1. Millers company's December 31 year end financial statements contained the following errors.

Ending inventory December 31,2014= 22,500 overstated December 31, 2015= 33,000 overstated

No corrections have been made for any of the errors. Ignore income tax considerations. What is the total net effect of the errors on miller's 2015 net income?

a. Net income understated by 10,500

b. Net income overstated by 33,000

c. Net income overstated by 10,500

d. Net income overstated by 55,500

2. Kite co. was formed on 1/1/14 to sell a single product. Over a two year period. Kite's acquisition costs have increased steadily. Held in inventory were 300 units at 12/31/14, and zero at December 31,2015. Assuming the periodic inventory system, the inventory cost method which reports the highest amount of each of the following.

Inventory at 12/31/14 COGS for 2015

A. LIFO FIFO

B. LIFO LIFO

C. FIFO FIFO

D. FIFO LIFO

3. From a consolidated point of view the intercompany gain on a parent company's sale of a depreciable plant asset to the subsidiary is confirmed when.

a. the subsidiary depreciates the plant asset.

b. the parent company sells the plant asset to the subsidiary.

c. the subsidiary resells the plant asset to the parent company.

d. all of the above

4. Parker corporation acquired 100% of the voting stock of Sawyer company. The fair value of sawyer's net identifiable assets was $5,000,000. The acquisition transaction included the following:

- 5,000,000 in cash paid to the former owners of Sawyer.

- 150,000 new shares of stock with a market value of $45/share issued to the former owners of sawyer. Registration fees, paid in cash, were $100,000.

- $200,000 in cash paid to the lawyers for consulting services.

Goodwill for the acquisition is

a. $11,750,000

b. $6,750,000

c. $11,650,000

d. $6,950,000

5. Which of the following costs of goodwill should be amortized over their estimated useful lives?

Cost of goodwill from a business combination Costs of developing goodwill internally

a. Yes No

b. Yes Yes

c. No Yes

d. No No

6. In 2012, Hobbs Corp, acquired 9,000 shares of its own $1 par value common stock at $18 per share. In 2015, Hobbs issued 6,000 of these shares at $25 per share. Under the cost method, what accounts and what amounts should Hobbs credit in 2015 to record the issuance of the 6,000 shares?

	Treasury Stock	Additional paid in capital	Retained Earnings	Common Stock
a	$108,000		$42,000
b	$108,000	$42,000
c		$144,000		$6,000
d		$102,000	$42,000	$6,000

6. On January 1, 2015, Subsidiary company sold to Parent company for $30,000 a parcel of land that had cost the subsidiary $23,000. On March 2, 2018, Parent company sold the land to an outside party for $27,000. Working paper entries for the year ended December 31,2017 would include:

a. a debit of $7,000 to Land

b. a debit of $7,000 to Investment in subsidiary.

c. a debit of $7,000 to Retained Earnings.

d. a credit of $7,000 to Intercompany loss on sale of land

7. Which of the following accounts appears on consolidated financial statements?

a. Equipment, reported on the subsidiary's books

b. Retained earnings, reported on the subsidiary's books

c. Dividends Declared, reported on the subsidiary's books

d. Investment in subsidiary, reported on the parent's books

9. On December 5, 2015, Whole World corporation sold merchandise to a German customer at a price of Euro 5,000 to be paid on January 30, 2016. The bank exchange rates are as shown below:

	12/5/2015	12/31/2015	1/30/2016
Spot Rate	Euro 1= US$1.43	Euro 1= US$1.39	Euro 1= US$1.39

The journal entries for Whole World on December 31, 2015 would include

a. a debit of $6,950 to Cash

b. a debit of $200 to Exchange loss

c. a debit of $200 to Accounts Receivable

d. a credit of $6,950 to Account Receivable

10. Which of the following statements is TRUE?

a. Revenues and expenses are converted at the current exchange rate under the current rate method.

b. Cumulative translation adjustment is reported in the income statement

c. The objective of remeasurement is to produce a set of remeasured financial statements as if all transactions occurred in the functional currency.

d. The objective of translation is to retain in the translated financial statements the financial relationships of the affiliate as measured in U.S. dollars

11. Which of the following statements is true?

a. Revenues and expenses are converted at the current exchange rate under the current rate method.

b. cumulative translations adjustment is reported in the income statement.

c. The objective of translation is to retain in the translated financial statements the financial results and relationships of the affiliate as measured in U.S. dollars

d. The objective of remeasurement is to produce a set of remeasured financial statements as if all transactions occurred in the functional currency.

12. Simon company has two foreign subsidiaries. One is located in Italy, the other in Austria. Simon has determined the Euro is functional currency for the Italian subsidiary, while the U.S dollar is the functional currency for the Austrian subsidiary. Both subsidiaries maintain their books and records in their local currency (Euro) What methods will Simon use to convert each of the subsidiary's financial statements into U.S. dollars?

	Italian Subsidiaries Financial Statements	Austrian Subsidiary's Financial Statements
a	Translation	Translation
b	Remeasurement	Remeasurement
c	Translation	Remeasurement
d	Remeasurement	Translation

Use the following information for questions 13 and 14:

On October 1, 2014, Patton Corporation purchased merchandise from a German supplier at a price of Euro 240,000 and issued a 7-month, 8% note denominated in Euro to the supplier. The note was payable on April 2015. The bank exchange rates were shown below:

	10/1/2014	12/31/2014	4/30/2015
Spot Rate	Euro 1= US$1.45	Euro 1= US$1.39	Euro 1= US$1.43

13. How much total foreign currency transaction gain or loss should Patton report on its 2015 income statement?

a. Loss of $14,400

b. Loss of $9,792

c. Loss of $9,856

d. Gain of $14,688

14. The journal entries for Patton on April 30, 2015 would include

a. a credit of $359,216 to Cash

b. a credit of $350,064 to Cash

c. a debit of $8,896 to Interest Expense

d. a debit of $16,016 to Interest Expense

Use the following information for questions 16 and 17

Partners John and Kite share profits and losses in the ratio of 3:1, and have current total capital balance of $127,400. They agree to admit Smith as a partner with a 30% interest in the capital.

16. If smith pays $67,200 and the bonus method used, entries to record the admission of Smith would include a

a. credit of $1,575 to Kite, Capital

b. credit of $2,205 to Kite, Capital

c. credit of $3,150 to Kite, Capital

d. debit of $1,470 to Kite, Capital

17. If smith pays $67,200 and the goodwill method used, entries to record the admission of Smith would include a

a. credit of $5,250 to Kite, Capital

b. credit of $3,150 to Kite, Capital

c. credit of $7,350 to Kite, Capital

d. credit of $2,450 to Kite, Capital

18. On January 1, 2014, Path Corporation (a U.S. company) acquired 100% of newly organized shade company, a French enterprise. The cumulative translation adjustment in the translated balance sheet. Shade has a balance of $1,200 credit and $3,500 credit on 12/31/14 and 12/31/15 respectively. The income on the 2015 translated income statement of Shade is $30,000. Path's complete equity method journal entry to record the operating results of shade for 2015 would include a

a. debit of $32,300 to Investment in Shade

b. credit of $27,700 to Investment in Shade

c. credit of $3,500 to Cumulative Translation Adjustment

d. debit of $34,700 to Investment in Shade