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Advanced Financial Accounting Final MC Exam | Comprehensive Questions and Answers Latest Updated 2024/2025 With 100% Verified Solutions Dale Inc., a U.S. company, bought machine parts from a German company on March 1, 20X1, for €30,000, when the spot rate for euros was $0.4895. Dale's year-end was March 31, when the spot rate was $0.4845. On April 20, 20X1, Dale paid the liability with €30,000 acquired at a rate of $0.4945. Dale's income statements should report a foreign exchange gain or loss for the years ended March 31, 20X1 and 20X2 of - 20X1: $150 Gain 20X2: $300 Loss Marvin Company's receivable from a foreign customer is denominated in the customer's local currency. This receivable of 900,000 LCUs has been translated into $315,000 on Marvin's December 31, 20X5, balance sheet. On January 15, 20X6, the receivable was collected in full when the exchange rate was 3 LCU to $1. The journal entry Marvin should make to record the collection of this receivable is - DR Foreign Currency Units 300, DR Exchange loss 15000 CR A/R 315, On July 1, 20X1, Black Company lent $120,000 to a foreign supplier, evidenced by an interest-bearing note due on July 1, 20X2. The note is denominated in the borrower's currency and was equivalent to 840,000 LCUs on the loan date. The note principal was appropriately included at $140,000 in the receivables section of Black's December 31, 20X1, balance sheet. The note principal was repaid to Black on the July 1, 20X2, due date when the exchange rate was 8 LCUs to $1. In its income statement for the year ended December 31, 20X2, what amount should Black include as a foreign currency transaction gain or loss on the note principal? - $35,000 loss If 1 Canadian dollar can be exchanged for 90 cents of U.S. currency, what fraction should be used to compute the indirect quotation of the exchange rate expressed in Canadian dollars? - 1/. On July 1, 20X4, Bay Company borrowed 1,680,000 local currency units (LCUs) from a foreign lender evidenced by an interest-bearing note due on July 1, 20X5, which is denominated in the currency of the lender. The U.S. dollar equivalent of the note principal was as follows: 7/1/X4 (date borrowed) $210, 12/31/X4 (Bay's year-end) $240,

7/1/X5 (date repaid) $280, In its income statement for 20X5, what amount should Bay include as a foreign exchange gain or loss on the note principal? - $40,000 loss An entity denominated a sale of goods in a currency other than its functional currency. The sale resulted in a receivable fixed in terms of the amount of foreign currency to be received. The exchange rate between the functional currency and the currency in which the transaction was denominated changed. The effect of the change should be included as a - Component of income whether the change results in a gain or loss An entity denominated a December 15, 20X6, purchase of goods in a currency other than its functional currency. The transaction resulted in a payable fixed in terms of the amount of foreign currency and was paid on the settlement date, January 20, 20X7. The exchange rates between the functional currency and the currency in which the transaction was denominated changed at December 31, 20X6, resulting in a loss that should - Be included as a component of income from continuing operations for 20X On November 15, 20X3, Chow Inc., a U.S. company, ordered merchandise FOB shipping point from a German company for €200,000. The merchandise was shipped and invoiced on December 10, 20X3. Chow paid the invoice on January 10, 20X4. The spot rates for euros on the respective dates were November 15, 20X3 $0. December 10, 20X3 $0. December 31, 20X3 $0. January 10, 20X4 $0. In Chow's December 31, 20X3, income statement, the foreign exchange gain is - $4, Stees Corporation had the following foreign currency transactions during 20X2. First, it purchased merchandise from a foreign supplier on January 20, 20X2, for the U.S. dollar equivalent of $90,000. The invoice was paid on March 20, 20X2, at the U.S. dollar equivalent of $96,000. Second, on July 1, 20X2, Stees borrowed the U.S. dollar equivalent of $500,000 evidenced by a note that was payable in the lender's local currency on July 1, 20X4. On December 31, 20X2, the U.S. dollar equivalents of the principal amount and accrued interest were $520,000 and $26,000, respectively. Interest on the note is

