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fundamentals of advanced accounting

Questions and Answers of Fundamentals Of Advanced Accounting

How might the enterprise fund amounts on the proprietary fund statement of net assets differ from the amounts reported as "business-type activities" on the governmentwide statement of net
What statements are included in a set of financial statements for nongovernmental not-for-profit entities?AppendixLO1
How does one determine whether a hospital, college, or voluntary health and welfare organization should be reported in accordance with FASB standards or GASB standards?AppendixLO1
Explain the difference between a conditional promise to give and an unconditional promise to give.AppendixLO1
Explain the difference between donor-imposed conditions and donor-imposed restrictions.AppendixLO1
How are unconditional promises to give with collections due in the next period accounted for?AppendixLO1
How is the expiration of a time restriction recognized?AppendixLO1
Are gifts in kind always reported as unrestricted support that increases unrestricted net assets?AppendixLO1
Expenses of voluntary health and welfare organizations include classifications for program services and supporting services. Explain these classifications.AppendixLO1
What is the purpose of the statement of functional expenses of voluntary health and welfare organizations?AppendixLO1
Are contributed services reported in the statement of activities of a nongovernmental voluntary health and welfare organization?AppendixLO1
Health care entities frequently provide charity care to qualified individuals. How is charity care reported in the financial statements of a hospital?AppendixLO1
How are net patient service revenues of hospitals measured, and in which hospital financial statement are they reported?AppendixLO1
What are the major revenue groupings of hospitals? Give an example of a revenue item that would be included in each grouping.AppendixLO1
Are provisions for bad debts and depreciation of hospitals reported as expenses? Explain.AppendixLO1
Describe the difference in a set of financial statements for a governmental university and a private not-for- profit university.AppendixLO1
When is the AICPA college guide model used?AppendixLO1
Other than FASB standards and the AICPA guide, where can you find guidance on accounting and reporting issues for colleges and universities?AppendixLO1
Describe the reporting requirements for a governmental not-for-profit entity with both governmental and business-type activities.AppendixLO1
Identify the functional expense classifications for a university. Provide an example of each.AppendixLO1
Discuss the two options that not-for-profit organizations have for recording fixed assets.AppendixLO1
What is an indirect holding of the stock of an affiliated company?AppendixLO1
P owns a 60% interest in S, and S owns a 40% interest in T. Should T be consolidated? If not, how should T be included in the consolidated statements of P Company and Subsidiaries?AppendixLO1
Prepare diagrams of two types of affiliation structures involving indirect ownership. Compute the direct and indirect ownership held by majority and noncontrolling stockholders for each of your
Distinguish between indirect holding affiliation structures and mutual holding affiliation structures.AppendixLO1
Parent Company owns 70% of the voting stock of Subsidiary A, and Subsidiary A owns 70% of the stock of Subsidiary B. Is the inside ownership of Subsidiary B more than 50%? Should Subsidiary B be
Pat Corporation owns 80% of the stock of Sam Corporation, and Sam Corporation owns 70% of the stock of ' Stan Corporation. Separate earnings of Pat, Sam, and Stan are $100,000, $80,000, and $50,000,
In using the schedule approach for allocating income of subsidiaries to majority and noncontrolling stock¬ holders in an indirect holding affiliation structure, why is it necessary to begin with the
P owns 80% of SI, and SI owns 70% of S2. Separate incomes of P, SI, and S2 are $20,000, $10,000, and $5,000, respectively, for 2006. During 2006, SI sold land to P at a gain of $1,000. Compute Si’s
If a parent company owns 80% of the voting stock of a subsidiary, and the subsidiary in turn owns 20% of the stock of the parent, what kind of affiliation structure is involved? Explain.AppendixLO1
How is the treasury stock approach applied to the elimination of mutually held stock?AppendixLO1
Are the treasury stock and conventional approaches equally applicable to all mutual holdings? Explain.AppendixLO1
Under the treasury stock approach, a mutually held subsidiary accounts for its investment in the parent company on a cost basis. Are dividends received by the subsidiary from the parent company
