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1.

Howdointraentitysalesofinventoryaffectthepreparationofa
consolidatedstatementofcashflows?
A)Theymustbedeductedincalculatingcashflowsfrom
investingactivities.
B)Theymustbeaddedincalculatingcashflowsfrominvesting
activities.
C)Theymustbedeductedincalculatingcashflowsfrom
operatingactivities.
D)Theymustbeaddedincalculatingcashflowsfromoperating
activities.
E)Becausetheconsolidatedbalancesheetandincomestatement
areusedinpreparingtheconsolidatedstatementofcashflows,no
specialeliminationisrequired.
2.0/2.0
PointsEarned:
CorrectAnswer(s): E

2.
Popper Co. acquired 80% of the common stock of Cocker Co. on
January 1, 2009, when Cocker had the following stockholders'
equity accounts.
Common stock - 40,000 shares outstanding
$140,000
Additional paid-in capital
105,000
Retained earnings
476,000
Total stockholders equity
$721,000
To acquire this interest in Cocker, Popper paid a total of $682,000
with any excess acquisition date fair value over book value being

allocated to goodwill, which has been measured for impairment


annually and has not been determined to be impaired as of January
1, 2012.
On January 1, 2012, Cocker reported a net book value of
$1,113,000 before the following transactions were conducted.
Popper uses the equity method to account for its investment in
Cocker, thereby reflecting the change in book value of Cocker. On
January 1, 2012, Cocker issued 10,000 additional shares of
common stock for $21 per share. Popper did not acquire any of this
newly issued stock. How would this transaction affect the
additional paid-in capital of the parent company?
A)Decreaseitby$23,240
B)Decreaseitby$43,680
C)Decreaseitby$45,060
D)$0
E)Decreaseitby$68,250
2.0/2.0
PointsEarned:
CorrectAnswer(s): B

3.
The following information has been taken from the consolidation
worksheet of Graham Company and its 80% owned subsidiary,
Stage Company.
(1.) Graham reports a loss on sale of land of $5,000. The land cost
Graham $20,000.
(2.) Noncontrolling interest in Stage's net income was $30,000.
(3.) Graham paid dividends of $15,000.
(4.) Stage paid dividends of $10,000.
(5.) Excess acquisition-date fair value over book value was
expensed by $6,000.
(6.) Consolidated accounts receivable decreased by $8,000.
(7.) Consolidated accounts payable decreased by $7,000.


Using the indirect method, where does the decrease in accounts
payable appear in a consolidated statement of cash flows?
A)$5,600increasetonetincomeasanoperatingactivity
B)$7,000decreasetonetincomeasanoperatingactivity
C)$5,600decreasetonetincomeasanoperatingactivity
D)$7,000increaseasafinancingactivity
E)$7,000increasetonetincomeasanoperatingactivity.
2.0/2.0
PointsEarned:
CorrectAnswer(s): B

4.
On January 1, 2009, Nichols Company acquired 80% of Smith
Company's common stock and 40% of its non-voting, cumulative
preferred stock. The consideration transferred by Nichols was
$1,200,000 for the common and $124,000 for the preferred. Any
excess acquisition-date fair value over book value is considered
goodwill. The capital structure of Smith immediately prior to the
acquisition is:
Common stock, $10 par value (50,000 shares outstanding)
$500,000
Preferred stock, 6% cumulative, $100 par value,
3,000 shares outstanding
300,000
Additional paid-in capital
200,000
Retained earnings
500,000
Total stockholders equity
$1,500,000
Compute the goodwill recognized in consolidation.

