Free test bank for advanced accounting 11th edition

Free Test Bank for Advanced Accounting 11th Edition
by Fischer
Multiple Choice Questions
Company B acquired the net assets of Company S in exchange
for cash. The acquisition price exceeds the fair value of the net
assets acquired. How should Company B determine the amounts
to be reported for the plant and equipment, and for long-term debt
of the acquired Company S? Plant and Equipment Long-Term
Debt
1.
2.
3.
4.

Fair value S's carrying amount
Fair value Fair value
S's carrying amount Fair value
S's carrying amount S's carrying amount

Which of the following income factors should not be considered in
expected future income when estimating the value of goodwill?
1.
2.
3.
4.

sales for the period
income tax expense
extraordinary items
cost of goods sold

Some advantages of obtaining control by acquiring a controlling
interest in stock include all but:
1.
2.
3.

Negotiations are made directly with the acquiree’s management.
The legal liability of each corporation is limited to its own assets.
The cost may be lower since only a controlling interest in the assets, not the
total assets, is acquired.
4. Tax advantages may result from preservation of the legal entities.

Cozzi Company is being purchased and has the following balance
sheet as of the purchase date: Current assets $200,000 Liabilities
$ 90,000; Fixed assets 180,000 Equity 290,000; Total $380,000
Total $380,000; The price paid for Cozzi's net assets is $500,000.
The fixed assets have a fair value of $220,000, and the liabilities
have a fair value of $110,000; The amount of goodwill to be
recorded in the purchase is:
1.
2.
3.

$0
$150,000
$170,000


4.

$190,000

A(n) ________________ occurs when the management of the
target company purchases a controlling interest in that company
and the company incurs a significant amount of debt as a result.
1.
2.
3.
4.

greenmail
statutory merger
poison pill
leveraged buyout

Orbit Inc. purchased Planet Co. on January 1, 20X3. At that time
an existing patent having a 5-year estimated life was assigned a
provisional value of $10,000 and goodwill was assigned a value
of $100,000. By the end of fiscal year 20X3, better information
was available that indicated the fair value of the patent was
$20,000. How should intangible assets be reported at the
beginning of fiscal year 20X4?
1.
2.
3.
4.

Goodwill $100,000 Patent $10,000
Goodwill $90,000 Patent $16,000
Goodwill $84,000 Patent $16,000

Goodwill $90,000 Patent $20,000

Orbit Inc. purchased Planet Co. on January 1, 20X3. At that time
an existing patent having a 5-year life was not recorded as a
separately identified intangible asset. At the end of fiscal year
20X4, it is determined the patent is valued at $20,000, and
goodwill has a book value of $100,000. How should intangible
assets be reported at the beginning of fiscal year 20X5?
1.
2.
3.
4.

Goodwill $100,000 Patent $0
Goodwill $100,000 Patent $20,000
Goodwill $80,000 Patent $20,000
Goodwill $80,000 Patent $16,000

One large Midwestern bank’s acquisition of another midwestern
bank would be an example of a:
1.
2.
3.
4.

market extension merger.
conglomerate merger.
product extension merger.
horizontal merger.

An economic advantage of a business combination includes
1.
2.

Utilizing duplicative assets.
Creating separate management teams.


3.
4.

Shared fixed costs.
Horizontally combining levels within the marketing chain.

In performing the impairment test for goodwill, the company had
the following 20X6 and 20X7 information available. 20X6 20X7
Fair value of the reporting unit $350,000 $400,000; Net book
value (including $50,000 goodwill) $360,000 $380,000. Assume
that the carrying value of the identifiable assets are a reasonable
approximation of their fair values. Based upon this information
what are the 20X6 and 20X7 adjustment to goodwill, if any? 20X6
;20X7
1.
2.
3.
4.

no adjustment $20,000 decrease
$10,000 increase $20,000 decrease
$10,000 decrease $20,000 decrease

$10,000 decrease no adjustment

Jones company acquired Jackson Company for $2,000,000 cash.
At that time, the fair value of recorded assets and liabilities was
$1,500,000 and $250,000, respectively. Jackson also had
unrecorded copyrights valued at $150,000 and its direct costs
related to the acquisition were $50,000. What was the amount of
the goodwill related to the acquisition?
1.
2.
3.
4.

