ADVANCED FINANCIAL ACCOUNTING
COMPREHENSIVE PAPER 2026 QUESTIONS
AND SOLUTIONS GRADED A+
◉Parent owns 80% of Sub. Parent sells equipment to Sub for a gain
of $50,000 at the beginning of 2013. At that time, the equipment had
a remaining life of five years. Sub uses straight-line depreciation.
How will the intercompany eliminations for this transaction affect
consolidated income for 2014, assuming Sub still holds the
equipment? Answer: $10,000 increase
◉A parent sold a building to its subsidiary at a gain at the beginning
of 2013. Which statement is false concerning this transaction?
Answer: Parent's building account (original cost) at the end of 2013
is overstated
◉A parent sells merchandise to a subsidiary at a markup over its
cost. The subsidiary has sold all of this merchandise by year-end.
Which of the following worksheet elimination entries are needed to
consolidate the financial statements of the parent and subsidiary at
year-end, concerning the intercompany sales of merchandise?
Answer: DR. Sales; CR. COGS for the sales value of the merchandise
sold by the parent
,◉Parent has unconfirmed profits in its beginning inventory. The
working paper elimination for these profits will include: Answer: A
credit to cost of goods sold
◉A parent owns less than 100% of the voting stock of its subsidiary.
On its consolidated income statement, earnings per share is
calculated using which of the following amounts in the numerator?
Answer: Consolidated net income less noncontrolling interest in net
income
◉What is the preferred way to value the noncontrolling interest in a
subsidiary at the date of acquisition, per U.S. GAAP? Answer: The
stock price per share in an active market
◉On the consolidated statement of cash flows, cash dividends paid
to the shareholders of the parent company are: Answer: Reported in
the financing activities section
◉ASC Topic 810 requires the noncontrolling interest in net income
to be reported on the consolidated income statement as: Answer: A
distribution of consolidated net income
◉Noncontrolling interest is reported on the consolidated balance
sheet as: Answer: An equity
, ◉A parent acquires 80% of the stock of its subsidiary. Following U.S.
GAAP, on the consolidated balance sheet less than 20% of the total
goodwill will likely be allocated to the noncontrolling interest
because: Answer: The parent usually pays a higher price per share
because it acquires a controlling interest
◉Following U.S. GAAP, a 20% noncontrolling interest in a subsidiary
is reported on the consolidated balance sheet at the date of
acquisition at what amount? Answer: The fair value of the
noncontrolling interest
◉For a bargain purchase with a noncontrolling interest, the gain on
acquisition is: Answer: The fair value of identifiable net assets less
acquisition costs less the fair value of the noncontrolling interest
◉How did the FASB's ASU on goodwill impairment testing, effective
in 2012, change the calculation of goodwill impairment losses?
Answer: You don't have to do the goodwill impairment test if it is
more likely than not that the reporting unit's fair value is greater
than its book value.
◉If the parent uses the complete equity method when accounting
for its wholly-owned subsidiary on its own books, Answer: The
parent's separately reported income equals consolidated income.
COMPREHENSIVE PAPER 2026 QUESTIONS
AND SOLUTIONS GRADED A+
◉Parent owns 80% of Sub. Parent sells equipment to Sub for a gain
of $50,000 at the beginning of 2013. At that time, the equipment had
a remaining life of five years. Sub uses straight-line depreciation.
How will the intercompany eliminations for this transaction affect
consolidated income for 2014, assuming Sub still holds the
equipment? Answer: $10,000 increase
◉A parent sold a building to its subsidiary at a gain at the beginning
of 2013. Which statement is false concerning this transaction?
Answer: Parent's building account (original cost) at the end of 2013
is overstated
◉A parent sells merchandise to a subsidiary at a markup over its
cost. The subsidiary has sold all of this merchandise by year-end.
Which of the following worksheet elimination entries are needed to
consolidate the financial statements of the parent and subsidiary at
year-end, concerning the intercompany sales of merchandise?
Answer: DR. Sales; CR. COGS for the sales value of the merchandise
sold by the parent
,◉Parent has unconfirmed profits in its beginning inventory. The
working paper elimination for these profits will include: Answer: A
credit to cost of goods sold
◉A parent owns less than 100% of the voting stock of its subsidiary.
On its consolidated income statement, earnings per share is
calculated using which of the following amounts in the numerator?
Answer: Consolidated net income less noncontrolling interest in net
income
◉What is the preferred way to value the noncontrolling interest in a
subsidiary at the date of acquisition, per U.S. GAAP? Answer: The
stock price per share in an active market
◉On the consolidated statement of cash flows, cash dividends paid
to the shareholders of the parent company are: Answer: Reported in
the financing activities section
◉ASC Topic 810 requires the noncontrolling interest in net income
to be reported on the consolidated income statement as: Answer: A
distribution of consolidated net income
◉Noncontrolling interest is reported on the consolidated balance
sheet as: Answer: An equity
, ◉A parent acquires 80% of the stock of its subsidiary. Following U.S.
GAAP, on the consolidated balance sheet less than 20% of the total
goodwill will likely be allocated to the noncontrolling interest
because: Answer: The parent usually pays a higher price per share
because it acquires a controlling interest
◉Following U.S. GAAP, a 20% noncontrolling interest in a subsidiary
is reported on the consolidated balance sheet at the date of
acquisition at what amount? Answer: The fair value of the
noncontrolling interest
◉For a bargain purchase with a noncontrolling interest, the gain on
acquisition is: Answer: The fair value of identifiable net assets less
acquisition costs less the fair value of the noncontrolling interest
◉How did the FASB's ASU on goodwill impairment testing, effective
in 2012, change the calculation of goodwill impairment losses?
Answer: You don't have to do the goodwill impairment test if it is
more likely than not that the reporting unit's fair value is greater
than its book value.
◉If the parent uses the complete equity method when accounting
for its wholly-owned subsidiary on its own books, Answer: The
parent's separately reported income equals consolidated income.
