ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 2026/2027 | Page 1 | Passing Score: 75%
UNIVERSITY OF LOUISIANA AT LAFAYETTE
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS |
2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027
ACCOUNTING · Official Exam 2026/2027
100 75% CERTIFIED
QUESTIONS PASSING SCORE RECERTIFICATION
TABLE OF CONTENTS
Section 1 Financial Statement Analysis and Reporting Q1-25
Section 2 Auditing and Internal Controls Q26-45
Section 3 Taxation and Tax Planning Q46-65
Section 4 Managerial and Cost Accounting Q66-85
Section 5 Professional Ethics and Regulation Q86-100
Instructions: Select the single best answer for each question. This exam is designed for University of Louisiana at
Lafayette ACCT 526 preparation. Passing score: 75% (75 questions correct).
,nt Analysis and Reporting | Q1-Q25 | ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTI
Q1 Question 1 of 100
A financial analyst at a manufacturing firm reviews the current year financial statements
and notices that accounts receivable increased by 40% while sales revenue only increased
by 10%. The analyst should interpret this discrepancy as a potential indicator of which
issue?
A. An increase in the inventory turnover ratio
B. Improved efficiency in the collections department
C. Liberal credit policies that may lead to higher bad debt expense
D. A decrease in the cost of goods sold percentage
Correct Answer: A
Rationale:
When accounts receivable grows significantly faster than revenue, it suggests the company is extending credit
more liberally or struggling to collect, both of which increase bad debt risk. Improved collections would
decrease receivables relative to sales, and the other options relate to different financial metrics.
Q2 Question 2 of 100
A publicly traded company reports net income of $5 million but cash flow from operations
of negative $2 million. An investor examining the statement of cash flows should be most
concerned about which explanation for this divergence?
A. The company paid down long-term debt aggressively during the period
B. The company invested heavily in new equipment purchases
C. The company issued new common shares to raise capital
D. The company recognized substantial revenue on credit before collecting cash
Correct Answer: B
Rationale:
Recognizing revenue on credit under accrual accounting increases net income without generating cash,
creating a divergence between earnings and operating cash flow. Paying debt and buying equipment are
investing or financing activities, and issuing shares is a financing cash inflow, none of which explain negative
operating cash flow alongside positive net income.
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 2
, Q3 Question 3 of 100
A controller at a retail company is preparing the year-end financial statements and must
decide how to account for a contingent liability related to a pending lawsuit. Under U.S.
GAAP, a loss contingency should be accrued when which condition is met?
A. The likelihood of loss is probable and the amount can be reasonably estimated
B. The likelihood of loss is remote and the amount is material
C. The lawsuit has been filed but no court date has been set
D. The likelihood of loss is reasonably possible and the amount can be estimated
Correct Answer: C
Rationale:
Under ASC 450, a loss contingency is accrued when both conditions are met: the loss is probable (likely to
occur) and the amount can be reasonably estimated. Reasonably possible requires disclosure but not accrual,
and remote contingencies are neither accrued nor disclosed. Filing status alone does not determine the
accounting treatment.
Q4 Question 4 of 100
A company changes its inventory valuation method from FIFO to weighted average cost at
the beginning of the fiscal year. The financial statements must reflect this change using
which accounting treatment?
A. Current year adjustment with footnote disclosure only
B. Cumulative effect adjustment reported in other comprehensive income
C. Prospective application with no adjustment to prior periods
D. Retrospective adjustment to all presented prior periods
Correct Answer: D
Rationale:
A change in accounting principle such as an inventory method change requires retrospective application under
ASC 250, adjusting all prior periods presented for comparability. Prospective application is used for changes
in estimates, and neither footnote-only disclosure nor a cumulative OCI adjustment is the correct treatment for
a change in principle.
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 3
, Q5 Question 5 of 100
A parent company acquires 80% of a subsidiary for $10 million when the subsidiary has
net identifiable assets with a fair value of $11 million. The noncontrolling interest is
measured at fair value of $2.5 million. The amount of goodwill recognized in the
consolidated financial statements is which figure?
A. $2.5 million
B. $1 million
C. $1.5 million
D. $0
Correct Answer: A
Rationale:
Goodwill equals the excess of the purchase consideration plus the fair value of noncontrolling interest over the
fair value of net identifiable assets: $10 million + $2.5 million - $11 million = $1.5 million. The $1 million option
ignores the noncontrolling interest, zero would apply only if no premium was paid, and $2.5 million is just the
NCI value.
Q6 Question 6 of 100
An auditor reviewing a company financial statements notes that the debt-to-equity ratio has
increased from 0.8 to 1.5 over the past three years while the interest coverage ratio has
declined from 6.0 to 2.5. This trend most likely indicates which financial condition?
A. Improved profitability through financial leverage
B. Increasing financial risk and potential difficulty meeting debt obligations
C. A shift toward equity financing and away from debt
D. Strong operating performance relative to interest costs
Correct Answer: B
Rationale:
A rising debt-to-equity ratio combined with a declining interest coverage ratio signals increasing financial
leverage with weakening ability to service debt, indicating heightened financial risk. Improved leverage would
show stable or improving coverage ratios, a shift to equity would reduce debt-to-equity, and strong
performance would maintain or improve coverage.
