Discuss AICPA CPA-Financial Exam Topic 1 Question 19

Dean Co. acquired 100% of Morey Corp. prior to 1989. During 1989, the individual companies included in their financial statements the following:

What amount should be reported as related party disclosures in the notes to Dean's 1989 consolidated financial statements?

A$150,000

B$155,000

C$175,000

D$330,000

Suggested Answer: C

Choice 'c' is correct. The only related party transaction that would require disclosure (assuming that all amounts are material to the financial statements) would be the loans to officers since they are outside of the ordinary course of business.

Choices 'a', 'b', and 'd' are incorrect. Officers' salaries, officers' expenses and intercompany sales (between entities included in a consolidated set of financial statements) are all transactions in the ordinary course of business and generally would not require disclosure.

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10 comments · newest first

Barney 11 months ago

I’m leaning towards $150,000, but I see the $175,000 argument.

Lacresha 12 months ago

The related party transactions totaled $175,000.

Gearldine 12 months ago

Wait, are we sure about that amount? Seems high.

Abraham 12 months ago

Totally agree, $175,000 seems right!

Louisa 1 year ago

I think it should be $175,000 based on the calculations.

Cathrine 1 year ago

Hmm, I'm not sure about this one. The regex seems to be looking for something specific, but I'm not familiar with the pattern. I'll have to think this through carefully.

Dorinda 1 year ago

Honestly, I'm torn between A and D. I can see the importance of the significance of findings, but does it relate directly to retention policy?

Evangelina 1 year ago

Okay, I've got this. The two methods that would help consolidate the billing are A) creating draft invoices against individual projects and then consolidating them in Receivables, and E) using inter-project billing so that individual contract projects invoice a single project, which then bills the customer.

Glenn 1 year ago

Hmm, I'm not totally sure about this one. I'll have to think it through carefully. The options seem a bit similar, so I want to make sure I understand the differences before selecting an answer.

Lindsay 1 year ago

The key here is controlling the bridge domains, so I'm leaning towards D. Stretched Fabric as the best option to manage Layer 2 flooding across the sites.

AICPA CPA-Financial Exam - Topic 1 Question 19 Discussion