10 percent per annum. In Stees's 20X2 income statement, what amount should be included as a foreign exchange loss? - $27, On September 1, 20X1, Cott Corporation received an order for equipment from a foreign customer for 300,000 LCUs when the U.S. dollar equivalent was $96,000. Cott shipped the equipment on October 15, 20X1, and billed the customer for 300,000 LCUs when the U.S. dollar equivalent was $100,000. Cott received the customer's remittance in full on November 16, 20X1, and sold the 300,000 LCUs for $105,000. In its income statement for the year ended December 31, 20X1, Cott should report a foreign exchange gain of - $5, On April 8, 20X3, Trul Corporation purchased merchandise from an unaffiliated foreign company for 10,000 units of the foreign company's local currency. Trul paid the bill in full on March 1, 20X4, when the spot rate was $0.45. The spot rate was $0.60 on April 8, 20X3, and was $0.55 on December 31, 20X3. For the year ended December 31, 20X4, Trul should report a transaction gain of - $1, On October 1, 20X5, Stevens Company, a U.S. company, contracted to purchase foreign goods requiring payment in pesos one month after their receipt in Stevens's factory. Title to the goods passed on December 15, 20X5. The goods were still in transit on December 31, 20X5. Exchange rates were 1 dollar to 22 pesos, 20 pesos, and 21 pesos on October 1, December 15, and December 31, 20X5, respectively. Stevens should account for the exchange rate fluctuations in 20X5 as - A gain included in income before discontinued operations. On October 2, 20X5, Louis Co., a U.S. company, purchased machinery from Stroup, a German company, with payment due on April 1, 20X6. If Louis's 20X5 operating income included no foreign exchange gain or loss, the transaction could have - Been denominated in U.S. dollars. Cobb Co. purchased merchandise for 300,000 pounds from a vendor in London on November 30, 20X5. Payment in British pounds (£) was due on January 30, 20X6. The exchange rates to purchase 1 pound were as follows: Spot rates: November $1.65, December $1. 30 - day rate: November 1.64, December 1. 60 - day rate: November 1.63, December 1. In its December 31, 20X5, income statement, what amount should Cobb report as a foreign exchange gain? - $9,

Certain balance sheet accounts in a foreign subsidiary of Shaw Company on December 31, 20X1, have been restated in U.S. dollars as follows: Accounts Receivable, Current (Current rate = $100,000) (Historical rate = $110,000) Accounts Receivable, Long-Term (C=50,000) (H=55,000) Prepaid Insurance (C=25,000) (H=30,000) Patents (C=40,000) (H=45,000)

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Total C=$215,000 H=$240, What total should be included in Shaw's balance sheet for December 31, 20X1, for these items? - Foreign Currency is Functional Currency: $215, US Dollar is Functional Currency: $225, A wholly owned foreign subsidiary of Nick Inc. has certain expense accounts for the year ended December 31, 20X4, stated in local currency units (LCU) as follows: Depreciation of Equipment (related assets were purchased January 1, 20X2) 120, Provision for Uncollectible Accounts 80, Rent 200, The exchange rates at various dates were as follows: January 1, 20X2 0. December 31, 20X4 0. Average, 20X4 0. What total dollar amount should be included in Nick's income statement to reflect the preceding expenses for the year ended December 31, 20X4? - Foreign Currency is Functional Currency: $176,

