Financial Accounting – Sample 1

Multiple Choice

Delta Corporation owns 90 percent of Sigma Company and Sigma owns 90 percent of Pi, Inc., all of which are domestic corporations. Information for the three companies for the year ending December 31, 2009 follows:

                                      

1.             What is Pi’s accrual-based income for 2009?

a.              $152,000

b.             $16,000

c.              $192,000

d.        $200,000

e.              $208,000

 2.             What is Sigma’s accrual-based income for 2009?

a.              $400,000

b.             $592,000

c.              $540,000

d.             $572,800

e.        $600,000

3.             Compute Delta’s accrual-based income for 2009.

           Delta Income + Sigma Income = 600000 + 600000 = 1200000

4.             What is the non-controlling interest in Pi’s income for 2009?

a.              $0

b.             $9,600

c.              $10,000

d.             $19,200

e.         $20,000

5.             What is the non-controlling interest in Sigma’s income for 2009?

a.              $55,240

b.             $56,420

c.             $57,280

d.            $59,420

e.        $60,000

6.             Calculate the total non-controlling interest in the subsidiaries’ income for 2009.

Pi’s Income + Sigma’s income – 10%

Pi’s non controlling income = 60000 + 20000 – 2000 = 78000

7.             Under the temporal method of translating foreign currency financial statements, common stock would be restated at what rate?

a.              Beginning of the year rate

b.             Average rate

c.              Current rate

d.         Historical rate

e.              Composite amount

 

8.             Under the current rate method of translating foreign currency financial statements, common stock would be restated at what rate?

a.              Beginning of the year rate

b.             Average rate

c.              Current rate

d.         Historical rate

e.              Composite amount

9.             Under the current rate method, property, plant & equipment would be restated at what rate?

a.              Beginning of the year rate

b.             Average rate

c.          Current rate

d.             Historical rate

e.              Composite amount

10.         Under the temporal method, property, plant & equipment would be restated at what rate?

 Beginning of the year rate

Average rate

Current rate

Historical rate

Composite amount

 

11.         Under the current rate method, retained earnings would be restated at what rate?

a.              Beginning of the year rate

b.             Average rate

c.              Current rate

d.         Historical rate

e.              Composite amount

 

12.         Under the temporal method, depreciation expense would be restated at what rate?

a.              Beginning of the year rate

b.             Average rate

c.              Current rate

d.         Historical rate

e.              Composite amount

13.         Under the temporal method, how would cost of goods sold be restated?

a.              Beginning of the year rate

b.             Average rate

c.              Current rate

d.             Historical rate

e.        Composite amount

14.         Under the current rate method, how would cost of goods sold be restated?

a.              Beginning of the year rate

b.             Average rate

c.              Current rate

d.             Historical rate

e.              Composite amount

 

15.         Which of the following is not a problem caused by diverse accounting practices?

a.              Lack of comparability of financial statement between companies in the same country

b.             Preparation of consolidated financial statements

c.              Gaining access to foreign capital markets

d.             Adverse effects when making foreign acquisition decisions

e.         Translating IFRSs into other languages

 

16.         Harmonization of financial reporting practices is:

a.        The process of reducing differences in financial reporting practices across countries

b.             The process of translating differences in financial reporting practices across countries

c.              The process of increasing differences in financial reporting practices across countries

d.             The process of allowing different countries to create unique financial reporting practices

e.              The process of creating similar accounting practices according to geographic regions
of the world

17.         What international organization currently promulgates IFRSs?

a.    IASB

b.  IASC

c.    IOSCO

d.    FASB

e.      EU

18.         The IASB and FASB are working on several joint projects. What is the purpose of the Revenue Recognition Project?

a.              To provide guidance on the application of the purchase method

b.             To enhance the usefulness of information in assessing the financial performance of the reporting enterprise

c.          To develop a common comprehensive standard on revenue recognition

d.             To develop a common conceptual framework that both boards can use as a basis of futures standards

e.              To agree upon financial statement titles that will have no differentiation after translation to various languages

19.         What is Form 10-K?

a.              Aquarterly report filed with the SEC

b.          An annual report filed with the SEC

c.              Asemiannual report filed with the SEC

d.             Aform filed with the SEC before the company issues stock for the first time

e.              Aform filed with the SEC before issuing stocks to acquire another company

20.         According to the text, which of the following is not exempt from registration?

a.         Offerings of more than $5 million

b.             Securities issued by governments

c.              Securities issued by banks

d.             Securities issued by savings and loan associations

e.              Offerings of no more than $1 million made to any number of investors within a
12-month period

22.         The SEC has usually restricted its role in establishing accounting principles to

a.              Specifying the information that should be included in interim financial statements

b.             Developing definitions of key accounting terms

c.              Developing accounting standards for particular industries

d.         Determining required disclosures

e.              The promulgation and issuance of SASs (Securities Accounting Standards)

23.         Which one of the following regulates the subsequent trading of securities through brokers and exchanges?

a.              The Securities Act of 1933

b.         The Securities Exchange Act of 1934

c.              The Investment Company Act of 1940

d.             The Investment Advisers Act of 1940

e.              The Sarbanes-Oxley Act of 2002

24.         What is shelf registration?

a.              A procedure that allows the sale of securities to a small group of knowledgeable investors without any general solicitation

b.         A procedure that allows a company to register securities and then sell them over a period of two years without reregistering

c.              A method of filing Form 10-K with the SEC

d.             The registration of mutual funds that engage in investing and trading securities

e.              The registration of securities issued in connection with business combination
transactions

25.         What is private placement of securities?

a.              A procedure that allows a company to register securities and then sell them over a period of two years without reregistering

b.        A procedure that allows the sale of securities to a small group of knowledgeable investors without any general solicitation

c.              A method of filing Form 10-K with the SEC

d.             The registration of mutual funds that engage in investing and trading securities

e.              A sale of securities to 35 or fewer accredited investors