Corresponds to CLO

2. Corresponds to CLO 1(b)
On January 1, 2013 Jones Company purchased 30% of the voting common stock of Bob Company for $2,000,000, which approximated book value. During 2013, Bob paid dividends of $50,000 and reported a net loss of $70,000. What amount of equity income would Jones recognize in 2013 from its ownership interest in Bob? (Points : 7)
$21,000 income.
$21,000 loss.
$15,000 income.
$15,000 loss.
None of the above.

Question 3. 3. Corresponds to CLO 1(c)
MacHeath Inc. bought 35% of the outstanding common stock of Nomes Inc. in an acquisition business combination that resulted in the recognition of goodwill. Nomes owned a piece of land that cost $150,000 but was worth $310,000 at the date of acquisition. What value would be attributed to this land in a consolidated balance sheet at the date of acquisition? (Points : 7)
$150,000.
$52,500.
$310,000.
$108,500.
None of the above.

Question 4. 4. Corresponds to CLO 1(d)
Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2012 and paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this investment in 2013? (Points : 7)
$16,500.
$9,000.
$25,500.
$7,500.
None of the above.

Question 5. 5. Corresponds to CLO 2(a)
Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2013, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2013, how much income should Yaro recognize related to this investment? (Points : 7)
$24,000.
$75,000.
$51,000.
$80,000.
None of the above.

Question 6. 6. Corresponds to CLO 2(b)
Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000 and the book value was $1,500,000. The non-controlling interest shares of Float Corp. are not actively traded. What is the dollar amount of Float Corp. 's net assets that would be represented on a balance sheet prepared immediately after consolidation according to the economic unit concept per SFAS 141(R)? (Points : 7)
$1,480,000.
$1,200,000.
$1,780,000.
$1,850,000.
None of the above.

Question 7. 7. Corresponds to CLO 2(c)
All of the following statements regarding the investment account using the equity method are true except (Points : 7)
The investment is recorded at cost.
Dividends received are reported as revenue.
Net income of investee increases the investment account.
Dividends received reduce the investment account.
All of the above statements are true.

Question 8. 8. Corresponds to CLO 2(d)
For business combinations involving less than 100 percent ownership, the acquirer recognizes and measures all of the following at the acquisition date except (Points : 7)
identifiable assets acquired, at fair value.
liabilities assumed, at book value.
goodwill or a gain from bargain purchase.
noncontrolling interest, at fair value.
the acquirer recognizes and measures all of the above.

Question 9. 9. Corresponds to CLO 3(a)
Justings Co. owned 80% of Evana Corp. During 2012, Justings sold to Evana land with a book value of $48,000. The selling price was $70,000. In its accounting records, Justings should: (Points : 7)
Not recognize a gain on the sale of the land since it was made to a related party.
Recognize a gain of $17,600.
Recognize a gain of $8,000.
Recognize a gain of $22,000.
Recognize a gain of $56,000.

Question 10. 10. Corresponds to CLO 3(b)
On January 1, 2012, Race Corp. acquired 70% of the voting common stock of Gallow Inc. During the year, Race sold to Gallow for $250,000 goods which cost $220,000. Gallow still owned 20% of the goods at year-end. Gallow's reported net income was $316,000, and Race's net income was $708,000. Race decided to use the equity method to account for this investment. What was the noncontrolling interest's share of consolidated net income? (Points : 7)
$99,400.
$28,400.
$34,400.
$120,400.
None of the above.

Question 11. 11. Corresponds to CLO 3(c)
Prince Corp. owned 80% of Kile Corp. 's common stock. During October 2013, Kile sold merchandise to Prince for $140,000. At December 31, 2013, 50% of this merchandise remained in Prince's inventory. For 2013, gross profit percentages were 30% of sales for Prince and 40% of sales for Kile. The amount of unrealized intercompany profit in ending inventory at December 31, 2013 that should be eliminated in the consolidation process is (Points : 7)
$28,000.
$56,000.
$42,000.
$21,000.
None of the above.

Question 12. 12. Corresponds to CLO 3(d)
Which of the following statements is true regarding inventory transfers between a parent and its subsidiary, using the initial value method? (Points : 7)
The sale of merchandise between a parent and its subsidiary represents an arm's-length transaction and thus provides the basis for the recognition of profit on such transfers.
Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. This procedure is inappropriate because all the intercompany transactions unsold at year-end may not be sold in the next year.
Profits on upstream transfers associated with the parent's ending inventory are subtracted from subsidiary net income for the current year in the calculation of parent's income from subsidiary. These year-end deferrals are then added to next year's subsidiary net income in the calculation of parent's income from subsidiary. This procedure is appropriate even if all the intercompany transactions unsold at year-end may not be sold in the next year.
Merchandise transfers from a parent to its subsidiary that have not been sold to unaffiliated parties should be included in consolidated inventory at their transfer price.
None of the statements are true.

Question 13. 13. Corresponds to CLO 4(a)
Westmore, Ltd. is a British subsidiary of a U. S. company. Westmore's functional currency is the pound sterling. The following exchange rates were in effect during 2012:
.

Westmore reported sales of =2,500,000 during 2012. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales? (Points : 7)
$4,032,258.
$3,968,254.
$4,000,000.
$1,575,000.
None of the above.

Question 14. 14. Corresponds to CLO 4(b)
Meisner Co. ordered parts costing §50,000 for a foreign supplier on May 12 when the spot rate was $.21 per stickle. A one-month forward contract was signed on that date to purchase §50,000 at a forward rate of $.24 per stickle. On June 12, when the parts were received and payment was made, the spot rate was $.29 per stickle. At what amount should inventory be reported? (Points : 7)
$0.
$10,500.
$13,500.
$12,000.
$14,500

Question 15. 15. Corresponds to CLO 4(c)
When consolidating a foreign subsidiary, which of the following statements is not true? (Points : 7)
Subsidiary's income/loss is not carried forward to the consolidated balance sheet.
Subsidiary's cumulative translation adjustment is not carried forward to the consolidated balance sheet.
Parent reports a cumulative translation adjustment using the equity method.
Parent reports a gain or loss in net income using the equity method.
None of the above.