US Dollar is Functional Currency: $183, Linser Corporation owns a foreign subsidiary with 2,600,000 local currency units (LCU) of property, plant, and equipment before accumulated depreciation on December 31, 20X4. Of this amount, 1,700,000 LCU were acquired in 20X2 when the rate of exchange was 1.5 LCU = $1, and 900,000 LCU were acquired in 20X3 when the rate of exchange was 1.6 LCU = $1. The rate of exchange in effect on December 31, 20X4, was 1.9 LCU = $1. The weighted average of exchange rates that were in effect during 20X4 was 1.8 LCU = $1. Assuming that the property, plant, and equipment are depreciated using the straight-line method over a 10-year period with no salvage value, how much depreciation expense relating to the foreign subsidiary's property, plant, and equipment should be charged in Linser's income statement for 20X4? - Foreign Currency is Functional Currency: $144, US Dollar is Functional Currency: $169, On January 1, 20X1, Pat Company formed a foreign subsidiary. On February 15, 20X1, Pat's subsidiary purchased 100,000 local currency units (LCU) of inventory. Of the original inventory purchased on February 15, 20X1, 25,000 LCU made up the entire inventory on December 31, 20X1. The exchange rates were 2.2 LCU = $1 from January 1, 20X1, to June 30, 20X1, and 2 LCU = $1 from July 1, 20X1, to December 31, 20X1. The December 31, 20X1, inventory balance for Pat's foreign subsidiary should be restated in U.S. dollars in the amount of - Foreign Currency is Functional Currency: $12, US Dollar is Functional Currency: $11, At what rates should the following balance sheet accounts in the foreign currency financial statements be restated into U.S. dollars? Equipment; Accumulated Depreciation of Equipment - Foreign Currency is Functional Currency: both current US Dollar is Functional Currency: both historical A credit-balancing item resulting from the process of restating a foreign entity's financial statement from the local currency unit to U.S. dollars should be included as a - Foreign Currency is Functional Currency: Separate component of stockholders' equity US Dollar is Functional Currency: Component of income from continuing operations

A foreign subsidiary of the Bart Corporation has certain balance sheet accounts on December 31, 20X2. Information relating to these accounts in U.S. dollars is as follows: Restated at Marketable (AFS and Trading) Securities C=$75,000 H=$85, Inventories, carried at average cost C=600,000 H=700, Refundable Deposits C=25,000 H=30, Goodwill C=55,000 H=70,

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TOTALS C=$755,000 H=$885, What total should be included in Bart's balance sheet on December 31, 20X2, as a result of the preceding information? - Foreign Currency is Functional Currency: $755, US Dollar is Functional Currency: $870, Gate Inc. had a $30,000 credit adjustment for the year ended December 31, 20X2, from restating its foreign subsidiary's accounts from their local currency units into U.S. dollars. Additionally, Gate had a receivable from a foreign customer payable in the customer's local currency. On December 31, 20X1, this receivable for 200,000 local currency units (LCU) was correctly included in Gate's balance sheet at $110,000. When the receivable was collected on February 15, 20X2, the U.S. dollar equivalent was $120,000. In Gate's 20X2 consolidated income statement, how much should be reported as foreign exchange gain in computing net income? - LCU is Functional Currency: $10, USD is Functional Currency: $40, Bar Corporation had a realized foreign exchange loss of $13,000 for the year ended December 31, 20X2, and must also determine whether the following items will require year-end adjustment:

1. Bar had a $7,000 credit resulting from the restatement in dollars of the accounts of its wholly owned foreign subsidiary for the year ended December 31, 20X2.
2. Bar had an account payable to an unrelated foreign supplier to be paid in the supplier's local currency. The U.S. dollar equivalent of the payable was $60,000 on the October 31, 20X2, invoice date and $64,000 on December 31, 20X2. The invoice is payable on January 30, 20X3.

