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Wiley CPA Exam Review 2013 Financial Accounting And Reporting 10th Edition O. Ray Whittington - Solutions

. Which of the following statements is correct about the accounting for infrastructure assets using the modified approach?I. Depreciation expense on the infrastructure assets should be reported on the government-wide statement of activities, under the governmental activities column.II. Certain
. On the government-wide statement of net position at December 31, 2012, under the governmental activities column, the information related to capital assets should be reported in the net position section at which of the following amounts?a. $3,500,000b. $1,500,000c. $2,250,000d. $2,750,000
. On the government-wide statement of net position at December 31, 2012, under the governmental activities column, what amount should be reported for capital assets under the asset section?a. $3,500,000b. $1,500,000c. $2,250,000d. $2,750,000
. The statement of activities of the government-wide financial statements is designed primarily to provide information to assess which of the following?a. Operational accountability.b. Financial accountability.c. Fiscal accountability.d. Functional accountability.As of December 31, 2012, Fullerton
. Hunt Community Development Agency (HCDA), a financially independent authority, provides loans to commercial businesses operating in Hunt County. This year, HCDA made loans totaling $500,000. How should HCDA classify the disbursements of loans on the cash flow statement?a. Operating activities.b.
. In the government-wide financial statement, the statement of net position, deferred outflows of resources are presenteda. As a part of liabilities.b. As a part of equity.c. In a separate section following assets.d. In a separate section following liabilities.
. Which of the following is an example of a deferred outflow of resources?a. Cost to acquire rights to future revenues.b. Grant amounts received in advance of meeting timing requirements.c. Proceeds from the sale of future revenues.d. Deferred gain from a sale and leaseback transaction.
. Which of the following is an example of a deferred inflow of resources?a. Grant expenditures paid in advance of meeting timing requirements.b. Cost to acquire rights to future revenues.c. Proceeds from the sale of future revenues.d. Deferred loss from sale and leaseback of assets.
. Which of the following describes the required government-wide financial statements?a. The statement of net position and the statement of activities.b. The statement of net fund balances and statement of changes in fund balances.c. The statement of net position, the statement of activities, and
. Which of the following characteristics would require a component unit to be presented on a blended rather than discretely presented basis?a. The primary government and the component unit are located at the same physical location.b. Substantially all of the debt of the component unit is expected
. Marta City’s school district is a legally separate entity, but two of its seven board members are also city council members and the district is financially dependent on the city. However, major debts of the school district are expected to be paid by school taxes. The school district should be
. South City School District has a separately elected governing body that administers the public school system. The district’s budget is subject to the approval of the city council. Major debts of the school district are expected to be paid by school taxes. The district’s financial activity
. What is the basic criterion used to determine the reporting entity for a governmental unit?a. Special financing arrangement.b. Geographic boundaries.c. Scope of public services.d. Financial accountability.
. Which of the following statements about the statistical section of the Comprehensive Annual Financial Report (CAFR) of a governmental unit is true?a. Statistical tables may not cover more than two fiscal years.b. Statistical tables may not include nonaccounting information.c. The statistical
. A deferred outflow of resources is most like which of the following financial statement elements?a. An asset.b. A liability.c. Equity.d. Revenue.C. The Government Reporting Model
. Which of the following is true about service efforts and accomplishments reporting (SEA reporting) under GASB Concepts Statements?a. SEA reporting is required for all state and local governments with more than $100 in total assets.b. SEA reporting is more appropriate for governmental
. According to GASB Concepts Statements, the elements of resource flows statements includea. Outflow of resources and inflow of resources.b. Outflow of resources, inflow of resources and deferred inflow of resources.c. Outflow of resources, inflow of resources, deferred outflow of resources.d.
. According to GASB Concepts Statements which of the following is an essential characteristic of an asset?a. An asset has present service capacity.b. An asset is tangible.c. An asset is acquired through purchase.d. An asset provides future benefits to the citizenry.
. Which of the following is an accurate statement from the GASB Concepts Statements about service efforts and accomplishments reporting?a. Service efforts and accomplishments reporting is required for large governmental entities.b. Service efforts and accomplishments reporting is necessary for
. Which of the following is the least authoritative guidance based on the GAAP Hierarchy for state and local governments?a. AICPA Industry Audit and Accounting Guide for state and local governments.b. GASB Technical Bulletins.c. GASB Implementation Guides.d. AICPA Statements of Position.B.