Question 16. 16. Corresponds to CLO 4(d)
Belsen purchased inventory on December 1, 2013. Payment of 200,000 stickles was to be made in sixty days. Also on December 1, Belsen signed a contract to purchase §200,000 in sixty days. The spot rate was §1 = .35714, and the 60-day forward rate was §1 = $.38462. On December 31, the spot rate was §1 = .34483 and the 30-day forward rate was §1 = .38168. Assume an annual interest rate of 12% and a fair value hedge. The present value for one month at 12% is .9901.
In the journal entry to record the establishment of a forward exchange contract, at what amount should the Forward Contract account be recorded on December 1? (Points : 7)
$71,428.
$76,924.
$588.
$0, since there is no cost there is no value for the contract at this date.
None of the above.

Question 17. 17. Corresponds to CLO 5(a)
A local partnership has assets of cash of $5,000 and a building worth $60,000. All liabilities have been paid and the partners are all insolvent. The partners' capital accounts are as follows Bob $35,000, Ed $20,000 and Joe 18,000. The partners share profits and losses 4:4:2. If the building is sold for $40,000, how much cash will Bob receive in the final settlement? (Points : 7)
$36,400.
$29,200.
$27,000.
$20,000.
None of the above.

Question 18. 18. Corresponds to CLO 5(b)
When Williams withdrew from Jones, Smith, Thomas, and Williams LLP, he was paid $40,000, although his capital account balance was only $28,000. The four partners shared net income and losses equally. The journal entry of the partnership to record Frank's withdrawal, preferably should include a debit of (Points : 7)
$3,333.
$40,000.
$30,000.
$2,500.
$4,000

Question 19. 19. Corresponds to CLO 5(c)
Which statement below is correct? (Points : 7)
If a partner of a liquidating limited liability partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the income-sharing ratio of those partners.
Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances if there is no income-sharing plan in the partnership contract.
A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan.
Partners may receive cash before creditors receive cash when liquidated a limited liability partnership.
None of the above.

Question 20. 20. Corresponds to CLO 5(d)
The liquidation process does not include (Points : 7)
Conveying any remaining property to the partners based on their final capital balances.
Converting partnership property into cash.
Paying off liabilities and liquidation expenses.
The liquidation process includes all of the above.
Both a and c.

Question 21. 21. Corresponds to CLO 6(a)
Which statement is true regarding the acceptance and confirmation of a reorganization plan? (Points : 7)
The plan must be voted on by the creditors and the stockholders of the company.
Any class of creditors that is not damaged by a reorganization is assumed to have accepted the plan without voting.
Even if creditors and stockholders approve of the plan, the court can reject the plan.
All of the above.
Both a and b.

Question 22. 22. Corresponds to CLO 6(b)
Johnson Co. filed a bankruptcy petition and liquidated its noncash assets. Johnson was paying sixty cents on the dollar for unsecured claims. Smith Co. held a mortgage of $100,000 on land that was sold for $80,000. The total amount of payment that Smith should have received is calculated to be (Points : 7)
$20,000.
$90,000.
$80,000.
$92,000.
$100,000

Question 23. 23. Corresponds to CLO 6(c)
Assuming all of the following expenses have priority, in what order are they prioritized? (Points : 7)
Administrative expenses, employee claims for wages, unpaid taxes, claims for the return of customer deposits.
Employee claims for wages, unpaid taxes, administrative expenses, claims for the return of customer deposits.
Unpaid taxes, administrative expenses, employee claims for wages, return of customer deposits.
Administrative expenses, employee claims for wages, claims for the return of customer deposits, unpaid taxes.
None of the above.

Question 24. 24. Corresponds to CLO 6(d)
Sparkman Co. filed a bankruptcy petition and liquidated its noncash assets. Sparkman was paying forty cents on the dollar for unsecured claims. Bailey Co. held a mortgage of $150,000 on land that was sold for $110,000. The total amount of payment that Bailey should have received is calculated to be (Points : 7)
$110,000.
$44,000.
$126,000.
$134,000.
None of the above.

Question 25. 25. Corresponds to CLO 7(a)
What of the following is not a significant difference between IFRS and U. S. GAAP related to recognition and measurement of assets? (Points : 7)
Difference in the determination of whether an asset is impaired.
Acceptable use of LIFO under U. S. GAAP, but not IFRS.
Reversal of inventory writedowns allowed under IFRS, but not U. S. GAAP.
Sequent reversal of impairment losses allowed under IFRS, especially for U. S. GAAP.

Question 26. 26. Corresponds to CLO 7(b)
Which of the following is a framework for the development of accounting systems internationally? (Points : 7)
Institutional Consequences.
Accounting Values.
Accounting Systems.
All of the above.
None of the above.

Question 27. 27. Corresponds to CLO 7(c)
Which of the following is a problem caused by diverse accounting practices? (Points : 7)
Companies gaining access to foreign capital markets.
The lack of comparability of financial statements between companies from different countries.
The preparation of consolidated financial statements by companies with foreign operations.
All of the above.
None of the above.

Question 28. 28. Corresponds to CLO 7(d)
Several differences between IFRS and U. S. GAAP relate to (Points : 7)
When it is recognized.
How it is recognized.
Why it is recognized.
Whether an item is recognized or not.
A, B, & D