A)$124,000
B)$310,000
C)$(196,000)
D)$800,000
E)$0
PointsEarned:

2.0/2.0

CorrectAnswer(s): B

5.
Ryan Company owns 80% of Chase Company. The original
balances presented for Ryan and Chase as of January 1, 2011, are
as follows:
Chase Company:
Shares outstanding
50,000
Book value
$400,000
Book value
$8
Ryan Company:
Shares owned of Chase
40,000
Book value of investment
$320,000
Assume Chase issues 30,000 additional shares common stock
solely to Ryan for $12 per share. What is Ryan's percent ownership
in Chase after the acquisition of the treasury shares (rounded)?
A)95%
B)80%
C)64%
D)69%
E)76%
0.0/2.0
PointsEarned:
CorrectAnswer(s): A

6.
Aparentcompanyownsa70percentinterestinasubsidiarywhose
stockhasabookvalueof$27pershare.Thelastdayoftheyear,
thesubsidiaryissuesnewsharesfor$27pershare,andtheparent
buysits70percentinterestinthenewshares.Whichofthe
followingstatementsistrue?
A)Sincethesalewasmadeattheendoftheyear,theparent's
investmentaccountisnotaffected.
B)Sincethesharesweresoldforbookvalue,theparent's
investmentaccountmustbedecreased.
C)Noneofthesearetrue
D)Sincethesharesweresoldforbookvalue,theparent's
investmentaccountmustbeincreased.
E)Sincethesharesweresoldforbookvalueandtheparent
bought70percentoftheshares,theparent'sinvestmentaccountis
notaffectedexceptforthepriceofthenewshares.
0.0/2.0
PointsEarned:
CorrectAnswer(s): E

7.
Ifasubsidiaryreacquiresitsoutstandingsharesfromoutside
ownershipformorethanbookvalue,whichofthefollowing
statementsistrue?
A)Treasurystockontheparent'sbookswilldecrease.
B)Additionalpaidincapitalontheparentcompany'sbookswill
decrease.
C)Noadjustmentisnecessary.
D)Treasurystockontheparent'sbookswillincrease.
E)Investmentinsubsidiarywillincrease.

PointsEarned:

2.0/2.0

CorrectAnswer(s): B

8.
HorseCorporationacquiresallofPony,Inc.for$300,000cash.On
thatdate,Ponyhasnetassetswithfairvalueof$250,000buta
bookvalueandtaxbasisof$200,000.Thetaxrateis40percent.
Priortothisdate,neitherHorsenorPonyhasreportedanydeferred
incometaxassetsorliabilities.Whatamountofgoodwillshouldbe
recognizedonthedateoftheacquisition?
A)$150,000.
B)$100,000.
C)$50,000.
D)$0.
E)$70,000.
0.0/2.0
PointsEarned:
CorrectAnswer(s): E

9.
Delta Corporation owns 90 percent of Sigma Company, and Sigma
owns 90 percent of Pi, Inc., all of which are domestic corporations.
Information for the three companies for the year ending December
31, 2011 follows:
Delta.
Sigma
Pi
Operating income
$600,000 $400,000 $200,000
Unrealized gains in
ending inventory
24,000
0
8,000

(included in operating income above)


What is the noncontrolling interest in Pi's income for 2011?
A)$20,000
B)$0
C)$10,000
D)$9,600
E)$19,200
PointsEarned:

2.0/2.0

CorrectAnswer(s): E

10.
Whichofthefollowingstatementsistrueregardingthe
subsidiary'sinvestmentinitsparent'scommonstock?
A)Theconsolidationworksheetentrytoeliminatethesubsidiary's
investmentinparent'scommonstockisdebitedtotreasurystock.
B)Theconsolidationworksheetentrytoeliminatethesubsidiary's
investmentinparent'scommonstockisdebitedtoadditionalpaid
incapital.
C)Alloftheparentcompany'scommonstockiseliminated.
D)Theconsolidationworksheetentrytoeliminatethesubsidiary's
investmentinparent'scommonstockisdebitedtoretained
earnings.
E)Theinvestmentinparentcompany'scommonstockisnot
eliminatedinconsolidation.
2.0/2.0
PointsEarned:
CorrectAnswer(s): A

