Question 1

Consolidated financial statements combine the books of two or more ________ into one set of financial statements.

Accepted Answer

A) subsidiaries 
B) divisions 
C) separate legal entities 
D) segments 
A) subsidiaries 
B) divisions 
C) separate legal entities 
D) segments

Question 2

Marketable securities that the investor company does not intend to sell in the near future are called ________.

Accepted Answer

A) trading securities 
B) options 
C) available-for-sale securities 
D) marketable securities 
A) trading securities 
B) options 
C) available-for-sale securities 
D) marketable securities

Question 3

Goodwill is amortized on the consolidated financial statements.

Accepted Answer

A) True 
 B)False

Question 4

The following information is available for the Huddle Company:   What is the return on sales for the year ended December 31,2009?

Accepted Answer

A) 2.9% 
B) 7.9% 
C) 23.4% 
D) 33.9% 
A) 2.9% 
B) 7.9% 
C) 23.4% 
D) 33.9%

Question 5

Goodwill can only be recognized when one company acquires another company.

Accepted Answer

A) True 
 B)False

Question 6

The following information is available for the Thomas Company:   What is the debt-to-equity ratio at December 31,2009?

Accepted Answer

A) 27% 
B) 41% 
C) 46% 
D) 51% 
A) 27% 
B) 41% 
C) 46% 
D) 51%

Question 7

On January 1,2012,a parent company acquired all of the stock of a subsidiary.The following data is available:   The acquisition by the parent company represents a 100 percent interest in the subsidiary.On January 1,2012,the fair value of the subsidiary's assets and liabilities are equal to their book value.The parent company paid $250 for the 100 percent interest in the subsidiary.What amount of goodwill is implied in the purchase?

Accepted Answer

A) $0 
B) $10 
C) $40 
D) $200 
A) $0 
B) $10 
C) $40 
D) $200

Question 8

If the fair value of a subsidiary's assets exceeds their book value when the subsidiary is acquired,the assets of the subsidiary are written up at the time consolidated financial statements are prepared.

Accepted Answer

A) True 
 B)False

Question 9

On January 1,2015,Julia Company acquired 80 percent of the outstanding shares of Harkins Company for $120.At the time of the acquisition,Harkins Company's total assets were $550 and total liabilities were $400.What is the balance in the Investment in Harkins Company account on the consolidated balance sheet immediately after the acquisition of Harkins Company's stock? (Assume elimination entries are completed.)

Accepted Answer

A) $0 
B) $120 
C) $190 
D) $440 
A) $0 
B) $120 
C) $190 
D) $440

Question 10

When a company acquires all of the common stock of a subsidiary,the books of the subsidiary are no longer used.

Accepted Answer

A) True 
 B)False

Question 11

Goelzer Company has the following income statement for the year ending December 31,2016:   Operating expenses:
  If Goelzer Company prepares a common size income statement,what will they report for Income tax expense?

Accepted Answer

A) 10.4% 
B) 11.0% 
C) 12.4% 
D) 39.9% 
A) 10.4% 
B) 11.0% 
C) 12.4% 
D) 39.9%

Question 12

An investor in available-for-sale securities has the following information available at December 31,2012:   How does the investor report the change in market value on the available-for-sale securities at December 31,2012?

Accepted Answer

A) unrealized loss of $1,000 on income statement 
B) unrealized gain of $1,000 on income statement 
C) $1,000 is added to accumulated other comprehensive income account on the balance sheet 
D) $1,000 is subtracted from the accumulated other comprehensive income account on the balance sheet 
A) unrealized loss of $1,000 on income statement 
B) unrealized gain of $1,000 on income statement 
C) $1,000 is added to accumulated other comprehensive income account on the balance sheet 
D) $1,000 is subtracted from the accumulated other comprehensive income account on the balance sheet

Question 13

In an efficient capital market,the market prices of securities ________.

Accepted Answer

A) fully reflect all the information available to the public 
B) fully reflect all the information available to insiders 
C) reflect some of the information available to the public 
D) reflect most of the information available to the public 
A) fully reflect all the information available to the public 
B) fully reflect all the information available to insiders 
C) reflect some of the information available to the public 
D) reflect most of the information available to the public

Question 14

When an investing company owns less than 50 percent of another company,the companies must prepare consolidated financial statements.

Accepted Answer

A) True 
 B)False

Question 15

Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.At the end of Year 1,Boulder Company reports net income of $15 million and pays cash dividends of $5 million.At the end of Year 1,the market value of Rocky Company's investment in Boulder Company is $44 million.What accounts on Rocky Company's books would be affected by the dividends of Boulder Company?

Accepted Answer

A) none 
B) Cash increase $2 million and Stockholders' Equity increases $2 million 
C) Cash increase $5 million and Stockholders' Equity increases $5 million 
D) Cash increase $2 million and Investments decrease $2 million 
A) none 
B) Cash increase $2 million and Stockholders' Equity increases $2 million 
C) Cash increase $5 million and Stockholders' Equity increases $5 million 
D) Cash increase $2 million and Investments decrease $2 million

Question 16

Presented below is the balance sheet of Hal Company at January 1,2015:     The balance sheet of Monty Company at January 1,2015 is below:
    On January 1,2015,Monty Company acquired 100 percent of the outstanding common stock of Hal Company for $260 cash.The net income for the year ending December 31,2015 was $30 for Hal Company.The net income for the year ending December 31,2015 was $40 for Monty Company.There were no intercompany sales.What is the net income on the consolidated income statement for the year ended December 31,2015?

