ACC 455 EXAM MULTIPLE CHOICE QUESTIONS 5,4,6,
PRACTICE EXAM
1. Consolidation workpaper entries normally:
a Are posted to the general ledger accounts of one or more of the affiliates
b Are posted to the general ledger accounts only when the financial statement approach
is used
c Are posted to the general ledger accounts only when the trial balance approach is
used
d Do not affect the general ledger accounts of any of the affiliates
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 126). Pearson Education.
Kindle Edition. - Answers :D
2. The direction of intercompany sales (upstream or downstream) does not affect
consolidation workpaper procedures when the intercompany sales between affiliates
are made:
a At fair value
b Above market value
c At book value
d To a 100 percent-owned subsidiary
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 167). Pearson Education.
Kindle Edition. - Answers :D
3. Pop Corporation sells inventory items for $500,000 to Son Corporation, its 80
percent-owned subsidiary. The consolidated workpaper entry to eliminate the effect of
this intercompany sale will include a debit to sales for:
a $500,000
b $400,000
c The amount remaining in Son's ending inventory
d 80 percent of the amount remaining in Son's ending inventory
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 167). Pearson Education.
Kindle Edition. - Answers :A
4. Sun Corporation, a 90 percent-owned subsidiary of Pam Corporation, buys half of its
raw materials from Pam. The transfer price is exactly the same price as Sun pays to buy
identical raw materials from outside suppliers and the same price as Pam sells the
materials to unrelated customers. In preparing consolidated statements for Pam
Corporation and Subsidiary:
a The intercompany transactions can be ignored because the transfer price represents
arm's-length bargaining
b Any unrealized profit from intercompany sales remaining in Pam's ending inventory
must be offset against the unrealized profit in Pam's beginning inventory
c Any unrealized profit on the intercompany transactions in Sun's ending inventory is
eliminated in its entirety
, d Only 90 percent of any unrealized profit on the intercompany transactions in Sun's
ending inventory is eliminated
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pear - Answers :C
8. Sun Corporation is a 90 percent-owned subsidiary of Pam Corporation, acquired on
January 1, 2016, at a price equal to book value and fair value. Pam accounts for its
investment in Sun using the equity method of accounting. The only intercompany
transactions between the two affiliates in 2016 and 2017 are as follows:
2016: Pam sold inventory items that cost $400 to Sun for $500. One-fourth of this
merchandise remains unsold at December 31, 2016.
2017: Pam sold inventory items that cost $600 to Sun for $750. One-third of this
merchandise remains unsold at December 31, 2017.
At December 31, 2017, Pam's Investment in Sun account:
a Will equal its underlying equity in Sun
b Will be $25 greater than its underlying equity in Sun
c Will be $50 less than its underlying equity in Sun
d Will be $25 less than its underlying equity in Sun
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pearson Education. Kin
- Answers :C
6. Sun Corporation regularly sells inventory items to its parent, Pam Corporation. In
preparing the consolidated income statement, which of the following items would not be
affected by the direction (upstream or downstream) of these intercompany sales?
a Consolidated gross profit
b Noncontrolling interest share
c Controlling interest share of consolidated net income
d Consolidated retained earnings
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pearson Education.
Kindle Edition. - Answers :A
Pop, Inc., owns 80 percent of Son, Inc. During 2016, Pop sold goods with a 40 percent
gross profit to Son. Son sold all of these goods in 2016. For 2016 consolidated financial
statements, how should the summation of Pop and Son income statement items be
adjusted?
a Sales and cost of goods sold should be reduced by the intercompany sales.
b Sales and cost of goods sold should be reduced by 80 percent of the intercompany
sales.
c Net income should be reduced by 80 percent of the gross profit on intercompany
sales.
d No adjustment is necessary.
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pearson Education.
Kindle Edition. - Answers :A
2. Car Company had the following transactions with affiliated parties during 2016.
PRACTICE EXAM
1. Consolidation workpaper entries normally:
a Are posted to the general ledger accounts of one or more of the affiliates
b Are posted to the general ledger accounts only when the financial statement approach
is used
c Are posted to the general ledger accounts only when the trial balance approach is
used
d Do not affect the general ledger accounts of any of the affiliates
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 126). Pearson Education.
Kindle Edition. - Answers :D
2. The direction of intercompany sales (upstream or downstream) does not affect
consolidation workpaper procedures when the intercompany sales between affiliates
are made:
a At fair value
b Above market value
c At book value
d To a 100 percent-owned subsidiary
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 167). Pearson Education.
Kindle Edition. - Answers :D
3. Pop Corporation sells inventory items for $500,000 to Son Corporation, its 80
percent-owned subsidiary. The consolidated workpaper entry to eliminate the effect of
this intercompany sale will include a debit to sales for:
a $500,000
b $400,000
c The amount remaining in Son's ending inventory
d 80 percent of the amount remaining in Son's ending inventory
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 167). Pearson Education.
Kindle Edition. - Answers :A
4. Sun Corporation, a 90 percent-owned subsidiary of Pam Corporation, buys half of its
raw materials from Pam. The transfer price is exactly the same price as Sun pays to buy
identical raw materials from outside suppliers and the same price as Pam sells the
materials to unrelated customers. In preparing consolidated statements for Pam
Corporation and Subsidiary:
a The intercompany transactions can be ignored because the transfer price represents
arm's-length bargaining
b Any unrealized profit from intercompany sales remaining in Pam's ending inventory
must be offset against the unrealized profit in Pam's beginning inventory
c Any unrealized profit on the intercompany transactions in Sun's ending inventory is
eliminated in its entirety
, d Only 90 percent of any unrealized profit on the intercompany transactions in Sun's
ending inventory is eliminated
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pear - Answers :C
8. Sun Corporation is a 90 percent-owned subsidiary of Pam Corporation, acquired on
January 1, 2016, at a price equal to book value and fair value. Pam accounts for its
investment in Sun using the equity method of accounting. The only intercompany
transactions between the two affiliates in 2016 and 2017 are as follows:
2016: Pam sold inventory items that cost $400 to Sun for $500. One-fourth of this
merchandise remains unsold at December 31, 2016.
2017: Pam sold inventory items that cost $600 to Sun for $750. One-third of this
merchandise remains unsold at December 31, 2017.
At December 31, 2017, Pam's Investment in Sun account:
a Will equal its underlying equity in Sun
b Will be $25 greater than its underlying equity in Sun
c Will be $50 less than its underlying equity in Sun
d Will be $25 less than its underlying equity in Sun
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pearson Education. Kin
- Answers :C
6. Sun Corporation regularly sells inventory items to its parent, Pam Corporation. In
preparing the consolidated income statement, which of the following items would not be
affected by the direction (upstream or downstream) of these intercompany sales?
a Consolidated gross profit
b Noncontrolling interest share
c Controlling interest share of consolidated net income
d Consolidated retained earnings
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pearson Education.
Kindle Edition. - Answers :A
Pop, Inc., owns 80 percent of Son, Inc. During 2016, Pop sold goods with a 40 percent
gross profit to Son. Son sold all of these goods in 2016. For 2016 consolidated financial
statements, how should the summation of Pop and Son income statement items be
adjusted?
a Sales and cost of goods sold should be reduced by the intercompany sales.
b Sales and cost of goods sold should be reduced by 80 percent of the intercompany
sales.
c Net income should be reduced by 80 percent of the gross profit on intercompany
sales.
d No adjustment is necessary.
Beams Floyd A.. Advanced Accounting (2-downloads) (p. 168). Pearson Education.
Kindle Edition. - Answers :A
2. Car Company had the following transactions with affiliated parties during 2016.