. Which of the following pronouncements provides the most authoritative guidance applicable to financial reporting for state and local governments?a. GASB Interpretations.b. FASB Accounting Standards Codification.c. AICPA Industry Audit and Accounting Guide for state and local governments.d. GASB
Which of the following is not a IFRS requirement regarding foreign currency translation?a. Nonmonetary items measured at historical cost are translated at the historical exchange rate.b. Monetary items are translated at the year-end spot rate.c. If the functional currency is the same as the
For IFRS reporting, if the functional currency is the same as the presentation currency, any translation gains or losses are generally reported asa. A gain or loss on the statement of income.b. A gain or loss in other comprehensive income.c. A gain or loss directly in the retained earnings
For IFRS reporting, the functional currency isa. The currency in which the company reports its earnings.b. The currency in which the company primarily conducts banking activities.c. The currency in which the company primarily operates.d. The currency in which the company presents its financial
For IFRS reporting purposes, currencies are defined asa. International and functional.b. Foreign, functional, and presentation.c. Domestic and international.d. Operating, international, and presentation.
In preparing consolidated financial statements of a US parent company with a foreign subsidiary, the foreign subsidiary’s functional currency is the currencya. In which the subsidiary maintains its accounting records.b. Of the country in which the subsidiary is located.c. Of the country in which
Park Co.’s wholly owned subsidiary, Schnell Corp., maintains its accounting records in euros. Because all of Schnell’s branch offices are in Switzerland, its functional currency is the Swiss franc. Remeasurement of Schnell’s year 1 financial statements resulted in a $7,600 gain, and
When remeasuring foreign currency financial statements into the functional currency, which of the following items would be remeasured using historical exchange rate?a. Inventories carried at cost.b. Marketable equity securities reported at market values.c. Bonds payable.d. Accrued liabilities.
A balance arising from the translation or remeasurement of a subsidiary’s foreign currency financial statements is reported in the consolidated income statement when the subsidiary’s functional currency is the Foreign currency US dollara. No Nob. No Yesc. Yes Nod. Yes Yes
The functional currency of Nash, Inc.’s subsidiary is the euro. Nash borrowed euros as a partial hedge of its investment in the subsidiary. In preparing consolidated financial statements, Nash’s translation loss on its investment in the subsidiary exceeded its exchange gain on the borrowing.
A foreign subsidiary’s functional currency is its local currency, which has not experienced significant inflation. The weighted-average exchange rate for the current year would be the appropriate exchange rate for translating Sales to customers Wages expensea. No Nob. Yes Yesc. No Yesd. Yes No
Which of the following should be reported as a stockholders’ equity account?a. Discount on convertible bonds.b. Premium on convertible bonds.c. Cumulative foreign exchange translation loss.d. Organization costs.
A wholly owned subsidiary of Ward, Inc. has certain expense accounts for the year ended December 31, year 3, stated in local currency units (LCU) as follows:LCU Depreciation of equipment (related assets were purchased January 1, year 1) 120,000 Provision for doubtful accounts 80,000 Rent 200,000
Certain balance sheet accounts of a foreign subsidiary of Rowan, Inc., at December 31, year 1, have been translated into US dollars as follows:Translated at Current rates Historical rates Note receivable, long-term $240,000 $200,000 Prepaid rent 85,000 80,000 Patent 150,000 170,000 $475,000
Jay & Kay partnership’s balance sheet at December 31, year 1, reported the following:Total assets $100,000 Total liabilities 20,000 Jay, capital 40,000 Kay, capital 40,000 On January 2, year 2, Jay and Kay dissolved their partnership and transferred all assets and liabilities to a newly formed
On January 1, year 1, the partners of Cobb, Davis, and Eddy, who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows:Assets Cash $ 50,000 Other assets 250,000 $300,000 Liabilities
The following condensed balance sheet is presented for the partnership of Smith and Jones, who share profits and losses in the ratio of 60:40, respectively:Other assets $450,000 Smith, loan 20,000 $470,000 Accounts payable $120,000 Smith, capital 195,000 Jones, capital 155,000 $470,000 The partners
When Mill retired from the partnership of Mill, Yale, and Lear, the final settlement of Mill’s interest exceeded Mill’s capital balance. Under the bonus method, the excessa. Was recorded as goodwill.b. Was recorded as an expense.c. Reduced the capital balances of Yale and Lear.d. Had no effect
Allen retired from the partnership of Allen, Beck, and Chale. Allen’s cash settlement from the partnership was based on new goodwill determined at the date of retirement plus the carrying amount of the other net assets. As a consequence of the settlement, the capital accounts of Beck and Chale
