Advance Accounting MCQ
1) Michigan-based Leo Corporation acquired 100 percent of the common stock of a British company on January 1, 20X8, for $1,100,000. The British subsidiary’s net assets amounted to 500,000 pounds on the date of acquisition. On January 1, 20X8, the book values of its identifiable assets and liabilities approximated their fair values. As a result of an analysis of functional currency indicators, Leo determined that the British pound was the functional currency. On December 31, 20X8, the British subsidiary’s adjusted trial balance, translated into U.S. dollars, contained $17,000 more debits than credits. The British subsidiary reported income of 33,000 pounds for 20X8 and paid a cash dividend of 8,000 pounds on October 25, 20X8. Included on the British subsidiary’s income statement was depreciation expense of 3,500 pounds. Leo uses the fully adjusted equity method of accounting for its investment in the British subsidiary and determined that goodwill in the first year had an impairment loss of 25 percent of its initial amount. Exchange rates at various dates during 20X8 follow: January 1, 1 pound = $2.10; October 25, 1 pound = $2.25; December 31, 1 pound = $2.20; Average for 20X8: 1 pound = $2.21. Based on the preceding information, the receipt of the dividend will result in a credit to the investment account for:
2) Which division of the SEC develops and administers the disclosure requirements for the securities acts and reviews all registration statements and other issue-oriented disclosures?
Division of Enforcement
Division of Corporation Finance
Division of Investment Management
Division of Market Regulation
3) In a statement of realization and liquidation, unusual revenue items are reported under:
These are never reported.
4) Which combination of accounts and exchange rates is correct for the translation of a foreign entity’s financial statements from the functional currency to U.S. dollars?
Current – Salary Expense, Sales, Depreciation Expense
Current – Accounts Payable, Inventories, Investments
Historical – Common Stock, Dividends Payable, Retained Earnings
Weighted Average – Retained Earnings, Land, Inventories