11.
WhiteCompanyowns60%ofCodyCompany.Separatetax
returnsarerequired.For2010,White'soperatingincome
(excludingtaxesandanyincomefromCody)was$300,000while
Codyreportedapretaxincomeof$125,000.Duringtheperiod,
Codypaidatotalof$25,000incashdividends;$15,000(60%)to
Whiteand$10,000tothenoncontrollinginterest.Whitepaid
dividendsof$180,000.Theincometaxrateforbothcompaniesis
30%.ComputeWhite'sdeferredincometaxesfor2011.
A)$11,250.
B)$6,000.
C)$2,250.
D)$21,000.
E)$3,150.
2.0/2.0
PointsEarned:
CorrectAnswer(s): C

12.
PrescottCorp.owned90%ofBellInc.,whileBellowned10%of
theoutstandingcommonsharesofPrescott.Nogoodwillorother
allocationswererecognizedinconnectionwitheitherofthese
acquisitions.Prescottreportedoperatingincomeof$266,000for
2009whereasBellearned$98,000duringthesameperiod.No
investmentincomewasincludedwithineitheroftheseincome
totals.Onaconsolidatedincomestatement,whatisthe
noncontrollinginterestinBell'snetincome?
A)$12,460.
B)$9,800.
C)$13,692.

D)$10,836.
E)$11,214.
PointsEarned:

0.0/2.0

CorrectAnswer(s): B

13.
ChaseCompanyowns80%ofLawrenceCompanyand40%of
RossCompany.LawrenceCompanyalsoowns30%ofRoss
Company.Separateoperatingincomesfor2011ofChase,
Lawrence,andRossare$450,000,$300,000,and$250,000,
respectively.Eachcompanyalsoretainsa$20,000unrealizedgain
intheircurrentincomefigures.Annualamortizationexpenseof
$15,000isassignedtoChase'sinvestmentinLawrenceandanother
$15,000isassignedtoLawrence'sinvestmentinRoss.Compute
thenoncontrollinginterestinRoss'netincomefor2011.
A)$92,000.
B)$69,000.
C)$75,000.
D)$64,500.
E)$77,400.
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

14.
Reggie,Inc.owns70percentofNancyCorporation.Duringthe
currentyear,Nancyreportedearningsbeforetaxof$100,000and
paidadividendof$30,000.Theincometaxrateforboth
companiesis30percent.Whatdeferredincometaxliabilityarising

inthecurrentyearmustberecognizedintheconsolidatedbalance
sheet?
A)$9,800.
B)$1,470.
C)$2,400.
D)$1,680.
E)$2,940.
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

15.
Elektronix, Inc. has three operating segments with the following
information:
DVDs
VCRs
MP3s
Sales to outsiders
$4,000,000
$500,000
$2,000,000
Intersegment transfers
none
none
100,000
Segment expenses
3,000,000
624,000
1,700,000
Segment assets
14,000,000
6,000,000
5,000,000
What is the minimum amount of revenue an operating segment
must have to be considered a reportable segment?
A)$670,000
B)$690,000
C)$680,000
D)$650,000
E)$660,000

PointsEarned:

0.0/2.0

CorrectAnswer(s): E

16.
Whichofthefollowingstatementsistrueregardingthereporting
ofrevenuesinaninterimreport?
A)Projectedlossesonlongtermcontractsshouldbedeferredto
theannualreport.
B)Thepercentageofcompletionmethodofreportinglongterm
constructionprojectsisnotanacceptablemethodforinterim
reporting.
C)Revenuesshouldberecognizedonthecashbasisofaccounting
forinterimreporting.
D)Revenuesshouldberecognizedontheincometaxbasisfor
interimreporting.
E)Revenuesshouldberecognizedininterimperiodsinthesame
wayastheyareonanannualbasis.
2.0/2.0
PointsEarned:
CorrectAnswer(s): E

17.
WhichofthefollowingwouldbeanacceptablegroupingforaU.S.
companytoprovideinformationbygeographicarea?
A)UnitedStates,CentralAmerica,Mexico,Germany.
B)UnitedStates,Asia,Germany.
C)UnitedStates,Europe,Taiwan.
D)UnitedStates,AllOtherCountries.
E)SouthAmerica,Spain,AllOtherCountries.