Describe the concept of a constructive retirement of parent-company stock. Should the parent company adjust its equity accounts when its stock is constructively retired?AppendixLO1
P’s separate earnings are $50,000, and S’s separate earnings are $20,000. P owns an 80% interest in S, and S owns a 10% interest in P. What is the amount of consolidated net income?AppendixLO1
How do consolidation procedures for mutual holdings involving the father-son-grandson type of affilia¬ tion structure differ from those for mutually held parent-company stock?AppendixLO1
If all companies in an affiliation structure account for their investments on an equity basis, how can non¬ controlling interests be determined without the use of simultaneous equations?AppendixLO1
Arom Corporation has 100,000 outstanding shares of no par common stock and 5,000 outstanding shares of $100 par, cumulative, 10% preferred stock. Arom Corporation’s net income for the current year
Refer to the information in question 1. Assume that Arom pays two years’ preferred dividend require¬ ments during the current year. Would this affect your computation of Flora’s investment
How should preferred stock of a subsidiary be shown in a consolidated balance sheet in each case?a. If it is held 100% by the parent companyb. If it is held 50% by the parent company and 50% by
Describe the computation of noncontrolling interest expense for an 80%-owned subsidiary with both preferred and common stock outstanding.AppendixLO1
How does consolidated earnings per share differ from parent-company earnings per share?AppendixLO1
Do investments in nonconsolidated subsidiaries and 20%- to 50%-owned investees affect the nature of the investor company’s EPS calculations?AppendixLO1
Under what conditions will the procedures used in computing a parent company’s EPS be the same as those for a company without equity investments?AppendixLO1
It may be necessary to compute the earnings per share for subsidiaries and equity investees before parent- company (and consolidated) earnings per share can be determined. When are the subsidiary EPS
Potentially dilutive securities of a subsidiary may be converted into parent-company common stock or subsidiary common stock. Describe how these situations affect the parent company’s EPS
In computing diluted earnings for a parent company, it may be necessary to replace the parent’s equity in subsidiary realized income with the parent company’s equity in the subsidiary’s diluted
Are consolidated income tax returns required for all consolidated entities? Discuss.AppendixLO1
Can a consolidated entity that is classified as an “affiliated group” under the IRS code elect to tile separate tax returns for each affiliate?AppendixLO1
What are the primary advantages of filing a consolidated tax return?AppendixLO1
Some or all of the dividends received by a corporation from domestic affiliated companies may be excluded from federal income taxation. When are all of the dividends excluded?AppendixLO1
Describe the nature of the tax effect of temporary differences that arise from use of the equity method of accounting.AppendixLO1
Does a parent company/investor provide for income taxes on the undistributed earnings of a subsidiary by adjusting investment and investment income accounts? Explain.AppendixLO1
When do unrealized and constructive gains and losses create temporary differences for a consolidated entity?AppendixLO1
Define the functional currency concept and briefly describe how a foreign entity’s functional currency is determined. Why is this definition critical from a financial reporting
How does Statement No. 52 define a highly inflationary economy? If the economy is deemed to be highly inflationary, which method for converting the financial statements to the reporting currency is
At the date of acquisition of a foreign subsidiary, what procedure is used to allocate the investment purchase price?AppendixLO1
Describe what the current rate method is and under what circumstances it should be used.AppendixLO1
Describe what the temporal method is and under what circumstances it should be used.AppendixLO1
If the current rate method is used, the gain or loss on translation is included under other comprehensive income. Explain why this makes sense economically.AppendixLO1
If the temporal method is used, the gain or loss on remeasurement is included in net income each year. Explain why this makes sense economically.AppendixLO1
Under what circumstances would a foreign entity’s financials statements need to be both remeasured and translated? Would this process have an effect on both the income statement and other
If a company’s sales were very seasonal—for example, a holiday-tree grower—would it be appropriate to use the annual average exchange rate to translate and remeasure sales and other expenses?
