SOLUTION PRACTICE EXAM I ADVANCED ACCOUNTING
SPRING 2026 QUESTIONS AND CORRECT ANSWERS
MULTIPLE CHOICE
1. Which of the following is NOT a benefit of horizontal integration?
a. economies of scale.
b. reduction in competition.
c. access to new markets.
X d. government regulatory issues.
2. Separate parent company financial statements and consolidated financial statement
amounts would not be the same for
X a. investments in consolidated subsidiaries.
The Investment in S account is eliminated on the Consolidated balance sheet
but not in the Parents separate balance sheet.
b. investments in unconsolidated equity affiliates.
c. capital stock.
d. retained earnings.
3. If Griffon Inc. has a 30% ownership in Duck Corporation, Griffon should use the
equity method under which of the following circumstances:
a. Surrender of significant stockholder rights by agreement between Griffon and
Duck.
b. Lack of membership on Duck’s board of directors.
X c. Inter-company sales of inventory between Griffon and Duck.
d. Temporary ownership by Griffon.
4. According to ASC Topic 805-20-55, which one of the following intangible assets
would not be recognized separately from goodwill under the legal-contractual
criterion?
a. Patented technology.
X b. Customer lists. Customer Lists are recognized under the
Separability criterion.
c. Franchise agreements.
d. Noncompetition agreements.
, 5. Muttonbird Inc. has 90% ownership of Beach Co., but would not consolidate Beach
under ASC Topic 805-10-15-10 if:
a. Beach is in a regulated industry.
b. Muttonbird uses the equity method for Beach.
X c. Muttonbird expects to sell Beach within a year.
d. Beach is in a foreign country and records its books in a foreign currency.
6. The account entitled "Unamortized Excess" appears in which of the following sections
of the consolidated financial statements:
a. Assets.
b. Expenses.
c. Stockholder's Equity.
X d. None of the above. The account ―Unamortized Excess is eliminated on
the work-papers.
7. On January 2, 2019, Weylan Corporation acquired a 30% interest in Artwork
Corporation at a cost of $15,000 in excess of Artwork's book value. This excess is
assigned to a patent with a 10-year remaining life. In 2019, the excess will:
X a. Decrease Weylan's earnings, but not affect the earnings of Artwork.
In accounting for Artwork under the equity method, Weylan makes the
following income-decreasing entry on its books to record patent amortization:
Income from Artwork 1,500
Investment in Artwork 1,500
(15,000 ÷ 10 = 1,500)
b. Increase Weylan's earnings, but not affect the earnings of Artwork.
c. Decrease the earnings of both Weylan and Artwork.
d. Appear on Weylan's balance sheet as an intangible asset.
8. Under ASC Topic 805-30-35, contingent consideration based on future performance
targets that are determinable at the date of acquisition should be:
a. treated as an adjustment to retained earnings when the future performance target
is realized.
X b. treated as part of the consideration transferred at fair value and included in the
purchase price.
c. treated as an increase to goodwill when the future performance target is realized.
d. recorded in the footnotes to the annual report only.
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SPRING 2026 QUESTIONS AND CORRECT ANSWERS
MULTIPLE CHOICE
1. Which of the following is NOT a benefit of horizontal integration?
a. economies of scale.
b. reduction in competition.
c. access to new markets.
X d. government regulatory issues.
2. Separate parent company financial statements and consolidated financial statement
amounts would not be the same for
X a. investments in consolidated subsidiaries.
The Investment in S account is eliminated on the Consolidated balance sheet
but not in the Parents separate balance sheet.
b. investments in unconsolidated equity affiliates.
c. capital stock.
d. retained earnings.
3. If Griffon Inc. has a 30% ownership in Duck Corporation, Griffon should use the
equity method under which of the following circumstances:
a. Surrender of significant stockholder rights by agreement between Griffon and
Duck.
b. Lack of membership on Duck’s board of directors.
X c. Inter-company sales of inventory between Griffon and Duck.
d. Temporary ownership by Griffon.
4. According to ASC Topic 805-20-55, which one of the following intangible assets
would not be recognized separately from goodwill under the legal-contractual
criterion?
a. Patented technology.
X b. Customer lists. Customer Lists are recognized under the
Separability criterion.
c. Franchise agreements.
d. Noncompetition agreements.
, 5. Muttonbird Inc. has 90% ownership of Beach Co., but would not consolidate Beach
under ASC Topic 805-10-15-10 if:
a. Beach is in a regulated industry.
b. Muttonbird uses the equity method for Beach.
X c. Muttonbird expects to sell Beach within a year.
d. Beach is in a foreign country and records its books in a foreign currency.
6. The account entitled "Unamortized Excess" appears in which of the following sections
of the consolidated financial statements:
a. Assets.
b. Expenses.
c. Stockholder's Equity.
X d. None of the above. The account ―Unamortized Excess is eliminated on
the work-papers.
7. On January 2, 2019, Weylan Corporation acquired a 30% interest in Artwork
Corporation at a cost of $15,000 in excess of Artwork's book value. This excess is
assigned to a patent with a 10-year remaining life. In 2019, the excess will:
X a. Decrease Weylan's earnings, but not affect the earnings of Artwork.
In accounting for Artwork under the equity method, Weylan makes the
following income-decreasing entry on its books to record patent amortization:
Income from Artwork 1,500
Investment in Artwork 1,500
(15,000 ÷ 10 = 1,500)
b. Increase Weylan's earnings, but not affect the earnings of Artwork.
c. Decrease the earnings of both Weylan and Artwork.
d. Appear on Weylan's balance sheet as an intangible asset.
8. Under ASC Topic 805-30-35, contingent consideration based on future performance
targets that are determinable at the date of acquisition should be:
a. treated as an adjustment to retained earnings when the future performance target
is realized.
X b. treated as part of the consideration transferred at fair value and included in the
purchase price.
c. treated as an increase to goodwill when the future performance target is realized.
d. recorded in the footnotes to the annual report only.
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