$600,000
$650,000
$550,000
$700,000

Crystal Co. purchased all of the common stock of Sill Corp. on
January 1 of the current year. Five years prior to the acquisition,
Sill Corp. had issued 30-year bonds bearing an interest rate of
8%. At the time of the acquisition, the prevailing interest rate for
similar bonds was 5%. These bonds should be included in the
consolidated balance sheet at
1.
2.

face value.
at a value higher than Sill’s recorded value due to the change in interest
rates.

3. at a value lower than Sill’s recorded value due to the change in interest
rates.
4. at Sill’s recorded value.

Polk issues common stock to acquire all the assets of the Sam
Company on January 1, 20X5. There is a contingent share
agreement, which states that if the income of the Sam Division
exceeds a certain level during 20X5 and 20X6, additional shares


will be issued on January 1, 20X7. The impact of issuing the
additional shares is to
1.
2.

increase the price assigned to fixed assets.
have no effect on asset values, but to reassign the amounts assigned to
equity accounts.
3. reduce retained earnings.
4. record additional goodwill.

A tax advantage of business combination can occur when the
existing owner of a company sells out and receives:
1.
2.
3.
4.

cash to defer the taxable gain as a "tax-free reorganization."
stock to defer the taxable gain as a "tax-free reorganization."

cash to create a taxable gain.
stock to create a taxable gain.

ACME Co. paid $110,000 for the net assets of Comb Corp. At the
time of the acquisition the following information was available
related to Comb's balance sheet: Book Value Fair Value; Current
Assets $50,000 $ 50,000; Building 80,000 100,000; Equipment
40,000 50,000; Liabilities 30,000 30,000. What is the amount of
gain or loss on disposal of business should Comb Corp.
recognize?
1.
2.
3.
4.

Gain of $60,000
Gain of $60,000
Loss of $30,000
Loss of $60,000

A contingent liability of an acquiree
1.
2.
3.

refers to future consideration due that is part of the acquisition agreement.
is recorded when it is probable that future events will confirm its existence.
may be recorded beyond the measurement period under certain
circumstances.
4. should be recorded even if the amount cannot be reasonably estimated.

A large nation-wide bank’s acquisition of a major investment
advisory firm would be an example of a:
1.
2.
3.
4.

market extension merger.
conglomerate merger.
product extension merger.
horizontal merger.

While performing a goodwill impairment test, the company had
the following information: Estimated implied fair value of reporting
unit $420,000; Fair value of net assets on date of measurement


(without goodwill) $400,000; Existing net book value of reporting
unit (without goodwill) $380,000; Book value of goodwill $ 60,000.
Based upon this information the proper conclusion is:
1.
2.
3.
4.

The company should recognize a goodwill impairment loss of $20,000.
Goodwill is not impaired.
The company should recognize a goodwill impairment loss of $40,000.
The company should recognize a goodwill impairment loss of $60,000.

Jones company acquired Jackson Company for $2,000,000 cash.
At that time, the fair value of recorded assets and liabilities was
$1,500,000 and $250,000, respectively. If Jackson meets
specified sales targets, Jones is required to pay an additional
$200,000 in cash per the acquisition agreement. Jones estimates
the probability of this to be 50%. The direct costs related to the
acquisition were $50,000. What was the amount of the goodwill
related to the acquisition?
1.
2.
3.
4.

$900,000
$950,000
$850,000
$750,000

Which of the following costs of a business combination can be
deducted from the value assigned to paid-in capital in excess of
par?
1.
2.
3.

Direct and indirect acquisition costs.
Direct acquisition costs.
Direct acquisition costs and stock issue costs if stock is issued as
consideration.

4. Stock issue costs if stock is issued as consideration.

Acquisition costs such as the fees of accountants and lawyers
that were necessary to negotiate and consummate the purchase
are
1.

recorded as a deferred asset and amortized over a period not to exceed 15
years
2. expensed if immaterial but capitalized and amortized if over 2% of the
acquisition price
3. expensed in the period of the purchase
4. included as part of the price paid for the company purchased

Jones company acquired Jackson Company for $2,000,000 cash.
At that time, the fair value of recorded assets and liabilities was
$1,500,000 and $250,000, respectively. Jackson also had in-


process research and development projects valued at $150,000
and its pension plan’s projected benefit obligation exceeded the
plan assets by $50,000. What was the amount of the goodwill
related to the acquisition?
1.
2.
3.
4.

