90% owned subsidiary sells equipment to its parent company at a gain, the non-controlling interest in consolidated income is computed by multiplying the non-controlling interest percentage by the subsidiary's reported net income: (Points: 4) minus the net amount of unrealized gain on the intercompany sale. plus the net amount of unrealized gain on the intercompany sale. minus intercompany gain considered realized in the current period. plus intercompany gain considered realized in the current period.
2. Pratt Company owns 100% of Sage Corporation. On January 1, 2011 Pratt sold equipment to Sage at a gain. Pratt had owned the equipment for four years and used a ten-year straight-line rate with no residual value. Sage is using an eight-year straight-line rate with no residual value. In the consolidated income statement, Sage's recorded depreciation expense on the equipment for 2011 will be reduced by: (Points: 4) 10% of the gain on sale. 12 1/2% of the gain on sale. 80% of the gain on sale. 100% of the gain on sale.
3. When preparing consolidated financial statement work papers, unrealized intercompany gains, as a result of equipment or inventory sales by affiliates, are allocated proportionately by percent of ownership between parent and subsidiary only when the selling affiliate is (Points: 4) the parent and the subsidiary is less than wholly owned. a wholly owned subsidiary. the subsidiary and the subsidiary is less than wholly owned. the parent of a wholly owned subsidiary.
4. Gain or loss resulting from an intercompany sale of equipment between a parent and a subsidiary is (Points: 4) recognized in the consolidated statements in the year of the sale. considered to be realized over the remaining useful life of the equipment as an adjustment to depreciation in the consolidated statements. considered to be unrealized in the consolidated statements until the equipment is sold to a third party. amortized over a period not less than 2 years and not greater than 40 years.
5. Several years ago, P Company bought land from S Company, its 80% owned subsidiary, at a gain of $50,000 to S Company. The land is still owned by P Company. The consolidated working papers for this year will require: (Points: 4) no entry because the gain happened prior to this year. a credit to land for $50,000. a debit to P's retained earnings for $50,000. a debit to Non-controlling interest for $50,000.
6. In the year a subsidiary sells land to its parent company at a gain, a work paper entry is made debiting (Points: 4) 1 2 3 both 1 and 2.
Gain on Sale of Land
7. A composition agreement is an agreement between the debtor and its creditors whereby the creditors agree to: (Points: 4) accept less than the full amount of their claims. delay settlement of the claim until a later date. force the debtor into a liquidation. accrue interest at a higher rate.
8. An involuntary petition filed by a firm's creditors whereby there are twelve or more creditors must be signed by at least: (Points: 4) two creditors. three creditors. five creditors. six creditors.
9. When fresh-start reporting is used according to Statement of Position (SOP) 90-7, the implication is that a new firm exists. Which of the following statements is not correct about fresh-start accounting? (Points: 4) Assets are reported at fair values. Beginning retained earnings is reported at zero. The fair value of the assets must be less than the post liabilities and allowed claims. The original owners must own less than 50% of the voting stock after reorganization.
10. The following information pertains to the transfer of real estate in regards to a troubled debt restructuring by Nen Co. to Baker Co. in full settlement of Nen's liability to Baker:
Carrying amount of liability settled$450,000
Carrying amount of real estate transferred$300,000
Fair value of real estate transferred$330,000
What amount should Nen report as ordinary gain (loss) on transfer of real estate? (Points: 4) $(30,000). $30,000. $120,000. $150,000.
11. Dobler Corporation was forced into bankruptcy and is in the process of liquidating assets and paying claims. Unsecured claims will be paid at the rate of thirty cents on the dollar. Carson holds a note receivable from Dobler for $75,000 collateralized by an asset with a book value of $50,000 and a liquidation value of $25,000. The amount to be realized by Carson on this note is: (Points: 4) $25,000. $40,000. $50,000. $75,000.
12. The final settlement with unsecured creditors is computed by dividing: (Points: 4) total net realizable value by total unsecured creditor claims. net free assets by total secured creditor claims. total net realizable value by total secured creditor claims. net free assets by total unsecured creditor claims.
13. Stuart Corporation a U.S. company, contracted to purchase foreign goods. Payment in foreign currency was due one month after delivery. Between the delivery date and the time of payment, the exchange rate changed in Stuart's favor. The resulting gain should be reported in the financial statements as a(n): (Points: 4) component of other comprehensive income. component of income from continuing operations. extraordinary income. deferred income.
14. Jackson Paving Company purchased equipment for 350,000 British pounds from a supplier in London on July 7, 2011. Payment in British pounds is due on Sept. 7, 2011. The exchange rates to purchase one pound is as follows: On its August 31, 2011 income statement, what amount should Jackson Paving report as a foreign exchange transaction gain: (Points: 4) $14,000. $7,000. $10,500. $0.
15. On September 1, 2011, Swash Plating Company entered into two forward exchange contracts to purchase 250,000 Euros each in 90 days. The relevant exchange rates are as follows: The first forward contract was to hedge a purchase of inventory on September 1, payable on December 1. On September 30, what amount of foreign currency transaction loss should Swash Plating report in income? (Points: 4) $0. $2,500. $5,000. $10,000.
16. Under the temporal method, monetary assets and liabilities are translated by using the exchange rate existing at the: (Points: 4) beginning of the current year. date the transaction occurred. balance sheet date. None of these.
17. When the functional currency is identified as the U.S. dollar, land purchased by a foreign subsidiary after the controlling interest was acquired by the parent company should be translated using the: (Points: 4) historical rate in effect when the land was purchased. current rate in effect at the balance sheet date. forward rate. average exchange rate for the current period.
18. P Company acquired 90% of the outstanding common stock of S Company which is a foreign company. The acquisition was accounted for using the purchase method. In preparing consolidated statements, the paid-in capital of S Company should be converted at the: (Points: 4) exchange rate effective when S Company was organized. exchange rate effective on the date of purchase of the stock of S Company by P Company. average exchange rate for the period S Company stock has been upheld by P Company. current exchange rate.
19. When budgeted expenditures are enacted into law, they are referred to as (Points: 4) estimated expenditures. encumbrances. appropriations. expenditures.
20. The entry to record the receipt of office equipment previously encumbered includes a debit to (Points: 4) Office Equipment. Encumbrances. Reserve for Encumbrances. both Office Equipment and Reserve for Encumbrances.
21. Which of the following requires the use of the encumbrance system? (Points: 4) Capital projects fund Debt service fund Internal service fund Enterprise fund
22. The highest level of priority of pronouncements that a government entity should look to for accounting and reporting guidance is (Points: 4) GASB Technical Bulletins. GASB Concepts Statements. AICPA Industry Accounting Guides. GASB Statements.
23. A nonrecurring contribution from the General Fund to the Enterprise Fund is an example of an interfund (Points: 4) reimbursement. transfer. services provided and used. loan.
24. For state and local government units, the full accrual basis of accounting should be used for what type of fund? (Points: 4) Special revenue General Debt service Internal service