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UNITY UNIVERSITY COLLEGE
SCHOOL OF DISTANCE AND CONTINUING EDUCATION
Worksheet for Advanced Accounting I (Acct 401)
This is a test paper you are expected to do on your own. It carries 15 points.
The test paper should be completed and mailed to the School of Distance
and Continuing Education for evaluation. Do not try to complete the
worksheet until you have covered all the lessons and exercises in the course
Any questions in the course that you have not been able to understand
should be stated on a separate sheet of paper and attached to this
worksheet. Your tutor will clarify them for you.
After completing this test paper, be certain to write your Name, Id.No and
Address on the first page. Your Name and Id.No on the other pages only. 0 Part I: select the best answer (5 marks)
1. Which of the following sets of accounts must always be kept in agreement?
a) Investment in branch and Equity In Home office.
b) Shipments to branch and shipments from home office
c) Branch income and equity in branch income
d) None of the above 2. Cash dividends declared out of current earnings are distributed to an investor.
How will be investors investment account be affected by those dividends under each of the
following accounting methods.
d 3. Cost method
No effect Equity method
No effect How are dividends paid to minority share holders reported in the consolidated
a) They reduce the amount reported as “minority interest in net income of subsidiary” in
the consolidated income statement.
b) They reduce the amount reported as “minority interest in net assets of subsidiary” in
the consolidated balance sheet.
c) They are included in the dividends declared line in the consolidated statement of
d) They are combined with expenses in the consolidated income statement
e) None of the above 4. A subsidiary may be acquired by issuing common stock in a pooling of
interests transaction or by paying cash in a purchase transaction. Which of the following
items would be reported in the consolidated financial statements at the same amount
regardless of the accounting method used?
a) Minority interest
c) retaining earnings d. capital stock account (in total) 1 5. How would the retained earnings of a subsidiary acquired in a business
combination usually be treated in a consolidated balance sheet prepared immediately after the
acquisition under each of the following methods? a
d Pooling of Purchase Interests
Excluded Part II. Exercises
A. The following transactions pertain to a branch’s first month’s operations:
1. The home office sent $9,000 cash to a branch.
2. The home office shipped inventory costing $40,000 to the branch; inter company bulling
was for $50,000.
3. Branch inventory purchases from outside vendors totaled $30,000.
4. Branch sales on account were $80,000.
5. The home office allocated $2,000 in adverting expense to the branch
6. Branch collection on accounts receivable were $45,000.
7. Branch operating expenses of $14,000 were incurred, none of which were paid at monthend.
8. The branch remitted $17,000 to the home office.
9. The branch’s ending inventory (as reported in its balance sheet) is composed of:
Acquired from outside vendors
Acquired from home office (at billing)
32,000 Required (5 marks)
Prepare the home office and branch journal entries for these transactions, assuming that a
periodic inventory system is used.
B. P company acquired 100% of the outstanding common stock of S
company for $2,300,000 cash and 10,000 shares of its common stock ($2 par value), which
was traded at $40 per share at these acquisition date. 2 Required (3 makers)
Prepare the entry to record the business combination on P Company’s books.
C. Parda Corporation issued voting common stock with $90,000 stated
value in exchange for all of the outstanding common stock of SOO Company. The
combination was properly accounted for as a pooling of interests.
The stockholder’s equity section of SOO’s
SOO’s balance sheet at the combination date was as
Capital contributed in excess of $70,000 stated value
Retained earnings 7,000
127,000 Required (2 marks)
What should be the increase in Parda’s
Parda’s stock holder’s equity at the acquisition date as a result
of this business combination? 3...
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