Parent Company owns stock in Subsidiary Company.

The stock is traded on the NYSE and the London

Stock Exchange. The stock price information is noted below:

C is correct. The fair market value, when there is no principal market, uses the most advantageous
account - which includes transaction cost. The quoted stock price is still used to determine the fair value.

Gary, a consultant, keeps accounting records on a cash basis. In year 2, Gary collected $300,000 in fees
from clients. At 12/31/Year 1, Gary had an accounts receivable of $50,000. At 12/31/Year 2, Gary had
accounts receivable of $70,000, and unearned revenue of $6,000. If Gary used accrual basis, what would
service revenue be for year 2?

D is correct.

Cash Collected - $300,000

Beginning Balance Accounts Receivable - ($50,000)

Ending Balance Accounts Receivable - $70,000

Unearned Revenue - ($6,000)

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Service Revenue - $314,000

True or False: GAAP and Tax use the same rules for contributions partners make when forming a
partnership.

False is correct.

GAAP Rule uses the fair value of assets contributed to determine amount contributed to partnership

Tax Rule uses net book value of assets contributed to partnership

XYZ Corp. uses the aging of receivables method when calculating the estimated uncollectable amount.
Use the below facts to determine the required amount in allowance account for accounts receivables.

Classifications by Due Date Balance in Category Estimated % Uncollectible Estimated Uncollectible Amount

Current $20,000 1% $220

31-60 Days $7,365 3% $221

61-90 Days $5,250 10% $525

90+ Days $1,375 20% $275

  $33,990 34% $1,221

C is correct. Multiply the balance in category by the estimated % uncollectible. This will give us the
estimate uncollectible amount.

ABC Corp's beginning inventory at January 1, Year 1 was understated by $32,000 and the ending
inventory was overstated by $57,000. As a result, ABC Corp's cost of goods sold for year 3 was:

A is correct.

The 32,000 understatement of beginning inventory causes and understatement of cost of goods
available for sale which leads to a 32,000 understatement of cost of goods sold.

The 57,000 overstatement of ending inventory creates a 57,000 understatement of cost of goods sold.
This cost of goods sold, in total is understated by 89,000

Salvage Value, also known as residual value, is:

D is correct. Salvage value, or residual value is an estimate used to determine what an asset will be
worth the end of its useful life. It is used to calculate depreciation

On September 1, Year 3, Bobcat Corp. sold land to Crystal Corp for $300,000. The initial cost of the land
to Bobcat Corp was $275,000. Crystal Corp and Bobcat Corp are both subsidiaries of Courtside Corp. On
the consolidated balance sheet, what would be the value of the land?

C is correct.

Since this would be an intercompany transaction, when the consolidated financial statements are
produced, the gain that Bobcat Corp would record would be eliminated and the land would be written
down to its original value (the amount of the gain).

Calculate the amount of depreciation in year 3 of the assets useful life assuming the following facts.
Your answer of b. 2,000 was correct.

The sum of years digits is calculated based on the useful life (1+2+3+4) = 10

The depreciable base is Cost of asset - salvage value (11,000-1,000) = 10,000

Depreciation Schedule:

1st year (4/10) x 10,000 = 4,000

2nd year (3/10) x 10,000 = 3,000

3rd year (2/10) x 10,000 = 2,000

4th year (1/10) x 10,000 = 1,000

An impairment loss is calculated for an asset held for use by the amount by which:

a. The carrying amount exceeds the fair value of the asset

If an asset is held for use the calculation for impairment loss is

Fair Value

(Net Carry Value)

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Impairment Loss (must be negative amount)

Company A owns 15 % of Company B. Company A's CEO is on the board of directors for Company B.
What type of accounting method should be used for this investment?

Your answer of a. Equity Method was correct.

A is correct. The equity method is used when a company owns 20%-50% of another company, but in this
instance, the CEO of Company A is on the board of directors for Company B.
This would exercise significant influence that Company A has over Company B and the equity method
would be used to account for the investment.