What amount of the net foreign exchange loss in computing net income should be reported in Bar's 20X2 consolidated income statement? - LCU is Functional Currency: $17, USD is Functional Currency: $10, The balance in Simpson Corp.'s foreign exchange loss account was $15,000 on December 31, 20X2, before any necessary year-endadjustment relating to the following:

1. Simpson had a $20,000 debit resulting from the restatement in dollars of the accounts of its wholly owned foreign subsidiary for the year ended December 31, 20X2.
2. Simpson had an account payable to an unrelated foreign supplier, payable in the supplier's local currency on January 27, 20X3. The U.S. dollar equivalent of the payable was $100,000 on the November 28, 20X2, invoice date, and $106,000 on December 31, 20X2. In Simpson's 20X2 consolidated income statement, what amount should be included as foreign exchange loss in computing net income? - LCU is Functional Currency: $21, USD is Functional Currency: $41, When remeasuring foreign currency financial statements into the functional currency, which of the following items would be remeasured using a historical exchange rate? - Inventories carried at cost A foreign subsidiary's functional currency is its local currency, which has not experienced significant inflation. The weighted-average exchange rate for the current year would be the appropriate exchange rate for translating
3. Sales to Customers? Y/N
4. Wages Expense? Y/N - Sales to customers: Yes Wages expense: Yes The functional currency of Dahl Inc.'s subsidiary is the European euro. Dahl borrowed euros as a partial hedge of its investment in the subsidiary. In preparing consolidated financial statements, Dahl's debit balance of its translation adjustment exceeded its exchange gain on the borrowing. *How should the

translation adjustment and the exchange gain be reported in Dahl's consolidated financial statements?*

• The translation adjustment should be netted against the exchange gain, and the excess translation adjustment should be reported in the stockholders' equity section of the balance sheet. Cash $20, Other Assets 180, total = $200, Liabilities $50, Alex, Capital (40%) 37, Betty, Capital (40%) 65, Claire, Capital (20%) 48, Total Liabilities and Capital = $200, If the assets are fairly valued on this balance sheet and the partnership wishes to admit Denise as a new one-sixth-interest partner without recording goodwill or bonus, Denise should contribute cash or other assets of - $30, Cash $20, Other Assets 180, total = $200, Liabilities $50, Alex, Capital (40%) 37, Betty, Capital (40%) 65, Claire, Capital (20%) 48, Total Liabilities and Capital = $200, If assets on the initial balance sheet are fairly valued, Alex and Betty give their consent, and Denise pays Claire $51,000 for her interest, the revised capital balances of the partners would be - Alex, $37,

*On December 31, 20X4, Alan and Dave are partners with capital balances of $80,000 and $40,000, and

they share profit and losses in the ratio of 2:1, respectively. On this date, Scott invests $36,000 cash for a 20 percent interest in the capital and profit of the new partnership. The partners agree that the implied Boris and Richard are partners who share profits and losses in the ratio of 6:4. On May 1, 20X9, their

*On that date, Lisa was admitted as a partner with a one-third interest in capital and profits for an *At December 31, Rod and Sheri are partners with capital balances of $40,000 and $20,000, and they share profits and losses in the ratio of 2:1, respectively. On this date, Pete invests $17,000 in cash for a

Total Liabilities and Capital = $200, The capital accounts of the partnership of Ella, Nick, and Brandon follow with their respective profit and loss ratios: Ella$139,000 (.500) Nick 209,000 (.333) Brandon 96,000 (.167) Tony was admitted to the partnership when he purchased directly, for $132,000, a proportionate interest from Ella and Nick in the partnership's net assets and profits. As a result, Tony acquired a 20 percent interest in the firm's net assets and profits. Assuming that implied goodwill is not to be recorded, what is the combined gain realized by Ella and Nick upon the sale of a portion of their partnership interests to Tony? - $43, Cash $20, Other Assets 180, total = $200, Liabilities $50, Alex, Capital (40%) 37, Betty, Capital (40%) 65, Claire, Capital (20%) 48, Total Liabilities and Capital = $200, *Fred and Ralph are partners who share profits and losses in the ratio of 7:3, respectively. Their respective capital accounts are as follows: Fred$35,000 Ralph 30, They agreed to admit Lute as a partner with a one-third interest in the capital and profits and losses upon an investment of $25,000. The new partnership will begin with total capital of $90,000.

