会计期末练习题

1. In a purchase business combination, the direct costs of registering and issuing equity securities are:

a. Added to the parent/investor company’s investment account

b. Charged against other paid-in capital of the combined entity

c. Deducted from income in the period of combination

d. None of the above

2. On April 1, Jack Company paid $800,000 for all the issued and outstanding common stock of Ann Corporation in a transaction properly accounted for as a purchase. The recorded assets and liabilities of Ann Corporation on April 1 are as follow:

Cash $ 80,000 Inventory 240,000 Property and equipment (net of accumulated depreciation of $320,000) 480,000 Liabilities (180,000) On April 1, it was determined that the inventory of Ann had a fair value of $190,000 and the property and equipment (net) had a fair value of $560,000. What is the amount of goodwill resulting from the business combination?

a. 0

b. $50,000

c. $150,000

d. $180,000

3. Fast Corporation paid $50,000 cash for the net assets of Agge Company, which consisted of the following:

Book Value Fair Value Current assets $ 10,000 $ 14,000

Plant and equipment 40,000 55,000

Liabilities assumed (10,000) (9,000)

$ 40,000 $ 60,000

The plant and equipment acquired in this business combination should be recorded at:

a. $ 55,000

b. $ 50,000

c. $ 45,833

d. $ 45,000

4. Jarret Corporation is a 25%-owned equity investee of Marco Corporation. During the current year, Marco receives $12,000 in dividends from Jarret. How does the $12,000 dividend affect Marco’s financial position and results of operations?

a. Increases assets

b. Decreases investment

c. Increases income

d. Decreases income

5. On January 1 Grade Company paid $300,000 for 20,000 shares of Medium Compa ny’s common stock, which represents a 15% investment in Medium. Grade does not have the ability to exercise significant influence over Medium. Medium declared and paid a dividend of $1 per share to its stockholders during the year.

Medium reported net income of $260,000 for the year ended December 31. The balance in Grade’s balance sheet account “Investment in Medium Company” at December 31 should be

a. $280,000

b. $300,000

c. $319,000

d. $339,000

6. Parent-company and consolidated financial statement amounts would not be the same for:

a. Capital stock

b. Retained earnings

c. Investments in unconsolidated subsidiaries

d. Investments in consolidated subsidiaries

7. If $1.5625 can be exchanged for 1 British pound, the direct and indirect exchange rate quotations are:

a. $1.5625 and 1 British pound, respectively

b. $1.5625 and 0.64 British pounds, respectively

c. $1.00 and 1.5625 British pounds, respectively

d. $1.00 and 0.64 British pounds, respectively

8. Mudflat Corporation’s stockholder’s equity at December 31, 2004 included the following:

shareholders on January 1, 2005 for $11,600,000. What is the book value of Brolga’s investment in Mudflat?

a. $10,800,000

b. $11,400,000

c. $14,240,000

d. $14,880,000

9. A U.S. firm purchases merchandise from a Canadian firm with payment due in 60 days and denominated in Canadian dollars. The U.S. firm will report an exchange gain or loss on settlement if the transaction is:

a. Recorded in U.S. dollars

b. Measured in U.S. dollars

c. Not hedged through a forward contract

d. Settled after an exchange rate change has occurred

10. On January 2, 2006, Troquel Corporation bought 15% of Zafacon Corporation’s capital stock for $30,000. Troquel accounts for this investment by the cost method. Zafacon’s net income for the years ended December 31, 2006, and December 31, 2007, were $10,000 and $50,000, respectively. During 2007 Zafacon declared a