On June 30, year 1, the balance sheet for the partnership of Coll, Maduro, and Prieto, together with their respective profit and loss ratios, were as follows:Assets, at cost $180,000 Coll, loan $ 9,000 Coll, capital (20%) 42,000 Maduro, capital (20%) 39,000 Prieto, capital (60%) 90,000 Total
Assume instead that Eddy remains in the partnership and that Hamm is admitted as a new partner with a 25% interest in the capital of the new partnership for a cash payment of $140,000. Total goodwill implicit in the transaction is to be recorded. Immediately after admission of Hamm, Eddy’s
Eddy decided to retire from the partnership and by mutual agreement is to be paid $180,000 out of partnership funds for his interest. Total goodwill implicit in the agreement is to be recorded. After Eddy’s retirement, what are the capital balances of the other partners?Fox Grimma. $ 84,000
In the Adel-Brick partnership, Adel and Brick had a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively. The bonus method was used to record Colter’s admittance as a new partner. What ratio would be used to allocate, to Adel and Brick, the excess of Colter’s contribution over
Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the other assets are sold for $500,000, what amount of the available cash should be distributed to Alfa?a. $255,000b. $273,000c. $327,000d. $348,000
The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to admit Capp as a new partner with 20% interest. No goodwill or bonus is to be recorded. What amount should Capp contribute in cash or other assets?a. $110,000b. $116,000c. $140,000d. $145,000
Dunn and Grey are partners with capital account balances of $60,000 and $90,000, respectively. They agree to admit Zorn as a partner with a one-third interest in capital and profits, for an investment of $100,000, after revaluing the assets of Dunn and Grey. Goodwill to the original partners should
Kern and Pate are partners with capital balances of $60,000 and $20,000, respectively. Profits and losses are divided in the ratio of 60:40. Kern and Pate decided to form a new partnership with Grant, who invested land valued at $15,000 for a 20% capital interest in the new partnership. Grant’s
Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, year 1, their respective capital accounts were as follows:Blau $60,000 Rubi 50,000 On that date, Lind was admitted as a partner with a one-third interest in capital and profits for an investment of
The Flat and Iron partnership agreement provides for Flat to receive a 20% bonus on profits before the bonus. Remaining profits and losses are divided between Flat and Iron in the ratio of 2:3, respectively. Which partner has a greater advantage when the partnership has a profit or when it has a
The partnership agreement of Reid and Simm provides that interest at 10% per year is to be credited to each partner on the basis of weighted-average capital balances. A summary of Simm’s capital account for the year ended December 31, year 1, is as follows:Balance, January 1 $140,000 Additional
The partnership agreement of Axel, Berg & Cobb provides for the year-end allocation of net income in the following order:First, Axel is to receive 10% of net income up to $100,000 and 20% over $100,000.Second, Berg and Cobb each are to receive 5% of the remaining income over $150,000.The balance of
Red and White formed a partnership in year 1. The partnership agreement provides for annual salary allowances of $55,000 for Red and $45,000 for White. The partners share profits equally and losses in a 60/40 ratio. The partnership had earnings of $80,000 for year 1 before any allowance to
When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the contributing partner’s capital account?a. Fair value at the date of contribution.b. Contributing partner’s original cost.c. Assessed valuation for property tax purposes.d.
Abel and Carr formed a partnership and agreed to divide initial capital equally, even though Abel contributed $100,000 and Carr contributed $84,000 in identifiable assets. Under the bonus approach to adjust the capital accounts, Carr’s unidentifiable asset should be debited fora. $46,000b.
On April 30, year 1, Algee, Belger, and Ceda formed a partnership by combining their separate business proprietorships. Algee contributed cash of $50,000. Belger contributed property with a $36,000 carrying amount, a $40,000 original cost, and $80,000 fair value. The partnership accepted
Roberts and Smith drafted a partnership agreement that lists the following assets contributed at the partnership’s formation:Contributed by Roberts Smith Cash $20,000 $30,000 Inventory -- 15,000 Building -- 40,000 Furniture & equipment 15,000 -- The building is subject to a mortgage of $10,000,
Rocket Corporation prepares its financial statements in accordance with IFRS.For segment reporting purposes, which tests must Rocket apply to determine if a unit or component is an operating segment?a. Revenue test and asset test.b. Revenue test, asset test, and profit or loss test.c. Revenue test,
Taylor Corp., a publicly owned corporation, assesses performance and makes operating decisions using the following information for its reportable segments:Total revenues $768,000 Total profit and loss 40,600 Included in the total profit and loss are intersegment profits of $6,100. In addition,
The method used to determine what information to report for business segments is referred to as thea. Segment approach.b. Operating approach.c. Enterprise approach.d. Management approach.
