Unity University College School of Distance and Continuing Education Worksheet For Advanced Accounting I (Acct 401)

Name________________________
Id. No_______________________
P.O.Box______________________
City (Town)___________________
Region (Zone)_________________
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 material.
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.
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.
Cost method Equity method
a Decrease No effect
b Decrease Decrease
c No effect Decrease
d No effect No effect
3. How are dividends paid to minority share holders reported in the consolidated
statements?
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
retained earnings.
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
b) goodwill
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?
Pooling of Purchase
Interests Method
a Excluded Excluded
b Excluded Included
c Included Included
d Included 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 month-
end.
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 $12,000
Acquired from home office (at billing) 20,000
Total 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
follows:
Common stock $70,000
Capital contributed in excess of
stated value 7,000
Retained earnings 50,000
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?

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Name________________________

UNITY UNIVERSITY COLLEGE

Worksheet for Advanced Accounting I (Acct 401)

Part II. Exercises

C. Parda Corporation issued voting common stock with $90,000 stated

The stockholder’s equity section of SOO’s

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