Infolink University College Hawassa Campus

Faculty of Business; Department of Accounting & Finance

Final examination for the course of Advance Financial Accounting
Items formats

 Academic year :2012 EC  Multiple items: 25%

 Year : 3rd  Matching items:10%
 Time allowed : 2:00hrs  Short answer: 10 %
 Instructor : Gurmu Ephrem  Total weight: 45 %
General Instruction

 Switch off your mobile phone

 Make sure that exam has 5 consecutive pages with 34 question
 Write your Name and ID NO clearly and neatly
 Write your answer on the provided answer sheet only and use only CAPITAL LETTERS
 Write your answer clearly and neatly, unreadable answer will be invalid.
 Try all questions
 Cheating and attempt to cheat is forbidden
ANSWER SHEET
Name ______________________________Id. No. __________________ Sec. _____ Sign.
__________
Program: Regular Extension Week End Year: 3rd
Part One: Multiple choices (25%)
1.________2.________3.________4.__________5._________6._______7._______8.______9._
10._______11._______12.______13._________14.________15.______16.______17._____18._
19._______20._______ 21. 22. 23. 24. 25.
Part Two: Matching (10%)
1 2. 3. 4. 5. 6. 7. 8. 9. 10.
part Three use the attached paper
No Parts Max. Achievable Point Achieved point (%) Remark
. (%)INSTRUCTOR ONLY
FOR
1 Multiple choice 25
2 Matching 10
3 Work out 10
Total 45

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Part I: Multiple choose
Instruction: Choose the correct answer and write your answer choice on space provided
1. The business enterprises that enter into a business combination
[A] Combined Enterprise B) Constituent Companies C) Combinor D) combinee
2. Reciprocal account of branch accounting system
[A] Cash account of Head office and branch office
[B] Merchandise inventory of Head office and branch office
[C] Investment at branch account of head office and HO account at branch office
[D] Fixed asset account of head office and branch office
3. The board of directors of the constituent companies generally workout the terms of the
business combination amicably and submit the proposal to stockholders of all constituent
companies for approval.
[A] Friendly takeover B) hostile takeover C) business combination D) ALL
4. Not- true
[A] Depreciation expense of fixed asset providing service to branch office is recognized at
branch office
[B] When fixed asset acquired by branch office : debited fixed asset account at branch
office and credited cash
[C] Transfer cash from branch office to head office : Investment at branch office
debited and cash credited
[D] All E) None
1. A branch transaction which doesn’t requires have a recording under head office accounting
record
[A] Sales transaction
[B] Expense transaction paid by head office on behalf of branch office
[C] Cash remittance by branch office
[D] Fixed asset purchase by branch office
2. Which one of the following is incorrect
[A] Cash transfer from Ho to branch office increase both reciprocal account
[B] Remittance of cash from branch office to Ho increased both reciprocal account
[C] Payment of a branch expense by HO increase both reciprocal account
[D] Branch expense recognized at a HO as well as branch office
3. Not true
[A] Fixed asset account recorded only at HO
[B] Depreciation expense recorded both at HO and Branch .office
[C] Reciprocal accounts balance Should not show any time an equal balance
[D] B&C
4. It is a Branch office account only
[A] Investment of BO account [C] Home office account
[B] Fixed asset [D] A/R
5. Not an objective of business combination
[A] Cost saving through elimination of duplicate facilities and staff.

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 [B] Quick entry for new and existing products into domestic or foreign markets.
[C] Economics of scale allowing greater efficiency and negotiating power.
[D] The ability to access financing at more attractive rates
[E] all
6. combinations take place between companies involved in the same industry but at different
levels
[A] vertical B) horizontal C) Conglomerate D) none
7. The absorption of one or more former legal entities by another company that continues as the
sole surviving legal entity
[A] statutory Marge C) statutory consolidation
[B] Acquisition of common stock D) Acquisition of asset
8. A new corporation is formed to issue its common stock to the stockholders of the constituent
companies in exchange for all their outstanding voting common stock of those companies
[A] statutory Marge C) statutory consolidation
[B] Acquisition of common stock D) Acquisition of asset
9. The stockholders of one combining company assume a dominant, controlling interest in the
combined company while the stockholders of the other combining
company do not participate in controlling the combined company. Requires a method for
recording
[A] Purchased method B) pooling of interest method C) consolidation D)all
10. Which of the following is correct about the receipt of shipment by the consignee?
[A] The consignee debit inventory and credits Consignment In ledger account
[B] The consignee debit inventory and credits Consignment Out ledger account
[C] The consignor recorded by a memorandum notation in the Consignment In ledger
account
[D] None of the above
11. The choice of accounting method by a consignor depends on whether:
[A] Consignment gross profits are measured separately from those on regular sales?
[B] The consignee rendered account sales or not?
[C] Sales on consignment are combined with regular sales?
[D] All except B E. None of the above
12. When the consignee received goods under consignment basis,
[A] It is recorded in a liability account until the goods are sold by the consignee
[B] It is neither include it in inventories nor record trade accounts payable or other liability
account.
[C] The shipment of merchandise on consignment may be referred to by the consignee as a
consignment out.
[D] All of the above
[E] None of the above
13. The report rendered by the consignee is called
[A] A balance sheet [D] All of the above
[B] A sales journal [E] None of the above
[C] An account sales

