FAR Becker Exam 1 UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Burgess Co. purchase 35% of Egg Co's outstanding common stock on December 31 for $300,000. On
that date, Egg's stockholders' equity was $600,000, and the fair value of its identifiable assets was
$700,000. On December 31, what amount of goodwill should Burgess attribute to this acquisition?
A. $35,000
B. $90,000
C. $0
D. $55,000 - CORRECT ANSWER 700,000*35%=245,000
300,000-245,000=$55,000
Balfour Charities, a not-for-profit organization, received a $200,000 cash donation from Emily
Balfour under a charitable remainder annuity trust agreement designating the Balfour Charities as
both trustee and remainder beneficiary. The trust agreement specifies that Balfour Charities must both
invest the $200,000 and pay $10,000 per year to Roscoe Balfour, Emily's cousin, until his death. Any
funds remaining after Roscoe's death will be retained by Balfour Charities and used in a manner
consistent with their vision. The present value of the annuity payable to Roscoe is $65,000. As a result
of this transaction, Balfour would recognize contributions of:
A. $135,000
B. $200,000
C. $65,000
D. $0 - CORRECT ANSWER $200,000 - 65,000 = 135,000
$135,000
Quentin University is organized as a not-for-profit organization. The university reaches out to its
alumni each year in a mass telephonic fund raising appeal that includes scripted dinner hour calls
appealing for ongoing support. In Year 1, the university used untrained student volunteers to make the
calls. In Year 2, an alumnus who owns a successful telemarketing company offers to perform the task.
The university accepts the offer and provides the alumnus with the script along with appropriate
phone numbers and contribution accounting forms. Based on the usual and customary charges used in
his business, the alumnus anticipates that the value of these services is $10,000. For each year,
contributed revenue associated with this transaction would be:
Year 1. Year 2
A. 10,000. 0
B. 0. 0
, C. 10,000. 10,000
D. 0. 10,000 - CORRECT ANSWER Year 1: $0 and Year 2: $0
You don't have to pay for telemarketing as it not a specific skill set like an accountant
On January 1, Billy Co. signed a three-year lease for office space. The lease required monthly rent of
$8,000 for the first year, $8,100 for the second year, and $8,200 for the third year. Billy has the option
to renew the lease for a fourth year at $8,300 per month. How much rent expense should Billy Co.
charge for January?
A. $8,100
B. $8,200
C. $8,150
D. $8,000 - CORRECT ANSWER $8,1000 Easy Math here
The Museum was established in the current year as a not-for-profit organization. It operates as a
privately-funded museum and curator of the historical and artistic treasures of the Town. The museum
received a $500K donation of securities from Uri with the stipulation that the donation would be kept
intact but that earnings from the principal could be used for the museum's art acquisition program.
During the year, the museum received $50K in contributions without donor restrictions to fund
operations. The donation of Mr. Apple yielded $30K in dividends and the fair market value of the
donation was $525K at YE. The museum purchased local treasures for display in the museum valued
at $38K during the year. The museum qualifies and elects not to capitalize its collection. What were
the values of the net asset classes at the EOY?
Without restrict With restrict
A $37K $530k
B $42K $525K
C $50K $517K
D $12K $555K - CORRECT ANSWER Without: $50K. With: $517K
Cross Corp. had outstanding 2,000 shares of 11% preferred stock, $50 par. On August 8, Cross
redeemed and retired 25% of these shares for $22,500. On that date, Cross' additional paid-in capital
from preferred stock totaled $30,000. To record this transaction, Cross should debit (credit) its capital
accounts as follows:
Preferredstock. Additionalpaid-in capital. Retainedearnings
A. $25,000 -- ($ 2,500)
B.$25,000 ($2,500) --
QUESTIONS AND CORRECT ANSWERS
Burgess Co. purchase 35% of Egg Co's outstanding common stock on December 31 for $300,000. On
that date, Egg's stockholders' equity was $600,000, and the fair value of its identifiable assets was
$700,000. On December 31, what amount of goodwill should Burgess attribute to this acquisition?
A. $35,000
B. $90,000
C. $0
D. $55,000 - CORRECT ANSWER 700,000*35%=245,000
300,000-245,000=$55,000
Balfour Charities, a not-for-profit organization, received a $200,000 cash donation from Emily
Balfour under a charitable remainder annuity trust agreement designating the Balfour Charities as
both trustee and remainder beneficiary. The trust agreement specifies that Balfour Charities must both
invest the $200,000 and pay $10,000 per year to Roscoe Balfour, Emily's cousin, until his death. Any
funds remaining after Roscoe's death will be retained by Balfour Charities and used in a manner
consistent with their vision. The present value of the annuity payable to Roscoe is $65,000. As a result
of this transaction, Balfour would recognize contributions of:
A. $135,000
B. $200,000
C. $65,000
D. $0 - CORRECT ANSWER $200,000 - 65,000 = 135,000
$135,000
Quentin University is organized as a not-for-profit organization. The university reaches out to its
alumni each year in a mass telephonic fund raising appeal that includes scripted dinner hour calls
appealing for ongoing support. In Year 1, the university used untrained student volunteers to make the
calls. In Year 2, an alumnus who owns a successful telemarketing company offers to perform the task.
The university accepts the offer and provides the alumnus with the script along with appropriate
phone numbers and contribution accounting forms. Based on the usual and customary charges used in
his business, the alumnus anticipates that the value of these services is $10,000. For each year,
contributed revenue associated with this transaction would be:
Year 1. Year 2
A. 10,000. 0
B. 0. 0
, C. 10,000. 10,000
D. 0. 10,000 - CORRECT ANSWER Year 1: $0 and Year 2: $0
You don't have to pay for telemarketing as it not a specific skill set like an accountant
On January 1, Billy Co. signed a three-year lease for office space. The lease required monthly rent of
$8,000 for the first year, $8,100 for the second year, and $8,200 for the third year. Billy has the option
to renew the lease for a fourth year at $8,300 per month. How much rent expense should Billy Co.
charge for January?
A. $8,100
B. $8,200
C. $8,150
D. $8,000 - CORRECT ANSWER $8,1000 Easy Math here
The Museum was established in the current year as a not-for-profit organization. It operates as a
privately-funded museum and curator of the historical and artistic treasures of the Town. The museum
received a $500K donation of securities from Uri with the stipulation that the donation would be kept
intact but that earnings from the principal could be used for the museum's art acquisition program.
During the year, the museum received $50K in contributions without donor restrictions to fund
operations. The donation of Mr. Apple yielded $30K in dividends and the fair market value of the
donation was $525K at YE. The museum purchased local treasures for display in the museum valued
at $38K during the year. The museum qualifies and elects not to capitalize its collection. What were
the values of the net asset classes at the EOY?
Without restrict With restrict
A $37K $530k
B $42K $525K
C $50K $517K
D $12K $555K - CORRECT ANSWER Without: $50K. With: $517K
Cross Corp. had outstanding 2,000 shares of 11% preferred stock, $50 par. On August 8, Cross
redeemed and retired 25% of these shares for $22,500. On that date, Cross' additional paid-in capital
from preferred stock totaled $30,000. To record this transaction, Cross should debit (credit) its capital
accounts as follows:
Preferredstock. Additionalpaid-in capital. Retainedearnings
A. $25,000 -- ($ 2,500)
B.$25,000 ($2,500) --