Accepted Answer

A) $0 
B) $30 
C) $40 
D) $70 
A) $0 
B) $30 
C) $40 
D) $70

Question 17

Rocky Company acquired 40% of the voting stock of Boulder Company for $40 million.At the end of Year 1,Boulder Company reports net income of $15 million and pays cash dividends of $5 million.At the end of Year 1,the market value of Rocky Company's investment in Boulder Company is $44 million.What accounts will be affected on Rocky Company's books to account for the increase in market value of the investment at the end of Year 1?

Accepted Answer

A) none 
B) Cash increase $44 million and Stockholders' Equity increase $44 million 
C) Investments increase $44 million and Stockholders' Equity increase $44 million 
D) Investments increase $4 million and Stockholders' Equity increase $4 million 
A) none 
B) Cash increase $44 million and Stockholders' Equity increase $44 million 
C) Investments increase $44 million and Stockholders' Equity increase $44 million 
D) Investments increase $4 million and Stockholders' Equity increase $4 million

Question 18

The financial ratios for a company can be evaluated using ________.

Accepted Answer

A) time-series comparisons 
B) benchmark comparisons 
C) cross-sectional comparisons 
D) all of the above 
A) time-series comparisons 
B) benchmark comparisons 
C) cross-sectional comparisons 
D) all of the above

Question 19

The Basement Company reports the following information:   What is the price-earnings ratio at December 31,2012?

Accepted Answer

A) 0.7 
B) 10.3 
C) 19.3 
D) 75.0 
A) 0.7 
B) 10.3 
C) 19.3 
D) 75.0

Question 20

Company B has 40,000 shares of its common stock outstanding.Company A owns 15,000 shares of Company B's stock.What method should Company A use to account for its investment in Company B?

Accepted Answer

A) market-value 
B) equity 
C) consolidated 
D) available-for-sale 
A) market-value 
B) equity 
C) consolidated 
D) available-for-sale

Consolidated financial statements combine the books of two or more ________ into one set of financial statements.

Marketable securities that the investor company does not intend to sell in the near future are called ________.

Goodwill is amortized on the consolidated financial statements.

The following information is available for the Huddle Company: What is the return on sales for the year ended December 31,2009?

Goodwill can only be recognized when one company acquires another company.

The following information is available for the Thomas Company: What is the debt-to-equity ratio at December 31,2009?

If the fair value of a subsidiary's assets exceeds their book value when the subsidiary is acquired,the assets of the subsidiary are written up at the time consolidated financial statements are prepared.

When a company acquires all of the common stock of a subsidiary,the books of the subsidiary are no longer used.

Goelzer Company has the following income statement for the year ending December 31,2016: Operating expenses: If Goelzer Company prepares a common size income statement,what will they report for Income tax expense?

An investor in available-for-sale securities has the following information available at December 31,2012: How does the investor report the change in market value on the available-for-sale securities at December 31,2012?

In an efficient capital market,the market prices of securities ________.

When an investing company owns less than 50 percent of another company,the companies must prepare consolidated financial statements.

The financial ratios for a company can be evaluated using ________.

The Basement Company reports the following information: What is the price-earnings ratio at December 31,2012?

Company B has 40,000 shares of its common stock outstanding.Company A owns 15,000 shares of Company B's stock.What method should Company A use to account for its investment in Company B?

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

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Exam 17: Understanding and Analyzing Consolidated Financial Statements

Consolidated financial statements combine the books of two or more ________ into one set of financial statements.

Marketable securities that the investor company does not intend to sell in the near future are called ________.

Goodwill is amortized on the consolidated financial statements.

The following information is available for the Huddle Company: What is the return on sales for the year ended December 31,2009?

Goodwill can only be recognized when one company acquires another company.

The following information is available for the Thomas Company: What is the debt-to-equity ratio at December 31,2009?

If the fair value of a subsidiary's assets exceeds their book value when the subsidiary is acquired,the assets of the subsidiary are written up at the time consolidated financial statements are prepared.

When a company acquires all of the common stock of a subsidiary,the books of the subsidiary are no longer used.

Goelzer Company has the following income statement for the year ending December 31,2016: Operating expenses: If Goelzer Company prepares a common size income statement,what will they report for Income tax expense?

An investor in available-for-sale securities has the following information available at December 31,2012: How does the investor report the change in market value on the available-for-sale securities at December 31,2012?

In an efficient capital market,the market prices of securities ________.

When an investing company owns less than 50 percent of another company,the companies must prepare consolidated financial statements.

The financial ratios for a company can be evaluated using ________.

The Basement Company reports the following information: What is the price-earnings ratio at December 31,2012?

Company B has 40,000 shares of its common stock outstanding.Company A owns 15,000 shares of Company B's stock.What method should Company A use to account for its investment in Company B?

Managerial Accounting, the Business Organization

Introduction to Cost Behavior and Cost-Volume Relationships

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Filters