$750,000
$50,000

$250,000
$650,000

Goodwill results when:
1.
2.

a controlling interest is acquired.
the price of the acquisition exceeds the sum of the fair values of the net
identifiable assets acquired.
3. the fair value of net assets acquired exceeds the acquisition price.
4. the price of the acquisition exceeds the book value of an acquired
company.

ACME Co. paid $110,000 for the net assets of Comb Corp. At the
time of the acquisition the following information was available
related to Comb's balance sheet: Book Value Fair Value: Current
Assets $50,000 $ 50,000; Building 80,000 100,000; Equipment
40,000 50,000; Liabilities 30,000 30,000. What is the amount of
goodwill or gain related to the acquisition?
1.
2.
3.
4.

Goodwill of $70,000
Goodwill of $30,000
A gain of $30,000
A gain of $70,000

When an acquisition of another company occurs, FASB requires
disclosing all of the following except:
1.
2.

amounts recorded for each major class of assets and liabilities.
information concerning contingent consideration including a description of
the arrangements and the range of outcomes.
3. results of operations for the current period if both companies had remained
separate.
4. A qualitative description of factors that make up the goodwill recognized.

A building materials company’s acquisition of a television station
would be an example of a:
1.
2.
3.
4.

market extension merger.
conglomerate merger.
product extension merger.
horizontal merger.


A controlling interest in a company implies that the parent
company
1.
2.
3.

4.

owns all of the subsidiary's stock.
has acquired a majority of the subsidiary's common stock.
has paid cash for a majority of the subsidiary's stock.
has transferred common stock for a majority of the subsidiary's outstanding
bonds and debentures.

ACME Co. paid $110,000 for the net assets of Comb Corp. At the
time of the acquisition the following information was available
related to Comb's balance sheet: Book Value Fair Value: Current
Assets $50,000 $ 50,000; Building 80,000 100,000; Equipment
40,000 50,000; Liabilities 30,000 30,000; What is the amount
recorded by ACME for the Building?
1.
2.
3.
4.

$110,000
$20,000
$80,000
$100,000

When determining the fair values of assets acquired in an
acquisition, the highest level of measurement per GAAP is
1.
2.
3.
4.

adjusted market value based on prices of similar assets.
unadjusted market values in an actively traded market.
based on discounted cash flows.
the entity’s best estimate of an exit or sale value.

Total Points: 0 correct out of 2
46 Test Bank for Fraud Examination 4th Edition
by Albrecht
Multiple Choice Questions
Which of the following is the most common type of occupational
fraud?
1.
2.
3.
4.

Financial statement fraud
Mail fraud
Investment fraud
Employee embezzlement


Which of the following statements is true?
1.
2.
3.
4.

Fraud usually results from unintentional errors.

Fraud is more violent and traumatic than robbery.
Fraud always involves deception, confidence and trickery.
Losses from fraud are less than losses from robbery.

Which of the following is NOT one of the major types of fraud
classification schemes?
1.
2.
3.
4.

Employee embezzlement
Government fraud
Investment scams
Customer fraud

The most common fraud committed on behalf of an organization
is:
1.
2.
3.
4.

Vendor fraud
Employee embezzlement
Fraudulent financial reporting
Customer fraud

Which among the following frauds is most likely to be a civil
charge?

1.
2.
3.
4.

Racketeering
Mail fraud
Defamation
Perjury

Employee embezzlement can be direct or indirect. Indirect fraud
occurs when:
1.
2.

an employee uses company assets to run his/her private business.
employees establish dummy companies and have their employers pay for
goods that are not actually delivered.
3. an employee receives a kickback from a vendor.
4. an employee steals company cash, inventory, tools, or other assets.

Which of the following is NOT a primary reason for increased size
and number of frauds?
1.
2.
3.
4.

The advent of computers
Complex accounting systems

Increased centralization of businesses
The Internet

Which of the following statements about criminal and civil cases is
correct?


1.

The purpose of a criminal case is "to right a wrong", the purpose of civil
case is to obtain a remedy.
2. Jury must have 12 people in civil cases but in criminal cases may consist of
fewer than 12 persons.
3. Both criminal cases and civil cases require a fraud perpetrator to go to jail.
4. Only one claim at a time in civil cases however in criminal cases, various
claims may be joined in one action.