PointsEarned:

2.0/2.0

CorrectAnswer(s): D

18.
A company that generates reports by both geographic region and
product line must consider additional criteria in identifying
operating segments when there are multiple sets of reports. Which
of the following statement(s) is correct?
(I.) An operating segment has a segment manager who is directly
accountable to the chief operating decision maker for its financial
performance.
(II.) If more than one set of organizational units exists, each
organizational unit is considered an operating segment even if
there is only one set for which segment managers are held
responsible.
(III.) If segment managers exist for two or more overlapping sets
of organizational units, the nature of the business activities must be
considered.
A)IandIIIonly
B)Noneofthese
C)IandIIonly
D)IIandIIIonly
E)I,II,andIII
PointsEarned:

0.0/2.0

CorrectAnswer(s): A

19.

Whichofthefollowingisacriterionfordeterminingwhetheran
operatingsegmentisseparatelyreportable?
A)Anoperatingsegment'sassetsare10percentormoreof
consolidatedliabilities.
B)Anoperatingsegment'sassetsare10percentormoreof
corporateassets.
C)Anoperatingsegment'sassetsare10percentormoreof
combinedsegmentassets.
D)Anoperatingsegment'sassetsare10percentormoreof
combinedsegmentliabilities.
E)Anoperatingsegment'sassetsare10percentormoreof
consolidatedassets.
2.0/2.0
PointsEarned:
CorrectAnswer(s): C

20.
Whichofthefollowingisnotoneofthecriteriamanagement
shouldconsiderindeterminingwhetherbusinessactivitiesand
environmentsofanoperatingsegmentaresimilar?
A)Thetypeorclassofcustomer.
B)Thenatureoftheproductionprocess.
C)Thedistributionmethods.
D)Thenatureoftheregulatoryenvironment,ifapplicable.
E)Thegeographicallocationoftheoperations.
2.0/2.0
PointsEarned:
CorrectAnswer(s): E

21.

Kaycee Corporation's revenues for the year ended December 31,


2010, were as follows:
Consolidated Revenue per the Income Statement: $1,200,000
Upstream Intersegment Sales: $180,000
Downstream Intersegment Sales: $60,000
For purposes of the Revenue Test, what amount will be used as the
benchmark for determining whether a segment is reportable?
A)$138,000
B)$0
C)$144,000
D)$24,000
E)$120,000
PointsEarned:

0.0/2.0

CorrectAnswer(s): C

1.
Wheredointraentitysalesofinventoryappearina
consolidatedstatementofcashflows?
A)Cashflowsfrominvestingactivities.
B)Cashflowsfromfinancingactivities.
C)Cashflowsfromoperatingactivities.
D)Theydonotappearintheconsolidatedstatement
ofcashflows.
E)Supplementalscheduleofnoncashinvestingand
financingactivities.
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

2.
On January 1, 2009, Nichols Company acquired 80%
of Smith Company's common stock and 40% of its
non-voting, cumulative preferred stock. The
consideration transferred by Nichols was $1,200,000
for the common and $124,000 for the preferred. Any
excess acquisition-date fair value over book value is
considered goodwill. The capital structure of Smith
immediately prior to the acquisition is:
Common stock, $10 par value (50,000 shares
outstanding) $500,000
Preferred stock, 6% cumulative, $100 par value,
3,000 shares outstanding
300,000
Additional paid-in capital
200,000
Retained earnings
500,000
Total stockholders equity
$1,500,000
Determine the amount and account to be recorded
for Nichols' investment in Smith.