Immediately after Lute's admission, what are the capital balances of Fred, Ralph, and Lute, respectively?* - $31,500, $28,500, $30, Cash $20,00 0 Other Assets 180, total = $200, Liabilities $50, Alex, Capital (40%) 37, Betty, Capital (40%) 65, Claire, Capital (20%) 48, Total Liabilities and Capital = $200, If A is the total capital of a partnership before the admission of a new partner, B is the total capital of the partnership after the new partner's investment, C is the amount of the new partner's investment, and D is the amount of capital credit to the new partner, then there is - Goodwill to the old partners if B > ( A + C ) and D = C The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows: Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150, Joan, Capital 160, Charles, Capital 45, Thomas, Capital 55, Total Liabilities & Equities $410,

Assume Charles is insolvent, if the inventory is sold for $300,000, how much should Joan receive upon liquidation? - $136, The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows: Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150, Joan, Capital 160, Charles, Capital 45, Thomas, Capital 55, Total Liabilities & Equities $410, Assume Charles is insolvent, if the inventory is sold for $180,000, how much should Thomas receive upon liquidation? - $28, The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows: Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150, Joan, Capital 160, Charles, Capital 45,

Thomas, Capital 55, Total Liabilities & Equities $410, Assume Charles is insolvent, the partnership will be liquidated in installments. As cash becomes available, it will be distributed to the partners. If inventory costing $200,000 is sold for $140,000, how much cash should be distributed to each partner at this time? - option D Joan: $20, Charles: $ Thomas: $20, The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows: Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150, Joan, Capital 160, Charles, Capital 45, Thomas, Capital 55, Total Liabilities & Equities $410, In accounting for partnership liquidation, cash payments to partners after all creditors' claims have been satisfied but before the final cash distribution should be according to - Safe payments computations The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows:

Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150, Joan, Capital 160, Charles, Capital 45, Thomas, Capital 55, Total Liabilities & Equities $410, After all noncash assets have been converted into cash in the liquidation of the Adam and Kay Partnership, the ledger contains the following account balances: DR Cash $47, CR Accounts Payable $32, CR Loan Payable to Adam 15, DR Adam, Capital 7, CR Kay, Capital 7, Available cash should be distributed with $32,000 going to accounts payable and then - $8,000 to Adam and $7,000 to Kay The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows: Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150,

Joan, Capital 160, Charles, Capital 45, Thomas, Capital 55, Total Liabilities & Equities $410, F, A, S, and B are partners sharing profits and losses equally. The insolvent partnership is to be liquidated. The status of the partnership and each partner is as follows: (not writing this bc too much info) the partnership creditors: - Have first claim to the partnership assets before any partner's personal creditors have rights to those assets. The balance sheet for the partnership of Joan, Charles, and Thomas, whose shares of profits and losses are 40, 50, and 10 percent, respectively is as follows: Cash $50, Inventory 360, Total Assets $410, Accounts Payable $150, Joan, Capital 160, Charles, Capital 45, Thomas, Capital 55, Total Liabilities & Equities $410,0 00 F, A, S, and B are partners sharing profits and losses equally. The insolvent partnership is to be liquidated. The status of the partnership and each partner is as follows: (not writing this bc too much info) The partnership creditors should seek recovery of their claims from: - From the partnership, including additional contributions from F and S.

On January 1, 20X7, the partners of Casey, Dithers, and Edwards, who share profits and losses in the ratio of 5:3:2, decided to liquidate their partnership. On this date, its condensed balance sheet was as follows: Cash $50, Other Assets 250, Total : $300, Liabilities $60, Casey, Capital 80, Dithers, Capital 90, Edwards, Capital 70, Total: $300, On January 15, 20X7, the first cash sale of other assets with a carrying amount of $150,000 realized $120,000. Safe installment payments to the partners were made on the same date. How much cash should be distributed to each partner? - Option A Casey: $15, Dithers: $51, Edwards: $44, In a partnership liquidation, the final cash distribution to the partners should be made in accordance with the - Balances of the partners' capital accounts The balance sheet for the Art, Blythe, and Cooper Partnership is as follows. Figures shown parenthetically reflect agreed-upon profit and loss-sharing percentages. Cash$20, Other Assets 180,

