BU 5540 Advanced Accounting

SUNY Old Westbury

Third Exam Summer I 2015
Prof. Straus

Name_______________________________

Please answer all questions completely. This Exam is worth 30% of the grade for
the course. You must do your own work; do not work with anyone else in the
class and do not consult anyone outside the class. You may use your book and
notes, but to other materials.
Submit one Excel file with all of your answers. Each part of the test (there are 5
parts, Parts I through V) should be on a separate sheet in the file.
Part I: Multiple Choice (2 points each for a total of 36 points)

1. Dell makes an investment in ATS, a small computer company, by buying 25% of its
stock, and obtains significant influence over ATS operations. Dell most likely will
account for ATS using the:
a) Cost method
b) Fair value method
c) Equity method
d) Consolidation method

2. In preparing a consolidation of a wholly-owned subsidiary, non-controlling interest is

recorded for:
a) the portion of the subsidiary company owned by outside investors
b) the portion of the parent company owned by outside investors
c) the portion of the subsidiary company owned by majority investors
d) non-controlling interest is not recorded
3. In an acquisition, a positive result between the Fair Value of an acquired company
less the Fair Value of its net identifiable assets is:
a) Expensed immediately
b) Recorded as Goodwill
c) Amortized over the remaining life of any assets or liabilities that were
adjusted to fair value
d) Recorded as a Gain on Bargain Purchase

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

4. In a dissolution of a general partnership of partners D, E, and F, partner D has a

negative capital balance of $100,000 after all assets are liquidated and any gain or loss
on sale was recorded, and E and F each have zero balances. The responsibility for
contributing $100,000 of cash to pay the balance owed to creditors falls to:
a) First to D to bring their capital balance to zero, then to E and F if D refuses or
is unable
b) It is Ds sole responsibility
c) The partners have no responsibility to contribute additional funds, as the
creditors made the decision to extend credit
d) D, E and F in order of their joining the partnership
5. Fair value of a company purchased in a partial acquisition can be calculated if one
knows the percentage purchased and the price paid by:
a) Subtracting book value from purchase price
b) Adding book value and purchase price
c) Multiplying price paid by percentage purchased
d) Dividing price paid by percentage purchased
6. Polar Bear Company buys 65% of Seal Corp. for $400,000. Seals equity at the time
of acquisition was $180,000. All of Seals accounts approximated fair value except that
the fair value of inventory was $850,000, while the book value was $720,000. The
amount of goodwill to be recorded is:
a) $435,385
b) $305,385
c) $130,000
d) $90,000
7. Using the current method of translating financial statements, revenue and expense
accounts are translated at the:
a) Historical exchange rate
b) Exchange rate on the last day of the period
c) Average exchange rate during the period
d) Weighted average exchange rate during the period

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

8. What is a registration statement as it relates to the SEC:

a) An annual filing made with the SEC
b) A filing made by a public company to alert the market that a significant
change occurred in its business
c) A required filing before an inside party trades a large amount of stock
d) A document that must be filed before a company can begin an initial offering
of securities to the public
9. What is EDGAR as it relates to the SEC?
a) The enforcement arm of the SEC
b) An electronic filing system
c) A system the SEC uses to reject incomplete filings
d) The branch of the US government that oversees the SEC
10. Mller Co. is based in New York and sells strawberries to Canada. If Mller sells
10,000 cases of strawberries to a company in Quebec in Canadian dollars on December
1, 2014 for payment on February 1, 2015, what information is needed to determine the
amount of Mllers foreign currency transaction gain or loss at December 31, 2014?
a) The sales price per case
b) The USD/CAN exchange rate on December 1, 2014
c) The USD/CAN exchange rate on December 31, 2014
d) All of the above
11. Which of the following is filed with the SEC on a regular periodic basis:
a)
b)
c)
d)

Form S-1
Form S-3
Form 10-K
Prospectus

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

12. Partners X, Y, and Z has capital balances of $20,000, $40,000, and $60,000 at
January 1, 2014. If the partners share equally in any profit and loss, and the
partnership had profit of $120,000 in 2014, the profit allocated to X, Y and Z was:
a)
b)
c)
d)

X:
X:
X:
X:

$60,000;
$80,000;
$20,000;
$40,000;

Y:
Y:
Y:
Y:

$80,000;
$80,000;
$40,000;
$40,000;

Z:
Z:
Z:
Z:

$100,000
$80,000
$60,000
$40,000

13. A shelf registration is a registration statement ___________

a)
b)
c)
d)

That the SEC rejects due to the lapse of a specified period of time
That the SEC formally rejects
That the filer withdraws before going effective
For large companies that allows them to offer securities over a period of time
without getting additional SEC approval

14. A significant difference between accounting for partnerships versus corporations is

that partnerships:
a) Must use the cash basis of accounting
b) Track each partners capital accounts, while a corporation just has a one
retained earnings account for all shareholders
c) Are required to recognize expenses earlier than corporations
d) Must defer revenue recognition until cash is collected
15. A Variable Interest Entity (VIE) should be consolidated into Klose Co. if:
a) Klose Co. has the power to direct the most significant economic activities of the
VIE OR has the right to receive benefits or obligation to absorb losses that are
significant to the VIE.
b) Klose Co. has the power to direct the most significant economic activities of the
VIE AND has the right to receive benefits or obligation to absorb losses that are
significant to the VIE.
c) Klose Co. owns more than 20% of the VIE.
d) Klose Co. has significant influence over the VIE.