In the current-rate-method example in the chapter, the parent’s other comprehensive income adjustment related to its investment in the subsidiary was larger than the other comprehensive income
Under the current rate method, all the expenses are translated using some form of current-period exchange rate. Under the temporal method, some expenses such as salaries and utilities are translated
How does the choice of functional currency affect how the gain or loss on a hedge of a net investment in a foreign subsidiary is reported in the financial statements?AppendixLO1
Appendix A-Noncontrolling interest-How are the noncontrolling interest balance and the noncontrol- ling interest-expense balance computations affected if the current rate method is used? If the
Appendix B-Cash flow statement-How is the effect of exchange rate changes in cash reported in a consolidated statement of cash flows?AppendixLO1
Appendix C-Discuss the possible accounting problems that can arise in remeasuring inventory items that were accounted for under the lower-of-cost-or-market pricing procedure in the foreign entity's
Understand the economic motivations underlying business combinations.AppendixLO1
Learn about the alternative forms of business combinations, from both the legal and accounting perspectives.AppendixLO1
Introduce concepts of accounting for business combinations, emphasizing the purchase method.AppendixLO1
See how firms make cost allocations in a purchase method combination.AppendixLO1
Describe the accounting concept of a business combination.AppendixLO1
Is dissolution of all but one of the separate legal entities necessary in order to have a business combina¬ tion? Explain.AppendixLO1
What are the legal distinctions between a business combination, a merger, and a consolidation?AppendixLO1
When does goodwill result from a business combination? How does goodwill affect reported net income after a business combination?AppendixLO1
What is negative goodwill? Describe the accounting procedures necessary to record and account for negative goodwill.AppendixLO1
A business combination in which a new corporation is formed to take over the assets and operations of two or more separate business entities, with the previously separate entities being dissolved, is
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
Which of the following accounts would be adjusted to its fair market value in a merger accounted for under the purchase method, regardless of the price paid?a Inventories b Goodwill c Patents d
An excess of the fair value of net assets acquired in a purchase business combination over the price paid is:a Reported as negative goodwill and amortized over a maximum period of 40 years b Applied
Cork Corporation acquires Dart Corporation in a business combination accounted for as a purchase. Which of the following would be excluded from the process of assigning fair values for purposes of
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
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
Prepare stockholders’ equity section The stockholders’ equities of Pillow Corporation and Sleep-bank Corporation at January 1 were as follows (in thousands):Pillow Sleep-bank Capital stock, $10
Journal entries to record business combinations IceAge Company issued 120,000 shares of $10 par common stock with a fair value of $2,550,000 for all the voting common stock of Jester Company. In
Journal entries to record a purchase with direct costs and fair value/book value differences On January 1, Danders Corporation pays $200,000 cash and also issues 18,000 shares of $10 par common stock
Prepare balance sheet after purchase business combination Comparative balance sheets for Pine and Sain Corporations at December 31, 2005, are as follows (in thousands):Pine Sain Current assets $130 $
Prepare balance sheet after purchase business combination On January 2, 2006, Pelican Corporation enters into a business combination with Seabird Corporation in which Seabird is dissolved. Pelican
Journal entries and balance sheet for purchase business combination On January 2, 2006, Persis Corporation issues its own $10 par common stock for all the outstand¬ ing stock of Sineco Corporation
Allocation schedule and balance sheet The balance sheets of Phule Corporation and Sen Corporation at December 31, 2005, are summa¬ rized together with fair value information as follows (in
Journal entries and balance sheet for a purchase combination Celistia Corporation paid $2,500,000 for Dawn Corporation’s voting common stock on January 2, 2006, and Dawn was dissolved. The purchase
How are the accounts of investor and investee companies affected when the investor acquires stock from stockholders of the investee company (for example, a New York Stock Exchange purchase)? When the
Would goodwill arising from an equity investment of more than 20% be recorded separately on the books of the investor corporation? Explain.
Why is the equity method of accounting for equity investments frequently referred to as a one-line consolidation?
Is there a difference between the amount of a parent company’s net income under the equity method and the consolidated net income for the same parent company and its subsidiaries?
What is the difference in reporting income from a subsidiary in the parent company’s separate income statement and in consolidated financial statements?
Ordinarily, the income from an investment accounted for by the equity method is reported on one line of the investor company’s income statement. When would more than one line of the income
Describe the accounting adjustments needed when a 25% equity interest in an investee company is decreased to a 15% equity interest.

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