Practice Test Geeks(CA) Certified Accountant Practice Test
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Corporate Accounting Flashcards

7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Corporate Accounting flashcards as text

  1. A parent company owns 80% of a subsidiary. Under the acquisition method, what percentage of the subsidiary's assets and liabilities appears on the consolidated balance sheet?

    Answer: 100%

    Under the acquisition method, 100% of the subsidiary's assets and liabilities are consolidated, with a noncontrolling interest recorded for the 20% minority.

  2. Goodwill arises in a business combination when the purchase price exceeds the fair value of identifiable net assets. Under US GAAP, how is goodwill subsequently measured?

    Answer: Tested annually for impairment

    ASC 350 requires goodwill to be tested for impairment at least annually rather than amortized.

  3. Which of the following intercompany transactions must be eliminated in full during the consolidation process?

    Answer: Sales from the parent to the subsidiary

    Intercompany sales between parent and subsidiary are eliminated in full to avoid double-counting revenue and cost.

  4. Under the equity method, an investor owning 30% of an investee records which of the following when the investee earns net income of $200,000?

    Answer: Debit Investment $60,000; Credit Investment Income $60,000

    Under the equity method, the investor recognizes its share of earnings by debiting the Investment account and crediting Investment Income.

  5. A corporation has net income of $900,000, preferred dividends of $100,000, and a weighted-average of 400,000 common shares outstanding. What is basic earnings per share?

    Answer: $2.25

    Basic EPS = (Net income – Preferred dividends) ÷ Weighted-average shares = $800,000 ÷ 400,000 = $2.00.

  6. In a stock split, for example a 2-for-1 split, what happens to par value per share and the total stockholders' equity?

    Answer: Par value halves; total equity is unchanged

    A stock split doubles the share count and halves the par value per share, leaving total stockholders' equity unchanged.

  7. Which financial statement best shows whether a profitable company is generating sufficient cash to meet its obligations?

    Answer: Statement of cash flows

    The statement of cash flows reveals actual cash inflows and outflows, showing whether profits are converting to cash.