Advanced Accounting Multiple Choice Questions and Answers PDF: Tips and Techniques for Solving them
Advanced Accounting Multiple Choice Questions and Answers PDF
Introduction
Advanced accounting is a branch of accounting that deals with complex topics such as consolidated financial statements, accounting for foreign currency transactions and hedging activities, accounting for partnerships, and other special topics. Advanced accounting requires a thorough understanding of accounting principles, standards, regulations, and practices, as well as analytical skills, problem-solving abilities, and critical thinking.
advanced accounting multiple choice questions and answers pdf
One of the best ways to learn advanced accounting is to practice multiple choice questions that test your knowledge and application of the concepts and techniques covered in the course. Multiple choice questions are designed to assess your comprehension, analysis, evaluation, and synthesis of the material. They also help you to prepare for exams, quizzes, assignments, and professional certification tests.
However, finding and downloading advanced accounting multiple choice questions and answers PDF files can be challenging. There are many sources online that offer such files, but not all of them are reliable, accurate, updated, or relevant. Some of them may contain errors, outdated information, incomplete explanations, or inappropriate questions. Therefore, you need to be careful and selective when choosing the sources that you use for your study.
In this article, we will provide you with some tips on how to find and download advanced accounting multiple choice questions and answers PDF files that are suitable for your needs. We will also give you some examples of multiple choice questions and answers on three important topics in advanced accounting: consolidated financial statements, accounting for foreign currency transactions and hedging activities, and accounting for partnerships. By reading this article, you will be able to enhance your knowledge and skills in advanced accounting.
Main body
Section 1: Consolidated financial statements
Definition and purpose of consolidated financial statements
Consolidated financial statements are financial statements that present the financial position, performance, and cash flows of a parent company and its subsidiaries as if they were a single economic entity. A parent company is a company that has control over one or more subsidiaries. A subsidiary is a company that is controlled by another company (the parent).
The purpose of consolidated financial statements is to provide a comprehensive view of the financial situation and performance of the group as a whole, rather than the individual entities. Consolidated financial statements eliminate the effects of intercompany transactions, such as sales, purchases, loans, dividends, etc., that occur between the parent and its subsidiaries. Consolidated financial statements also reflect the minority interest (the portion of equity that belongs to the non-controlling shareholders) in the net assets and net income of the subsidiaries.
Accounting principles and methods for preparing consolidated financial statements
The accounting principles and methods for preparing consolidated financial statements vary depending on the accounting standards and regulations that apply in different jurisdictions. However, some of the common principles and methods are:
The parent company uses the acquisition method to account for its investments in subsidiaries. The acquisition method involves measuring the fair value of the consideration paid by the parent to acquire the subsidiary, the fair value of the identifiable assets and liabilities of the subsidiary, and the goodwill or bargain purchase gain arising from the difference between the two.
The parent company consolidates the financial statements of its subsidiaries by adding together the line items of assets, liabilities, revenues, expenses, and cash flows of the parent and its subsidiaries. The parent company also adjusts the consolidated financial statements for any intercompany transactions and balances, such as intercompany sales, purchases, loans, dividends, etc.
The parent company allocates the net income and net assets of the subsidiaries between the controlling interest (the portion that belongs to the parent) and the minority interest (the portion that belongs to the non-controlling shareholders). The parent company reports the minority interest as a separate component of equity in the consolidated balance sheet and as a separate line item in the consolidated income statement.
Sample multiple choice questions and answers on consolidated financial statements
Here are some sample multiple choice questions and answers on consolidated financial statements. The questions are based on the web search results from ACCA Global and Academia.edu. The answers are highlighted in bold.
Which of the following statements are TRUE of consolidated financial statements?
The consolidated financial statements present the financial position and performance of the parent company only.
The consolidated financial statements eliminate the effects of intercompany transactions and balances.
The consolidated financial statements include the financial statements of all subsidiaries, regardless of the degree of control.
The consolidated financial statements reflect the minority interest in the net assets and net income of the subsidiaries.
A) 1 and 2 only
B) 2 and 4 only
C) 3 and 4 only
D) 1, 2, 3, and 4
B) 2 and 4 only
Which of the following is an example of an intercompany transaction that requires adjustment in preparing consolidated financial statements?
A sale of inventory from a subsidiary to a parent at a profit.
A purchase of land from a parent to a subsidiary at fair value.
A dividend payment from a subsidiary to a parent.
A loan from a parent to a subsidiary at market interest rate.
A) 1 only
B) 1 and 3 only
C) 2 and 4 only
D) All of them
B) 1 and 3 only
Which of the following formulas is used to calculate goodwill or bargain purchase gain in a business combination under the acquisition method?