In financial reporting for segments of a business enterprise, segment data may be aggregateda. Before performing the 10% tests if a majority of the aggregation criteria are met.b. If the segments do not meet the 10% tests but meet all of the aggregation criteria.c. Before performing the 10% tests
In financial reporting for segments of a business, an enterprise shall disclose all of the following excepta. Types of products and services from which each reportable segment derives its revenues.b. The title of the chief operating decision maker of each reportable segment.c. Factors used to
An enterprise must disclose all of the following about each reportable segment if the amounts are used by the chief operating decision maker, excepta. Depreciation expense.b. Allocated expenses.c. Interest expense.d. Income tax expense.
Enterprise-wide disclosures are required by publicly held companies with Only one reportable segment More than one reportable segmenta. Yes Yesb. Yes Noc. No Yesd. No No
Enterprise-wide disclosures include disclosures about Geographic areas Allocated costsa. Yes Yesb. Yes Noc. No Yesd. No No
External revenue reported by operating segments must be at leasta. $22,500,000b. $15,000,000c. $12,500,000d. $37,500,000
In its year 1 financial statements, Grum should disclose major customer data if sales to any single customer amount to at leasta. $ 300,000b. $1,500,000c. $4,000,000d. $5,000,000
The following information pertains to Aria Corp. and its operating segments for the year ended December 31, year 1:Sales to unaffiliated customers $2,000,000 Intersegment sales of products similar to those sold to unaffiliated customers 600,000 Interest earned on loans to other industry segments
Correy Corp. and its divisions (each is an operating segment) are engaged solely in manufacturing operations. The following data (consistent with prior years’ data) pertain to the operations conducted for the year ended December 31, year 1:In its segment information for year 1, how many
Which of the following describes IFRS’s requirements regarding interim financial statements?a. Interim financial statements are required.b. If interim financial statements are presented, four basic financial statements are required.c. If interim financial statements are presented, at least a
Noble Corporation prepares its financial statements in accordance with IFRS.If Noble prepares interim financial statements, which statements are required?I. Statement of Financial Position II. Statement of Income III. Statement of Comprehensive Income IV. Statement of Cash Flows V. Statement of
Which of the following statements is true regarding interim reporting for companies that prepare their financial statements in accordance with IFRS?a. The discrete view is required for interim financial statements.b. Interim reports are required on a quarterly basis.c. Interim reports are not
Wilson Corp. experienced a $50,000 decline in the market value of its inventory in the first quarter of its fiscal year. Wilson had expected this decline to reverse in the third quarter, and in fact, the third quarter recovery exceeded the previous decline by $10,000. Wilson’s inventory did not
Conceptually, interim financial statements can be described as emphasizinga. Timeliness over reliability.b. Reliability over relevance.c. Relevance over comparability.d. Comparability over neutrality.
ASC Topic 270, Interim Reporting, states that interim financial reporting should be viewed primarily in which of the following ways?a. As useful only if activity is spread evenly throughout the year.b. As if the interim period were an annual accounting period.c. As reporting for an integral part of
For interim financial reporting, a company’s income tax provision for the second quarter of year 1 should be determined using thea. Effective tax rate expected to be applicable for the full year of year 1 as estimated at the end of the first quarter of year 1.b. Effective tax rate expected to be
For interim financial reporting, the computation of a company’s second quarter provision for income taxes uses an effective tax rate expected to be applicable for the full fiscal year. The effective tax rate should reflect anticipated Foreign tax rates Available tax planning alternativesa. No
For external reporting purposes, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for Interim financial reporting Year-end financial reportinga. Yes Yesb. Yes Noc. No Yesd. No No
An inventory loss from a market price decline occurred in the first quarter. The loss was not expected to be restored in the fiscal year. However, in the third quarter the inventory had a market price recovery that exceeded the market decline that occurred in the first quarter. For interim
Due to a decline in market price in the second quarter, Petal Co. incurred an inventory loss. The market price is expected to return to previous levels by the end of the year. At the end of the year the decline had not reversed. When should the loss be reported in Petal’s interim income
A planned volume variance in the first quarter, which is expected to be absorbed by the end of the fiscal period, ordinarily should be deferred at the end of the first quarter if it is Favorable Unfavorablea. Yes Nob. No Yesc. No Nod. Yes Yes
Advertising costs may be accrued or deferred to provide an appropriate expense in each period for Interim financial reporting Year-end financial reportinga. Yes Nob. Yes Yesc. No Nod. No Yes