The elements of fraud include all of the following EXCEPT:
1.
2.
3.
4.

a material point is misrepresented.
the misrepresentation is intentional.
the misrepresentation is known to the victim.
the victim must sustain damages.

Government agencies such as the FBI, FDIC, IRS, or various
health agencies publish fraud statistics from time to time. Which

of the following observations concerning such statistics is true?
1.
2.
3.
4.

Generally, their statistics are complete.
Such information is rarely used.
They provide only those statistics related to their jurisdiction.
They usually provide a total picture in the areas for which they have
responsibility.

Fraud in companies such as WorldCom, Enron, Waste
Management, Sunbeam, Rite-Aid, Phar-Mor, Parmalat, and
ZZZZBest are examples of:
1.
2.
3.
4.

Customer fraud.
Investment scams.
Vendor fraud.
Management fraud.

Fraud statistics come from all of the following sources EXCEPT:
1.
2.
3.
4.

5.

Government agencies
Researchers
Insurance Companies
Victims
Fraud perpetrator

What is required to prove fraud, as opposed to negligence?
1.
2.
3.
4.

Gross error
Intent
Preponderance of the evidence
Confession from the perpetrator

Generally applicants for CFE certification should have a minimum
of a bachelor’s degree or equivalent from an institution of higher


learning. Alternatively if applicants do not have a bachelor’s
degree, they may substitute ______ months of fraud-related
professional experience for each year of academic study.
1.
2.
3.
4.

5.

24
18
15
12
9

The burden of proof in a criminal case must:
1.
2.
3.
4.

be beyond a reasonable doubt.
be the preponderance of knowledge and power.
be preponderance of evidence.
lie with the defendant.

A company is a victim of a $414 million fraud. At that time its profit
margin is 10%. How much additional revenue should the
company generate in order to recover the effect on net income?
1.
2.
3.
4.

$41.4 million
$414 million
$4.14 billion

$41.4 billion

Which of the following observations concerning occupational
fraud is NOT true?
1.
2.

It is clandestine.
It is committed for the purpose of direct or indirect financial benefit to the
employee.
3. It always involves two or more employees.
4. It costs the employing organization assets, revenues, or reserves.

Scammers often use their victim’s ethnic identity to gain their trust
and then steal their life savings. This is an example of:
1.
2.
3.
4.

vendor fraud.
affinity fraud.
embezzlement.
occupational fraud.

The following are all elements of Title 26, U.S. Code Section 7201
EXCEPT:
1.

not reporting bribe income may be grounds for being charged with tax

evasion.
2. filing income tax that excludes income from fraud may be considered an
improper tax filing.


3.
4.

bribes may be deducted as legitimate business expenses.
failure to report income from fraud may be grounds for being charged with
tax evasion.

Which of the following frauds is usually the most expensive?
1.
2.
3.
4.

Vendor fraud
Customer fraud
Occupational fraud
Financial statement fraud

Management fraud is often referred to as:
1.
2.
3.
4.

stockholder fraud.

financial statement fraud.
affinity fraud.
investment fraud.

What is the single most critical element for a fraud to be
successful?
1.
2.
3.
4.

Criminal intent
Confidence
Greed
Compulsion

Which of the following is NOT a characteristic of management
fraud?
1.
2.
3.
4.

Top management deception.
Manipulation of financial statements.
Kickbacks or bribes.
Pressure to earn year-end bonuses.

The word "con," which means to deceive, comes from the word:
1.

2.
3.
4.

Contract.
Conserve.
Confuse.
Confidence.

One way that criminal law differs from civil law is that it:
1.
2.
3.
4.

provides remedies for violations of private rights.
must yield a unanimous verdict.
can have a jury of fewer than 12 persons.
allows for various claims in one action.

Fraud has a direct dollar for dollar impact on a company's:
1.
2.

Revenues.
Net income.


3.
4.

Profit margin.
Stock price.

A company was the victim of several frauds that totaled
approximately $10 million in one year. With a profit margin of 10
percent, and assuming that the company’s product sold for
$1,000 per unit, how many additional units must the company sell
to compensate for the fraud losses?
1.
2.
3.
4.

1 million
100 million
100,000
10,000

Which of the following is NOT an example of a fraud-fighting
career?
1.
2.
3.
4.