A)$1,200,000forInvestmentinSmith'sCommon
Stockand$124,000forInvestmentinSmith's
PreferredStock.
B)$1,448,000forInvestmentinSmith'sCommon
Stock.
C)$1,324,000forInvestmentinSmith
D)$1,200,000forInvestmentinSmith'sCommon
Stockand$120,000forInvestmentinSmith's
PreferredStock
E)$1,200,000forInvestmentinSmith
2.0/2.0
PointsEarned:
CorrectAnswer(s): A

3.
On January 1, 2011, Riney Co. owned 80% of the
common stock of Garvin Co. On that date, Garvin's
stockholders' equity accounts had the following
balances:
Common stock ($5 par value)
$250,000
Additional paid-in capital
110,000
Retained earnings
330,000
Total stockholders equity
$690,000
The balance in Riney's Investment in Garvin Co.

account was $552,000, and the noncontrolling


interest was $138,000. On January 1, 2011, Garvin
Co. sold 10,000 shares of previously unissued
common stock for $15 per share. Riney did not
acquire any of these shares. What is the balance in
Investment in Garvin Co. after the sale of the 10,000
shares of common stock?
A)$404,000
B)$560,000
C)$460,000
D)$672,000
E)$552,000
2.0/2.0
PointsEarned:
CorrectAnswer(s): B

4.
Ryan Company owns 80% of Chase Company. The
original balances presented for Ryan and Chase as of
January 1, 2011, are as follows:
Chase Company:
Shares outstanding
50,000
Book value
$400,000
Book value
$8
Ryan Company:
Shares owned of Chase
40,000

Book value of investment

$320,000

Assume Chase issues 30,000 additional shares


common stock solely to Ryan for $12 per share. What
is the new percent ownership Ryan owns in Chase?
A)75%
B)90%
C)82.5%
D)87.5%
E)80%
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

5.
Davidson,Inc.owns70percentoftheoutstanding
votingstockofErnestCompany.OnJanuary2,2009,
Davidsonsold8percentbondspayablewitha
$5,000,000facevaluematuringJanuary2,2029ata
premiumof$400,000.OnJanuary1,2011,Ernest
acquired30percentofthesesamebondsontheopen
marketat97.6.Bothcompaniesusethestraightline
methodofamortization.Whatadjustmentshouldbe
madetoDavidson's2012beginningRetained
Earningsasaresultofthisbondacquisition?

A)$152,000.
B)$114,000.
C)$144,000.
D)$122,000.
E)$136,000.
PointsEarned:

2.0/2.0

CorrectAnswer(s): E

6.
Ryan Company owns 80% of Chase Company. The
original balances presented for Ryan and Chase as of
January 1, 2011, are as follows:
Chase Company:
Shares outstanding
50,000
Book value
$400,000
Book value
$8
Ryan Company:
Shares owned of Chase
40,000
Book value of investment
$320,000
Assume Chase issues 30,000 additional shares
common stock solely to Ryan for $12 per share. After
acquiring the additional shares, what adjustment is
needed for Ryan's investment in Chase account?

A)$70,000increase
B)$15,000increase
C)$70,000decrease
D)Noadjustmentisnecessary
E)$15,000decrease
2.0/2.0
PointsEarned:
CorrectAnswer(s): E

7.
Ifasubsidiaryissuesastockdividend,whichofthe
followingstatementsistrue?
A)Investmentinsubsidiaryontheparent'sbooks
willdecrease.
B)Additionalpaidincapitalontheparent'sbooks
willdecrease.
C)Investmentinsubsidiaryontheparent'sbooks
willincrease.
D)Noadjustmentisnecessary.
E)Additionalpaidincapitalontheparent'sbooks
willincrease.
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

8.
Whichofthefollowingistrueconcerningthe
treasurystockapproachinaccountingfora
subsidiary'sinvestmentinparentcompanystock?
A)Thecostofparentsharesistreatedasifthe
sharesarenolongerissued.
B)Theoriginalcostofthesubsidiary'sinvestment
reduceslongtermliabilities.
C)Thesubsidiarymustapplytheequitymethodin
accountingfortheinvestmentifthetreasurystock
approachisused.
D)Thetreasurystockapproachincreasestotal
stockholders'equity.
E)Thecostofparentsharesistreatedasiftheshares
arenolongeroutstanding.
2.0/2.0
PointsEarned:
CorrectAnswer(s): E

9.

