Advance Accounting- auditing exam

//for all the questions check the attached file//1. (TCO A) Which of the following results in an increase in the equity in investee income account when applying the equity method? (Points : 5)Unrealized gain on intercompany inventory transfers for the prior yearAmortizations of purchase price over book value on date of purchase for the prior yearAmortizations of purchase price over book value on date of purchaseExtraordinary gain of the investorSale of a portion of the investment at a loss Question 2.2. (TCO B) Which of the following is a characteristic of a business combination that should be accounted for as a purchase? (Points : 5)The combination must involve the exchange of equity securities only.The acquired subsidiary must be smaller in size than the acquiring parent.The two companies may be about the same size and it is difficult to determine the acquired company and the acquiring company.The transaction may be considered to be the uniting of the ownership interests of the companies involved.The transaction clearly establishes an acquisition price for the company being acquired.Question 3.3. (TCO C) Under the equity method of accounting for an investment, (Points : 5)the investment account remains at initial value.dividends received are recorded as revenue.income reported by the subsidiary increases the investment account.goodwill is amortized over 20 years.dividends received increase the investment account. Question 4.4. (TCO C) Which of the following internal record-keeping methods can a parent choose to account for a subsidiary acquired in a business combination? (Points : 5)Initial value or book valueInitial value, equity, or partial equityInitial value, equity, or book valueInitial value, lower-of-cost-or-market value, or equityInitial value, lower-of-cost-or-market value, or partial equity Question 5.5. (TCO D) All of the following statements regarding the sale of subsidiary shares are true except which of the following? (Points : 5)The use of specific identification based on serial number is acceptable.The use of the FIFO assumption is acceptable.The use of the specific LIFO assumption is acceptable.The use of the averaging assumption is acceptable.The parent company must determine whether consolidation is still appropriate for the remaining shares owned. Question 6.6. (TCO D) When Timber Co. acquired 75% of the common stock of Woody Corp., Woody owned land with a book value of $70,000 and a fair value of $100,000. What amount of excess land allocation would be included for the calculation of noncontrolling interest, according to SFAS 141(R)? (Points : 5)$70,000$25,000$17,500$7,500$0 Question 7.7. (TCO E) An intercompany sale took place whereby the transfer price exceeded the book value of a depreciable asset. Which statement is true for the year following the sale? (Points : 5)A worksheet entry is made with a debit to gain for a downstream transfer.A worksheet entry is made with a debit to gain for an upstream transfer.A worksheet entry is made with a debit to retained earnings for a downstream transfer.A worksheet entry is made with a debit to investment in the subsidiary for a downstream transfer when the parent uses the equity method.No worksheet entry is necessary. Question 8.8. (TCO F) A net asset balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true? (Points : 5)There is a transaction gain.There is a transaction loss.There is no translation adjustment.There is a negative translation adjustment.There is a positive translation adjustment. Question 9.9. (TCO G) Cline, Watters, and Nettles formed a partnership on January 1, 20X1, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) an interest of 10% of the beginning capital balance each year; (2) an annual compensation of $10,000 to Watters; and (3) sharing the remainder of the income or loss in a ratio of 20% for Cline and 40% each for Watters and Nettles. Net income was $150,000 in 20X1 and $180,000 in 20X2. Each partner withdrew $1,000 for personal use every month during 20X1 and 20X2.What was Clines share of income for 20X1? (Points : 5)$63,000$58,000$53,000$51,000$29,000 Question 10.10. (TCO G) The partnership of Jewel, Maggie, and Waters was insolvent and will be unable to pay $50,000 in liabilities currently due. What recourse is available to the partnerships creditors? (Points : 5)They must present their claims to the three partners in the order of the partners capital account balances.They must try to obtain a payment from the partner with the largest capital account balance.They may seek remuneration from any partner they choose.They cannot seek remuneration from the partners as individuals.They must present equal claims to the three partners as individuals.

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