Fair value of consideration paid by parent + Fair value of identifiable net assets of subsidiary - Fair value of parent's pre-existing interest in subsidiary.
Fair value of consideration paid by parent + Fair value of parent's pre-existing interest in subsidiary - Fair value of identifiable net assets of subsidiary.
Fair value of identifiable net assets of subsidiary + Fair value of parent's pre-existing interest in subsidiary - Fair value of consideration paid by parent.
Fair value of identifiable net assets of subsidiary + Fair value of consideration paid by parent - Fair value of parent's pre-existing interest in subsidiary.
A) 1 only
B) 2 only
C) 3 only
D) 4 only
B) 2 only
Section 2: Accounting for foreign currency transactions and hedging activities
Definition and types of foreign currency transactions and hedging activities
Accounting principles and methods for accounting for foreign currency transactions and hedging activities
The accounting principles and methods for accounting for foreign currency transactions and hedging activities depend on the accounting standards and regulations that apply in different jurisdictions. However, some of the common principles and methods are:
An entity must record foreign currency transactions using the exchange rate at the date of the transaction. The exchange rate is the ratio of exchange for two currencies.
An entity must remeasure monetary items denominated in foreign currencies using the exchange rate at the balance sheet date. Monetary items are assets and liabilities that are fixed or determinable in amounts of cash or cash equivalents. Examples of monetary items are cash, receivables, payables, loans, etc.
An entity must recognize any exchange differences arising from the settlement or remeasurement of foreign currency transactions in profit or loss, except when they qualify for hedge accounting.
An entity can apply hedge accounting to reduce the volatility of exchange differences in profit or loss. Hedge accounting is a method of accounting that recognizes the offsetting effects of changes in the fair value or cash flows of a hedged item and a hedging instrument. A hedged item is an asset, liability, firm commitment, or forecasted transaction that exposes an entity to foreign currency risk. A hedging instrument is a derivative or a non-derivative financial instrument that hedges the foreign currency risk of a hedged item.
An entity must follow specific criteria and requirements to apply hedge accounting, such as identifying and documenting the hedging relationship, measuring its effectiveness, and classifying it as a fair value hedge, a cash flow hedge, or a hedge of a net investment in a foreign operation.
Sample multiple choice questions and answers on accounting for foreign currency transactions and hedging activities
Here are some sample multiple choice questions and answers on accounting for foreign currency transactions and hedging activities. The questions are based on the web search results from PwC Viewpoint and Corporate Finance Institute. The answers are highlighted in bold.
Which of the following is an example of a non-monetary item denominated in a foreign currency?
A receivable from a foreign customer.
A payable to a foreign supplier.
A loan from a foreign bank.
A property held for sale in a foreign country.
A) A receivable from a foreign customer.
B) A payable to a foreign supplier.
C) A loan from a foreign bank.
D) A property held for sale in a foreign country.
D) A property held for sale in a foreign country.
Which of the following statements is TRUE about hedge accounting?
Hedge accounting eliminates all exchange differences arising from foreign currency exposures.
Hedge accounting requires an entity to use derivatives as hedging instruments.
Hedge accounting recognizes the offsetting effects of changes in the fair value or cash flows of a hedged item and a hedging instrument.
Hedge accounting applies automatically to all foreign currency exposures.
A) Hedge accounting eliminates all exchange differences arising from foreign currency exposures.
B) Hedge accounting requires an entity to use derivatives as hedging instruments.
C) Hedge accounting recognizes the offsetting effects of changes in the fair value or cash flows of a hedged item and a hedging instrument.
D) Hedge accounting applies automatically to all foreign currency exposures.
C) Hedge accounting recognizes the offsetting effects of changes in the fair value or cash flows of a hedged item and a hedging instrument.
Which of the following is an example of a hedge of a net investment in a foreign operation?
An entity enters into a forward contract to sell its expected dividend income from a foreign subsidiary.
An entity borrows in the same currency as the functional currency of a foreign subsidiary.
An entity purchases a call option on the foreign currency of a foreign subsidiary.
An entity sells a put option on the foreign currency of a foreign subsidiary.
A) An entity enters into a forward contract to sell its expected dividend income from a foreign subsidiary.
B) An entity borrows in the same currency as the functional currency of a foreign subsidiary.
C) An entity purchases a call option on the foreign currency of a foreign subsidiary.
D) An entity sells a put option on the foreign currency of a foreign subsidiary.
B) An entity borrows in the same currency as the functional currency of a foreign subsidiary.