Hardford Corp. held 80% of Inglestone Inc. which, in


turn, owned 80% of Jade Co. Operating income
figures (without investment income) as well as
unrealized upstream gains included in the income for
the current year follow:
Hardford Co.Ingleston Inc Jade Co.
Operating income
$560,000
$420,000
$280,000
Unrealized gains
70,000
42,000
84,000
The accrual-based income of Jade Co. is calculated
to be
A)$144,000
B)$189,000
C)$201,000
D)$193,000
E)$196,000
PointsEarned:

2.0/2.0

CorrectAnswer(s): E

10.

Paris,Inc.owns80percentofthevotingstockof
Stance,Inc.Theexcesstotalfairvalueoverbook
valuewas$75,000.Stanceholds10percentofthe
votingstockofParis.Thepaymentforthat
investmentwasinexcessofbookvalueandfairvalue
by$15,000.Anyexcessfairvalueisassignedto
trademarkstobeamortizedovera10yearperiod.
Duringthecurrentyear,Parisreportedoperating
incomeof$200,000anddividendincomefrom
Stanceof$20,000.Atthesametime,Stancereported
operatingincomeof$40,000anddividendincome
fromParisof$5,000.Whatwillbereportedasthe
noncontrollinginterestinStance'snetincome?
A)$8,000.
B)$9,000.
C)$7,500.
D)$1,000.
E)$6,500.
2.0/2.0
PointsEarned:
CorrectAnswer(s): C

11.

Beagle Co. owned 80% of Maroon Corp. Maroon


owned 90% of Eckston Inc. Operating income totals
for 2011 are shown below; these figures contained no
investment income. Amortization expense was not
required by any of these acquisitions. Included in
Eckston's operating income was a $56,000 unrealized
gain on intra-entity transfers to Maroon.
Beagle Co. Maroon Corp
Eckston
Inc.
Operating income$420,000
$280,000
$280,000
The accrual-based income of Maroon Corp. is
calculated to be
A)$472,700
B)$358,800
C)$481,600
D)$502,300
E)$488,900
2.0/2.0
PointsEarned:
CorrectAnswer(s): C

12.
Reggie,Inc.owns70percentofNancyCorporation.
Duringthecurrentyear,Nancyreportedearnings

beforetaxof$100,000andpaidadividendof
$30,000.Theincometaxrateforbothcompaniesis
30percent.Whatdeferredincometaxliabilityarising
inthecurrentyearmustberecognizedinthe
consolidatedbalancesheet?
A)$2,400.
B)$2,940.
C)$9,800.
D)$1,680.
E)$1,470.
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

13.
PrescottCorp.owned90%ofBellInc.,whileBell
owned10%oftheoutstandingcommonsharesof
Prescott.Nogoodwillorotherallocationswere
recognizedinconnectionwitheitherofthese
acquisitions.Prescottreportedoperatingincomeof
$266,000for2011whereasBellearned$98,000
duringthesameperiod.Noinvestmentincomewas
includedwithineitheroftheseincometotals.How
wouldthe10%investmentinPrescottownedbyBell
bepresentedintheconsolidatedbalancesheet?

A)The10%investmentwouldbeeliminatedandno
amountwouldbeshownintheconsolidatedbalance
sheet.
B)PrescottwouldtreatthesharesownedbyBellas
iftheyhadbeenrepurchasedontheopenmarket,and
atreasurystockaccountwouldbesetuponPrescott's
booksrecordingthesharesattheirmarketvalueon
thedateofcombination.
C)The10%investmentwouldbeincludedaspartof
AdditionalPaidInCapitalbecauseitislessthan20%
andthereforeindicatesnosignificantinfluenceis
present.
D)The10%investmentwouldbeeliminatedandthe
samedollaramountwouldappearastreasurystockin
theconsolidatedbalancesheet.
E)The10%investmentwouldbereclassifiedin
Bell'sbalancesheetasTreasuryStockbeforethe
consolidationprocessbegins.
2.0/2.0
PointsEarned:
CorrectAnswer(s): D