Total $200, Liabilities$50, Art, Capital (40%) 37, Blythe, Capital (40%) 65, Cooper, Capital (20%) 48, Total$200, If the firm, as shown on the balance sheet, is dissolved and liquidated by selling assets in installments and if the first sale of noncash assets having a book value of $90,000 realizes $50,000 and all cash available after settlement with creditors is distributed, the respective partners would receive (to the nearest dollar) - Option D Art: $ Blythe: $3, Cooper: $17, The balance sheet for the Art, Blythe, and Cooper Partnership is as follows. Figures shown parenthetically reflect agreed-upon profit and loss-sharing percentages. Cash$20, Other Assets 180, Total $200, Liabilities$50, Art, Capital (40%) 37, Blythe, Capital (40%) 65, Cooper, Capital (20%) 48, Total$200,

If the firm, as shown on the balance sheet, is dissolved and liquidated by selling assets in installments and if the first sale of noncash assets having a book value of $90,000 realizes $50,000 and $3,000 cash is to be withheld, the respective partners would then receive (to the nearest dollar) - Option D Art: $ Blythe: $1, Cooper: $16, The balance sheet for the Art, Blythe, and Cooper Partnership is as follows. Figures shown parenthetically reflect agreed-upon profit and loss-sharing percentages. Cash$20, Other Assets 180, Total $200, Liabilities$50, Art, Capital (40%) 37, Blythe, Capital (40%) 65, Cooper, Capital (20%) 48, Total$200, If each partner properly received some cash in the distribution after the second sale, if the cash to be distributed amounts to $12,000 from the third sale, and if unsold assets with an $8,000 book value remain, ignoring questions 3 and 4, the respective partners would receive - Option A Art: $4, Blythe: $4, Cooper: $2, The following condensed balance sheet is for the partnership of Arnie, Bart, and Kurt, who share profits and losses in the ratio of 4:3:3, respectively:

*The partners agreed to dissolve the partnership after selling the other assets for $200,000. On

• Betty, $65,
• Denise, $48,
• Cash $20,
• Other Assets 180,
• total = $200,
• Liabilities $50,
• Alex, Capital (40%) 37,
• Betty, Capital (40%) 65,
• Claire, Capital (20%) 48,
• Total Liabilities and Capital = $200,
• goodwill is* - $24, partnership goodwill is to be recorded simultaneously with Scott's admission. The firm's total implied
• Cash $20,
• Other Assets 180,
• total = $200,
• Liabilities $50,
• Alex, Capital (40%) 37,
• Betty, Capital (40%) 65,
• Claire, Capital (20%) 48,
• Total Liabilities and Capital = $200,
• Boris$60,
• Richard 50,
• Lisa's admission, Boris's capital should be* - $54, investment of $40,000. The new partnership began with a total capital of $150,000. Immediately after
• Cash $20,
• Other Assets 180,
• total = $200,
• Liabilities $50,
• Alex, Capital (40%) 37,
• Betty, Capital (40%) 65,
• Claire, Capital (20%) 48,
• Total Liabilities and Capital = $200,
• how much should be credited to Pete's capital account on December 31?* - $15, 20 percent interest in the new partnership's capital and profit. Assuming that the bonus method is used,
• Cash $20,
• Other Assets 180,
• total = $200,
• Liabilities $50,
• Alex, Capital (40%) 37,
• Betty, Capital (40%) 65,
• Claire, Capital (20%) 48,
• Cash$100,
• Other Assets 300,
• Total: $400,
• Liabilities$150,
• Arnie, Capital 40,
• Bart, Capital 180,
• Kurt, Capital 30,
• Total$400,
• dissolution of the partnership, Arnie should receive* - $