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 4
UNIVERSITY OF LOUISIANA AT LAFAYETTE
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS |
2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027
ACCOUNTING · Official Exam 2026/2027
100 75% CERTIFIED
QUESTIONS PASSING SCORE RECERTIFICATION
TABLE OF CONTENTS
Section 1 Financial Statement Analysis and Reporting Q1-25
Section 2 Auditing and Internal Controls Q26-45
Section 3 Taxation and Tax Planning Q46-65
Section 4 Managerial and Cost Accounting Q66-85
Section 5 Professional Ethics and Regulation Q86-100
Instructions: Select the single best answer for each question. This exam is designed for University of Louisiana at
Lafayette ACCT 526 preparation. Passing score: 75% (75 questions correct).
,nt Analysis and Reporting | Q1-Q25 | ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTI
Q1 Question 1 of 100
A financial analyst at a manufacturing firm reviews the current year financial statements
and notices that accounts receivable increased by 40% while sales revenue only increased
by 10%. The analyst should interpret this discrepancy as a potential indicator of which
issue?
A. An increase in the inventory turnover ratio
B. Improved efficiency in the collections department
C. Liberal credit policies that may lead to higher bad debt expense
D. A decrease in the cost of goods sold percentage
Correct Answer: A
Rationale:
When accounts receivable grows significantly faster than revenue, it suggests the company is extending credit
more liberally or struggling to collect, both of which increase bad debt risk. Improved collections would
decrease receivables relative to sales, and the other options relate to different financial metrics.
Q2 Question 2 of 100
A publicly traded company reports net income of $5 million but cash flow from operations
of negative $2 million. An investor examining the statement of cash flows should be most
concerned about which explanation for this divergence?
A. The company paid down long-term debt aggressively during the period
B. The company invested heavily in new equipment purchases
C. The company issued new common shares to raise capital
D. The company recognized substantial revenue on credit before collecting cash
Correct Answer: B
Rationale:
Recognizing revenue on credit under accrual accounting increases net income without generating cash,
creating a divergence between earnings and operating cash flow. Paying debt and buying equipment are
investing or financing activities, and issuing shares is a financing cash inflow, none of which explain negative
operating cash flow alongside positive net income.
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 2
, Q3 Question 3 of 100
A controller at a retail company is preparing the year-end financial statements and must
decide how to account for a contingent liability related to a pending lawsuit. Under U.S.
GAAP, a loss contingency should be accrued when which condition is met?
A. The likelihood of loss is probable and the amount can be reasonably estimated
B. The likelihood of loss is remote and the amount is material
C. The lawsuit has been filed but no court date has been set
D. The likelihood of loss is reasonably possible and the amount can be estimated
Correct Answer: C
Rationale:
Under ASC 450, a loss contingency is accrued when both conditions are met: the loss is probable (likely to
occur) and the amount can be reasonably estimated. Reasonably possible requires disclosure but not accrual,
and remote contingencies are neither accrued nor disclosed. Filing status alone does not determine the
accounting treatment.
Q4 Question 4 of 100
A company changes its inventory valuation method from FIFO to weighted average cost at
the beginning of the fiscal year. The financial statements must reflect this change using
which accounting treatment?
A. Current year adjustment with footnote disclosure only
B. Cumulative effect adjustment reported in other comprehensive income
C. Prospective application with no adjustment to prior periods
D. Retrospective adjustment to all presented prior periods
Correct Answer: D
Rationale:
A change in accounting principle such as an inventory method change requires retrospective application under
ASC 250, adjusting all prior periods presented for comparability. Prospective application is used for changes
in estimates, and neither footnote-only disclosure nor a cumulative OCI adjustment is the correct treatment for
a change in principle.
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 3
, Q5 Question 5 of 100
A parent company acquires 80% of a subsidiary for $10 million when the subsidiary has
net identifiable assets with a fair value of $11 million. The noncontrolling interest is
measured at fair value of $2.5 million. The amount of goodwill recognized in the
consolidated financial statements is which figure?
A. $2.5 million
B. $1 million
C. $1.5 million
D. $0
Correct Answer: A
Rationale:
Goodwill equals the excess of the purchase consideration plus the fair value of noncontrolling interest over the
fair value of net identifiable assets: $10 million + $2.5 million - $11 million = $1.5 million. The $1 million option
ignores the noncontrolling interest, zero would apply only if no premium was paid, and $2.5 million is just the
NCI value.
Q6 Question 6 of 100
An auditor reviewing a company financial statements notes that the debt-to-equity ratio has
increased from 0.8 to 1.5 over the past three years while the interest coverage ratio has
declined from 6.0 to 2.5. This trend most likely indicates which financial condition?
A. Improved profitability through financial leverage
B. Increasing financial risk and potential difficulty meeting debt obligations
C. A shift toward equity financing and away from debt
D. Strong operating performance relative to interest costs
Correct Answer: B
Rationale:
A rising debt-to-equity ratio combined with a declining interest coverage ratio signals increasing financial
leverage with weakening ability to service debt, indicating heightened financial risk. Improved leverage would
show stable or improving coverage ratios, a shift to equity would reduce debt-to-equity, and strong
performance would maintain or improve coverage.
ACCT 526 FINAL EXAM | QUESTIONS AND ANSWERS | 2026/2027 UPDATED | WITH COMPLETE SOLUTIONS - ULL. 2026/2027 -- 2026/2027 | Passing Score: 75% | Page 4