14.
EvanstonCo.owned60%ofMontgomeryCorp.
Montgomeryowned75%ofNoirInc.,andNoir

owned15%ofMontgomery.Thispatternof
ownershipwouldbecalled
A)anaffiliatedgroup.
B)indirectcontrol.
C)directcontrol.
D)aconnectingaffiliation.
E)mutualownership.
2.0/2.0
PointsEarned:
CorrectAnswer(s): E

15.
Allofthefollowingarerequiredtobereportedin
interimfinancialstatementsforamaterialoperating
segmentexcept:
A)Segmentprofitorloss.
B)Reconciliationofsegmentprofitorlosstototal
incomebeforetaxes.
C)Segmentassets.
D)Intersegmentrevenues.
E)Segmentrevenuesfromexternalcustomers.
0.0/2.0
PointsEarned:
CorrectAnswer(s): C

16.
Whichofthefollowingitemsofinformationare
requiredtobeincludedininterimreportsforeach
operatingsegment?
(I.)Revenuesfromexternalcustomers
(II.)Segmentprofitorloss
(III.)Reconciliationofsegmentprofitorlosstothe
enterprise'stotalincomebeforetaxes
(IV.)Intersegmentrevenues
A)I,IIandIII
B)IandIIIonly
C)I,II,III,andIV
D)IandIIonly
E)IIandIIIonly
2.0/2.0
PointsEarned:
CorrectAnswer(s): C

17.
Whichofthefollowingisnotoneofthecriteria
managementshouldconsiderindeterminingwhether
businessactivitiesandenvironmentsofanoperating
segmentaresimilar?

A)Thenatureoftheregulatoryenvironment,if
applicable.
B)Thegeographicallocationoftheoperations.
C)Thedistributionmethods.
D)Thenatureoftheproductionprocess.
E)Thetypeorclassofcustomer.
2.0/2.0
PointsEarned:
CorrectAnswer(s): B

18.
The Fratilo Co. had three operating segments with the
following information:
Pens
Pencils Erasers
Sales to outsiders $11,200 $5,600
$8,400
Intersegment revenues
840
1,400 1,960
In addition, revenues generated at corporate
headquarters are $1,400. Combined segment revenues
are calculated to be
A)$25,200
B)$28,000
C)$27,300

D)$26,600
E)$29,400
PointsEarned:

2.0/2.0

CorrectAnswer(s): E

19.
Howshouldrevenuesberecognizedininterim
periods?
A)Therearenorevenuesrecognizedininterim
periods.
B)Onanannualizedbasis.
C)Inthesamewayastheyarerecognizedonan
annualbasis.
D)Onaseasonalbasis.
E)Onthecashbasis.
2.0/2.0
PointsEarned:
CorrectAnswer(s): C

20.
Whendefiningareportablesegment,whichofthe
followingconditionswouldbesufficienttoallowa

companytocombinetwooperatingsegmentsfor
purposesoftesting?
A)Bothsegmentsareownedbythesameparent
company.
B)Thesegmentsmayselldifferentproducts,but
theyhaveasimilarproductionprocess.
C)Bothsegmentshaveseveralcustomersin
common.
D)Theproductssoldbyeachsegmentareproduced
inthesameplant.
E)BothsegmentsarerequiredtoadheretoU.S.
DepartmentofLaborregulationsregarding
immigrationlaws.
2.0/2.0
PointsEarned:
CorrectAnswer(s): B

21.
CementCompany,Inc.beganthefirstquarterwith
1,000unitsofinventorycosting$25perunit.During
thefirstquarter,3,000unitswerepurchasedatacost
of$40perunit,andsalesof3,400unitsat$65per
unitsweremade.Duringthesecondquarter,the
companyexpectstoreplacetheunitsofbeginning
inventorysoldatacostof$45perunit.Cement

CompanyusestheLIFOmethodtoaccountfor
inventory.Theamountofgrossprofitforthefirst
quarteris:
A)$250,000
B)$87,000
C)$221,000
D)$90,000
E)$83,000
2.0/2.0
PointsEarned:
CorrectAnswer(s): E