Section 3: Accounting for partnerships
Definition and characteristics of partnerships
A partnership is a business arrangement in which two or more parties agree to share the profits and losses of a common enterprise. A partnership is not a separate legal entity, but rather an association of individuals or entities that act as co-owners of the business. The partners contribute capital, assets, skills, or services to the partnership and have unlimited liability for the debts and obligations of the partnership.
Some of the characteristics of partnerships are:
The partnership agreement is a contract that defines the rights and obligations of the partners, such as their profit-sharing ratio, capital contributions, management responsibilities, admission and withdrawal procedures, etc.
The partnership income or loss is allocated to the partners according to their profit-sharing ratio, which may or may not be equal to their capital contributions. The partners report their share of partnership income or loss on their individual tax returns.
The partnership capital accounts reflect the partners' equity interest in the partnership. The capital accounts are increased by capital contributions, allocated income, and other comprehensive income, and decreased by capital withdrawals, allocated losses, and other comprehensive losses.
The partnership has no legal continuity, meaning that any change in the composition of the partners (such as admission, withdrawal, death, or bankruptcy) may result in the dissolution or reconstitution of the partnership, unless otherwise stated in the partnership agreement.
Accounting principles and methods for accounting for partnerships
The accounting principles and methods for accounting for partnerships vary depending on the accounting standards and regulations that apply in different jurisdictions. However, some of the common principles and methods are:
The partnership prepares financial statements that present the financial position, performance, and cash flows of the partnership as a whole, rather than the individual partners. The financial statements include a balance sheet, an income statement, a statement of changes in partners' equity, and a statement of cash flows.
The partnership uses the accrual basis of accounting to recognize revenues and expenses when they are earned or incurred, regardless of when cash is received or paid.
The partnership follows the same accounting policies and methods as other businesses for measuring and reporting its assets, liabilities, revenues, expenses, and cash flows, except for some specific issues related to partnerships, such as accounting for partner admissions and withdrawals, goodwill or bonus arising from partner transactions, and partner loans and advances.
The partnership maintains separate accounts for each partner's capital, drawing (or current), and loan balances. The capital accounts reflect the partners' permanent equity interest in the partnership. The drawing (or current) accounts reflect the partners' temporary withdrawals or advances from or to the partnership. The loan accounts reflect the partners' long-term borrowings from or lendings to the partnership.
Sample multiple choice questions and answers on accounting for partnerships
the web search results from ACCA Global and BYJU'S. The answers are highlighted in bold.
Which of the following is an example of a partnership agreement?
A contract that defines the rights and obligations of the partners, such as their profit-sharing ratio, capital contributions, management responsibilities, admission and withdrawal procedures, etc.
A document that records the financial position, performance, and cash flows of the partnership as a whole, rather than the individual partners.
A statement that shows the changes in the partners' capital accounts during a period.
A report that summarizes the activities and achievements of the partnership during a year.
A) A contract that defines the rights and obligations of the partners, such as their profit-sharing ratio, capital contributions, management responsibilities, admission and withdrawal procedures, etc.
B) A document that records the financial position, performance, and cash flows of the partnership as a whole, rather than the individual partners.
C) A statement that shows the changes in the partners' capital accounts during a period.
D) A report that summarizes the activities and achievements of the partnership during a year.
A) A contract that defines the rights and obligations of the partners, such as their profit-sharing ratio, capital contributions, management responsibilities, admission and withdrawal procedures, etc.
Which of the following is an example of a drawing (or current) account?
An account that reflects the partners' permanent equity interest in the partnership.
An account that reflects the partners' temporary withdrawals or advances from or to the partnership.
An account that reflects the partners' long-term borrowings from or lendings to the partnership.
An account that reflects the partners' share of partnership income or loss.
A) An account that reflects the partners' permanent equity interest in the partnership.
B) An account that reflects the partners' temporary withdrawals or advances from or to the partnership.
C) An account that reflects the partners' long-term borrowings from or lendings to the partnership.
D) An account that reflects the partners' share of partnership income or loss.
B) An account that reflects the partners' temporary withdrawals or advances from or to the partnership.
Which of the following is an example of goodwill arising from partner transactions?
The excess of fair value over book value of net assets when a new partner is admitted into an existing partnership.
The excess of book value over fair value of net assets when an existing partner withdraws from a partnership.
The excess of fair value over book value of net assets when an existing partner sells his or her interest to another partner.
All of them
A) The excess of fair value over book value of net assets when a new partner is admitted into an existing partnership.
B) The excess of book value over fair value of net assets when an existing partner withdraws from a partnership.
C) The excess of fair value over book value of net assets when an existing partner sells his or her interest to another par