Working for the criminal investigation division of the IRS.
Serving as an expert witness.
Maintaining the security of public records.
Defending an organization being sued in a civil case.

Perpetrators of some fraud schemes often target conspiracy
theorists, promising access to the “secret” investments used by
the Rothschilds or Saudi royalty and offer triple-digit returns. Such
schemes are best described as:
1.
2.
3.
4.

Affinity frauds.
Ponzi schemes.
Franchise frauds.
Prime bank schemes.

The ACFE includes three major categories of occupational fraud
EXCEPT:
1.
2.
3.
4.

asset misappropriations.
corruption.
fraudulent statements.
pension fraud.

Telemarketing fraud usually falls into this category.
1.
2.

3.
4.

Investment scams
Management fraud
Vendor fraud
Embezzlement

The GDP in the economy of Ponziland was $5 billion in the year
prior to the frauds (year 1). The economy were growing at 4


percent. Frauds during the year reduce aggregate income by
$200 million. During the year, the economy has:
1.
2.
3.
4.

shrunk by 1 percent.
grown by only 1 percent.
remained flat.
grown by 4 percent.

Who are the primary victims of financial statement fraud?
1.
2.
3.
4.

Middle management
Organizations that buy goods or services
Analysts
Stockholders

Which of the following is a common example of vendor fraud?
1.
2.
3.

Fraud perpetrated through collusion between buyers and vendors.
Fraud perpetrated by buyers acting alone.
The perpetrator physically removes the inventory from the business
premises.
4. A fraud perpetrated through an unintentional mistake.

Civil claims begin when one party files a complaint against
another, usually for the purpose of:
1.
2.
3.
4.

penalty.
imprisonment.
proving the other party wrong.
financial restitution.

In fraud prosecution cases, ______ matter consists of the
underlying data and all corroborating information available.

1.
2.
3.
4.

evidential
remedial
supplement
elementary

How is the confidence element established in a Ponzi scheme?
1.
2.
3.
4.

By investing in prime bonds.
By issuing notarized certificates.
By paying returns to initial investors.
By returning money to all investors.

The Anti-Kickback Act of 1986 intends to prevent:
1.
2.

bribery, by punishing perpetrators with up to 15 years in prison.
any scheme to defraud federally insured financial institutions.


3.

the giving or receiving of any thing of value by a subcontractor to a prime
contractor.
4. individuals from using insider information to purchase or sell a company's
securities.

To be successful, plaintiffs in civil cases must prove their case by
which of the following?
1.
2.
3.
4.

Preponderance of evidence.
Beyond a reasonable doubt.
To a degree of reasonable mitigation.
To the standard of prima facie.

Which legal code makes the bribing of public officials illegal?
1.
2.
3.
4.

Title 18, U.S. Code Section 201
Title 41, U.S. Code Section 51 to 58
Title 18, U.S. Code Section 1341
Title 18, U.S. Code Section 1344

Given below are the profit margins and fraud related losses of

four economies. Which economy will have to generate the
maximum dollar amount of additional revenues to recover the loss
to aggregate income? Economy A 10% $225 million; Economy B
10% $150 million; Economy C 5% $100 million; Economy D 2% $
50 million
1.
2.
3.
4.

Economy A
Economy D
Economy C
Economy B

Which one of the following is NOT a characteristic of a criminal
proceeding?
1.
2.
3.
4.

Deals with offenses against society.
Consequences include restitution and damage payments.
Jury of 12 individuals.
Only one claim may be heard at a time.

The study conducted by the Association of Certified Fraud
Examiners in 2008 estimated that U.S. organizations lose _____
percent of their annual revenues to fraud.

1.
2.
3.
4.

8
7
23
17

Which of the following is NOT an element of a Ponzi scheme?


1.
2.
3.
4.

Gaining other's confidence.
Promising abnormally high returns.
Collected money is invested in government bonds.
Investment principle is partially used to make payments to previous
investors.

Customer fraud includes all of the following EXCEPT:
1.
2.
3.
4.

Get something for nothing.
Do not pay for goods purchased.
Fraud perpetrated through collusion between buyers and vendors.
Deceive organization into giving them something they should not.

What is the most cost-effective way to minimize the cost of
fraud?
1.
2.
3.
4.

Prevention
Detection
Investigation
Prosecution