14. The person who forwards the goods for sale is

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 [A] consignor [C] consignment
[B] consignee [D] All
15. Not true
[A] under Consignment ,Ownership remains within consignor
[B] Under sale, ownership passed to the buyer
[C] Consignee hold the goods at the risk of consignor
[D] none
16. A statement showing sales, expenses incurred, commission charged and remittance made
with the resultant balance due by him.
[A] Account sale [C] Commission
[B] Advance on consignment [D] all
17. It is prepared to ascertain the balance of inventory shipped to consignee

[A] Consignment Account [C] Goods sent on Consignment Account

[B] Consignee’s Account [D] none
18. It is prepared to show the balance due to or from consignee at a particular date
[A] Consignment Account [C] Goods sent on Consignment Account
[B] Consignee’s Account [D] none

19. True about consignment account

[A] Debit side shows goods sent on consignment expenses incurred by consignor and
consignee consignees commission, bad debts
[B] Credit side shows total sales (cash and credit), good returned, and unsold stock
[C] The difference between the debit and credit totals of Consignment Account is regarded as
profit or loss.
[D] All
20. True under accounting method of purchase method for business combination
[A] Goodwill can recognized
[B] Retain earning account can maintain when allocate total cost of liquidation by combinor
[C] Direct out of pocket cost recognized as an expense
[D] All
21. Not true
[A] Goodwill create when net asset value greater than cost of business combination
[B] Bargain create when net asset value less than cost of business combination
[C] Negative goodwill create when net asset value greater than cost of business combination
[D] All
22. A means of combine business by hostile takeover through searching of candidate
[A] Pac man b) White Knight C) Scorched earth d) poison pill
23. which one is true for a merge of business made through the method of pooling of interest of
combinee a net asset value a total of $ 10,365,000 by paid 175,000 share $ 10 ,market value
of $60 , and out of pocket cost for Account, finder and legal fee $ 65,000 and SEC cost br
135,000.
[A] Goodwill $ 200,000 C) Goodwill $335,000
[B] Bargain $ 200,000 D) Goodwill $0.00
24. For question number 13 above what is the amount of paid cost for merge a combinee asset
by combinor

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 [A] $ 10,565,000.00 C) $10,500,000.00
[B] $10,700,000 .00 D) $10,365,000.00
25. Receivable and payable account of combine identified asset allocated cost by
[A] Present Value B) appraisal value C) Replacement cost D) fair value

Part II: Matching

“A”
1. Good will .
2. Negative good will
3. Constitute company
4. Conglomerate
5. Deferred gross profit
6. Replacement cost
7. Installment collection
8. Expense
9. Combination made by carrying balance of constitute company ledger
10. Combination made through the senses of sales or purchase transaction

“B”
[A] Identified asset cost less than combination cost
[B] Combinee
[C] combinations involve companies in totally unrelated industries
[D] Identified asset cost greater than combination cost
[E] Liability
[F] Raw Material cost
[G] Down payment
[H] Indirect out pocket cost paid by combinor during combination made under pooling interest
method
[I] Purchase method
[J] Pooling of interest method
Part III: workout
1. XY company merge its business with ABC corporation through purchase
method . The balance sheet of combinee has shown the following . ABC
corporation issue 5,000share @ $500.00,market value $1000.00
XY Company
Balance sheet statement
December 31, 19 x 5 Direct out of pocket cost
Carrying Current fair For 195,000 00
amount value Account
Current Asset 2,210,000.0 2,500,000 fee, Legal
0 fee,
Fixed asset 1,565,000.0 1,750,000 Finder fee
0
Total Asset 3,775,000.0

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 0
Liability and stock holder
equity
Current liability 245,000 245,000
Common stock 1,500,000
Paid in capital in excess of par 1,030,000
Retain earning 1,000,000
Total liability and 3,775,000 -0-
shareholder equity

Requires :

1. Record merger with XY company as a purchase By ABC

2. Record payment of out-of-pocket costs incurred in merger with XY Company
by ABC
3. Allocate total cost of liquidated XY Company by ABC

 (marked from 10%)

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