Bailey Company, a calendar-year corporation, has the following income before income tax provision and estimated effective annual income tax rates for the first three quarters of year 1:Quarter Income before income tax provision Estimated effective annual tax rate at end of quarter First $60,000 40%
During the first quarter of year 2, Tech Co. had income before taxes of $200,000, and its effective income tax rate was 15%. Tech’s year 1 effective annual income tax rate was 30%, but Tech expects its year 2 effective annual income tax rate to be 25%. In its first quarter interim income
On June 30, year 1, Mill Corp. incurred a $100,000 net loss from disposal of a business segment. Also, on June 30, year 1, Mill paid $40,000 for property taxes assessed for the calendar year 1. What amount of the foregoing items should be included in the determination of Mill’s net income or loss
Vilo Corp. has estimated that total depreciation expense for the year ending December 31, year 1, will amount to $60,000, and that year 1 year-end bonuses to employees will total $120,000. In Vilo’s interim income statement for the six months ended June 30, year 1, what is the total amount of
Kell Corp.’s $95,000 net income for the quarter ended September 30, year 1, included the following after-tax items:A $60,000 extraordinary gain, realized on April 30, year 1, was allocated equally to the second, third, and fourth quarters of year 1.A $16,000 cumulative-effect loss resulting from
On January 1, year 1, Builder Associates entered into a $1,000,000 long-term, fixed-price contract to construct a factory building for Manufacturing Company. Builder accounts for this contract under the percentage-of-completion, and estimated costs at completion at the end of each quarter for year
In personal financial statements, how should estimated income taxes on the excess of the estimated current values of assets over their tax bases be reported in the statement of financial condition?a. As liabilities.b. As deductions from the related assets.c. Between liabilities and net worth.d. In
For the purpose of estimating income taxes to be reported in personal financial statements, assets and liabilities measured at their tax bases should be compared to assets and liabilities measured at their Assets Liabilitiesa. Estimated current value Estimated current amountb. Historical cost
Smith owns several works of art. At what amount should these artworks be reported in Smith’s personal financial statements?a. Original cost.b. Insured amount.c. Smith’s estimate.d. Appraised value.
A business interest that constitutes a large part of an individual’s total assets should be presented in a personal statement of financial condition asa. A separate listing of the individual assets and liabilities at cost.b. Separate line items of both total assets and total liabilities at
Personal financial statements should report assets and liabilities ata. Estimated current values at the date of the financial statements and, as additional information, at historical cost.b. Estimated current values at the date of the financial statements.c. Historical cost and, as additional
Personal financial statements usually consist ofa. A statement of net worth and a statement of changes in net worth.b. A statement of net worth, an income statement, and a statement of changes in net worth.c. A statement of financial condition and a statement of changes in net worth.d. A statement
The following information pertains to Smith’s personal assets and liabilities at December 31, year 1:Smith’s year 1 income tax rate was 30%. In Smith’s personal statement of financial condition at December 31, year 1, what amount should be reported as Smith’s net worth?a. $294,000b.
Shea, a calendar-year taxpayer, is preparing a personal statement of financial condition as of April 30, year 2. Shea’s year 1 income tax liability was paid in full on April 15, year 2. Shea’s tax on income earned from January through April year 2 is estimated at $30,000. In addition, $25,000
The estimated current values of Lane’s personal assets at December 31, year 1, totaled $1,000,000, with tax bases aggregating $600,000. Included in these assets was a vested interest in a deferred profit-sharing plan with a current value of $80,000 and a tax basis of $70,000. The estimated
At December 31, year 1, Ryan had the following noncancelable personal commitments:Pledge to be paid to County Welfare Home thirty days after volunteers paint the walls and ceiling of the Home’s recreation room $ 5,000 Pledge to be paid to City Hospital on the recovery of Ryan’s comatose sister
Ely had the following personal investments at December 31, year 1:Realty held as a limited business activity not conducted in a separate business entity. Mortgage payments were made with funds from sources unrelated to the realty. The cost of this realty was $500,000, and the related mortgage
The following information pertains to an insurance policy that Barton owns on his life:Face amount $100,000 Accumulated premiums paid up to December 31, year 2 8,000 Cash value at December 31, year 2 12,000 Policy loan 3,000 In Barton’s personal statement of financial condition at December 31,
Jen has been employed by Komp, Inc. since February 1, year 1. Jen is covered by Komp’s Section 401(k) deferred compensation plan. Jen’s contributions have been 10% of salaries. Komp has made matching contributions of 5%. Jen’s salaries were $21,000 in year 1, $23,000 in year 2, and $26,000 in

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