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

Use the following information to complete questions 16-18:

On May 31, 2014 Vermont Teddy Bear Co. (Vermont TB) sold 3,000 bears dressed
in World Cup jerseys to Karstadt, which is a retail store based in Frankfurt.
Karstadt set a condition of the sale that it be denominated in Euros. On the date of
sale, the bears were sold at the Euro equivalent of $12 per bear.
Vermont TB is based in the U.S. and uses the US dollar (USD) as its functional and
reporting currency, and has a June 30 year end. The receivable is due on
September 1, 2014. The following were the exchange rates between the USD and
the Euro (EUR) on selected dates:

5/31/2014
6/30/2014
9/1/2014
9/30/2014

USD

EUR

1.36
1.37
1.35
1.39

:1
:1
:1
:1

16. When Vermont TB closes its books on June 30, 2014 it will record the following
related to this sale:
a)
b)
c)
d)

A
A
A
A

transaction
transaction
transaction
transaction

gain of 360
loss of 360
gain of 265
loss of 265

17. The initial entry on May 31, 2014 on Vermont TBs books will include:
a)
b)
c)
d)

A
A
A
A

debit to Accounts Receivable of $26,471

debit to Accounts Receivable of $36,000
debit to Accounts Receivable of $48,960
credit to Gain on Foreign Currency Exchange

18. Assuming Karstadt paid on time on September 1, 2014 and the exchange rates
above are accurate, Vermont TB received Euros worth how much in US Dollars on that
date:
a) $35,735
b) $36,000
c) $36,265
d) $36,794

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

Part II: Foreign Currency Translation (10 points)

A. Beeko Corp. is a U.S. corporation that has a small wholly-owned subsidiary

called Batok Ltd. based in Singapore. Batok uses Singapore dollars as its
reporting currency. Beeko bought the stock of Batok on February 1, 2009,
when one US dollar could buy 1.51 Singapore dollars. Translate the financial
statements below of Batok as of and for the year ended December 31, 2014
using the foreign exchange rates on the next page. Beeko uses the current
method of translation.

Cash
A/R
Inventory
Bldgs/Equip,net
Investments
TotalAssets

inSGD
300,000
122,000
240,000
250,000
130,000
1,042,000

A/P
Bondspayable
Commonstock
Retainedearnings
OCITranslationgain/(loss)
TotalLiabilities+OE

234,000
230,000
100,000
478,000

1,042,000

IncomeStatement
Revenue
Expenses
Netincome

760,000
680,000
80,000

StatementofRetainedEarnings
BOYRE
398,000
NI
80,000
EOYRE
478,000

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inUSD

286,331

BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

Singaporedollars
tobeexchanged
for1USD
12/31/2013
3/31/2014
6/30/2014
9/30/2014
12/31/2014
2014Average:

1.29
1.26
1.24
1.30
1.30
1.28

B. Prove out the Translation adjustment in Part II.A above by showing how it is
calculated using exchange rate differences (rather than as a plug to make
the balance sheet balance).

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

Part III: Partnership allocation (15 points)

Use the following information to answer questions III.1 through III.3:

Three college friends A, B, and C decided to form a business in the form of a
partnership on January 1, 2014. The business is called World Cup Partners and
launched an advertising-based website to explain the rules of soccer to the US market.
Partner A contributed $20,000 and brought considerable web development and soccer
expertise, while B and C each contributed $35,000. They agree to share 40:30:30 in
any profit/loss each year, and as they will work in different capacities in the
partnership, they will draw different salaries. Partner A will earn $120,000; B will earn
$100,000; C will earn $80,000. These amounts will be credited to each partners
capital accounts, and the partner will decide whether to withdraw any portion as a cash
payment. They also will be paid 5% interest at the end of each year based on their
capital balance at the beginning of that year.
During 2014, A withdrew $40,000 from the partnership, B withdrew $55,000, and C
withdrew only $20,000 as she had other sources of income. The partnership earned
$735,000 in 2014 before interest, salaries, or partner allocations. [Please show your
work on the following page for potential partial credit.]
III.1. Based on the information above, as of January 1, 2014, the capital balance of
Partner A was:
Bonus Method:
Goodwill Method:
III.2. Based on the information above, the amount of remaining profit/loss allocated to
Partner B in 2014 after allocating salaries and interest was:
Bonus Method:
Goodwill Method:
III.3. Based on the information above, the capital balance of Partner C at the end of
2014 was:
Bonus Method:
Goodwill Method:

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

BonusMethod

Total

Total

InitialCapital

GoodwillMethod
InitialCapital

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BU 5540 Advanced Accounting

SUNY Old Westbury
Third Exam Summer I 2015
Prof. Straus

Name_______________________________

Part IV: Partnership formation/operation (24 points)

Complete the following problems from Chapter 14 in the textbook in Excel, and show all
work in arriving at the answers. No credit will be given if the correct letter answer is
chosen if you do not show the calculation correctly in Excel. Attach your Excel file
separately.
Problems from pages 657-659:
5.
6.
7.
8.
9.
10.
13.
14.
Part V: Partnership liquidation (15 points)

Complete the following problems from Chapter 15 in the textbook in Excel, and show all
work in arriving at the answers. No credit will be given if the correct letter answer is
chosen if you do not show the calculation correctly in Excel. Attach your Excel file
separately.
Problems from page 690:
7.
8.
9.

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