35 Free Test Bank for Advanced Accounting by Fayerman

35 Free Test Bank for Advanced Accounting by Fayermen is designed to address those advanced topics in accounting that help students of accounting who can practice easier and build on the knowledge about advanced accounting. Addition to this, it helps students obtain in background and the concepts included in this textbook by the complementation of free textbook advanced accounting test bank samples and prompt answers. Let’s start practicing 35 free multiple choice questions below to become professional for your coming exam and help yourself prepare well skills for your future career. At test bank, you just need to practice online without downloading any document because you will be provided full answers after submitting. Wishing you have an excellent result. Good luck!

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The equity method is applied:

•  a) when one of the parties is designated as a subsidiary.
•  b) when a contractual agreement is written up providing joint control.
•  c) from the date the investor obtains significant influence over the investee.
•  d) on that date when it becomes clear that an investor has no power to participate in the financial and operating decisions of the investee.

At the beginning of 2013, Ridley Ltd. acquired 15% of the voting shares of Gasser Co. for $150,000. Ridley does not have any significant influence over Gasser. Ridley reports the investment using the cost method. In 2013, Gasser earned net income of $70,000 and paid dividends of $40,000. In 2014, Gasser earned net income of $80,000 and paid dividends of $100,000. At the end of 2014, what is the balance of Ridley's "Investment in Gasser" account?

•  a) $150,150
•  b) $154,500
•  c) $150,000
•  d) $182,500

______________ has sometimes been described as ‘one-line consolidation’.

•  a) The equity method of accounting
•  b) A joint venture
•  c) A passive investment
•  d) Significant influence

Non-strategic investments can be classified as fair value through profit or loss (FVTPL) or as fair value through other comprehensive income (OCI). Which of the following statements is true?

•  a) Under both FVTPL and OCI, changes in the fair value of the investment are reported as other comprehensive income on the statement of comprehensive income.
•  b) Under both FVTPL and OCI, changes in the fair value of the investment are reported under the net income section on the statement of comprehensive income.
•  c) Under both FVTPL and OCI, dividends received from the investee are reported as other comprehensive income on the statement of comprehensive income.
•  d) Under both FVTPL and OCI, dividends received from the investee are reported under the net income section on the statement of comprehensive income.

Which of the following is the first step in determining if one company controls another such that a parent/subsidiary relationship exists?

•  a) Determine the relevant activities of the investee.
•  b) Determine how decisions are made regarding the relevant activities.
•  c) Determine whether the investor has the current ability to direct those relevant activities.
•  d) Determine the purpose and design of the investee.

Regarding significant influence with respect to an associate, which of the following statements is TRUE?

•  a) The investor–associate relationship is directly opposite in nature compared to that existing between a parent and subsidiary.
•  b) There is a requirement for the investor to hold shares, or have a beneficial interest, in the associate.
•  c) The application of the cost method of accounting is based on the investor owning shares in the associate.
•  d) If significant influence is exercised by one company over another by virtue of an association or contract other than from the holding of shares, then the equity method cannot be applied in relation to the associate.

On January 1, 2013, Tonya Ltd. started Chen Ltd. by contributing $600,000 and received 100% of the common shares of Chen. Chen reported net income of $40,000 in 2013 and $85,000 in 2014 and paid out 40% of its net income as dividends in each year. Under the equity method, which of the following amounts should be reported on Tonya's separate-entity 2014 financial statements?

•  a)
•  Investment in Chen$600,000; Investment Income $34,000
•  b) Investment in Chen $685,000; Investment Income $85,000
•  c) Investment in Chen$625,000; Investment Income $34,000
•  d) Investment in Chen $625,000; Investment Income $40,000

Which methods will result in the same income and shareholders' equity?

•  a) Cost and consolidation.
•  b) Equity and consolidation.
•  c) Cost and equity.
•  d) Each method results in different income and shareholder's equity amounts.

Jamison Co. owned 60% of Tyler Co.'s voting shares and 25% of Simon Ltd.'s voting shares. Tyler owns 30% of Simon's voting shares. Which of the following statements is TRUE?

•  a) Tyler is the only subsidiary of Jamison.
•  b) Simon is a subsidiary of both Tyler and Jamison.
•  c) Simon is the only subsidiary of Tyler.
•  d) Both Tyler and Simon are subsidiaries of Jamison.

How do joint ventures differ from private corporations?

•  a) A joint venture does not have a board of directors.
•  b) There can only be two parties in a joint venture.
•  c) Venturers cannot make unilateral decisions.
•  d) The joint venturers must share the risks and profits of the joint venture equally.

Naylor Ltd. owns 100% of the common shares of Edward Ltd. During the year, Naylor reported net income of $108,000 including its income from its investment in Edward accounted for under the cost method. Edward reported net income of $20,000 and paid dividends of $8,000 during the year. What net income will be reported by Naylor on its separate-entity financial statements under the equity method and on its consolidated financial statements?

•  a) Equity Method$120,000; Consolidated Financial Statements $120,000
•  b) Equity Method $112,000; Consolidated Financial Statements $112,000
•  c) Equity Method $120,000; Consolidated Financial Statements $112,000
•  d) Equity Method $112,000; Consolidated Financial Statements $120,000

On whose books are the consolidating adjusting entries recorded?

•  a) Only on the consolidated worksheet.
•  b) In the general journal of both the parent company and on the consolidated worksheet.
•  c) In the general journal of both the parent and subsidiary companies and on the consolidated worksheet.
•  d) In the general journal of both the parent and subsidiary companies.

At the beginning of 2013, Zed Ltd. acquired 15% of the voting shares of Pine Co. for $150,000. Zed does not have any significant influence over Pine. Zed reports the investment using the cost method. In 2013, Pine earned net income of $70,000 and paid dividends of $40,000. In 2014, Pine earned net income of $80,000 and paid dividends of $100,000. At the end of 2014, what journal entry should Zed make to record the dividends from Pine?

•  a) No entry is required
•  b) DR Cash 12,000; CR Investment in Pine 12,000
•  c) DR Cash 15,000; CR Investment in Pine 15,000
•  d) DR Cash 15,000; CR Investment income 15,000

Which of the following is NOT an indicator of significant influence?

•  a) The investor and the investee share office space and use the same accounting firm.
•  b) The investor has representation on the investee's board of directors.
•  c) There are material transactions between the investor and the investee.
•  d) The investor provides computing services to the investee.

A subsidiary is defined as an entity that is controlled by another company. Three criteria must be present in order for there to be control. The parent must have all of the following except:

•  a) the ability to direct the financial and operating policies of another company.
•  b) the ability to obtain returns from another company.
•  c) the ability to use its power to affect the returns from another company.
•  d) the ability to issue any class of securities in a public market on behalf of another company.

Dither Co. owns 100% of the common shares of Franklin Ltd. Dither records its investment in Franklin using the cost method. Dither and Franklin have transactions with each other. In preparing Dither's consolidated financial statements, which of the following should be done?

•  a) Dividends received by Dither from Franklin should be deducted from Dither's dividend income.
•  b) Franklin's retained earnings should be deducted from Dither's retained earnings.
•  c) Dither's receivable from Franklin should be netted with Dither's accounts receivable.
•  d) Franklin's share capital should be added to Dither's share capital.

Foster Corporation uses the equity method to account for its 25% investment in Vector Corporation and receives $25,000 in dividends. How should Foster account for these dividends?

•  a) An increase in assets.
•  c) An increase in income.
•  b) A decrease in the investment.
•  d) A decrease in income.