BST College

Accounting and finance department

Advanced Financial accounting II – Mid Exam
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Name ____________________________________ ID. _____________ Modality & Section ___________
Part I – Choose the BEST answer
1. A joint venture is a joint arrangement in which no separate entity is established to conduct joint activity.
A. True B. False
2. The contractual arrangement of in a joint arrangement includes:
A. The purpose, activity and duration of joint arrangement C. The decision-making process
B. Capital contributions required of the parties D. All E. None
3. Company X and Y agrees and forms a joint arrangement to give consultancy services t awash bank
using through there own individual resources. This type of arrangement is
A. Joint Venture B. Joint operation C. service type arrangement D. B and C E. None
4. Profit or loss on the joint venture business is shared by the co-venture
A. Equally C. In the agreed up on ratio
B. In the ratio of capital contributed D. As per salary allowance
5. Transaction between a home office and its branch are accounted for reciprocal accounts .The
reciprocal account maintained in the branch books is called
A. Home office C. Advance from home office
B. Investment in branch D. Inventory
6. A joint venture account their interest in a joint venture using equity method, under this method:
A. The investment is initial recognized at fair value
B. The carrying amount of the investment is decreased by investees profit
C. Distributions received from an investee reduce the carrying amount of the investment
D. All are answers E. None
7. One is true about joint operation
A. Established as structured separate form C. parties have the right to net asset
B. parties have the right to asset and liability D. A and C are answer E. None
8. When income summary accounts of a branch have credit balance, then
A. It would be closed to investment account
B. It would be closed home office and the home office is debited
C. It would be closed to home office account and the home office is credited
D. All of the above

Answer question no. 9 to 12 using the following information

➢ YD Plc, HP Plc and FM Plc each invested Br 120,000 for an Equal interest in YHF joint venture
on April 1, 2022.
➢ At December 31, 2022, YHF reported a Net Income of Br 90,000
➢ YHF declared a dividend of Br 60,000
9. The journal entry related to YD Plc investment in the joint venture includes:
A. A debit to cash for birr 120,000 C. A debit to investment for birr 60,000
B. A debit to investment for birr 120,000 D. A debit to cash for birr 360,000 E. None
 10. HP Plc record the net income of the investee as:
A. Debit Investment and credit income for birr 30,000
B. Debit Investment and credit income for birr 90,000
C. Debit cash and credit investment for birr 30,000
D. Debit cash and credit income for birr 30,000 E. None
11. FM Plc record the dividend declared by investee as:
A. Debit cash and credit dividend income for birr 20,000
B. Debit dividend receivable and credit dividend income for birr 20,000
C. Debit dividend receivable and credit investment for birr 20,000
D. Debit dividend receivable and credit investment for birr 60,000 E. None
12. The balance of investment by HP plc in a joint venture could show;
A. 120,000 Birr B. 130,000 Birr C. 270,000-birr D. 170,000-birr E. None

Use the following information to answer question no. 1 to 8

Assume that DX Plc established a branch in Addis Ababa and the following transactions occurred
during the formation of the branch in a month operation.
(Dx use perpetual inventory system and bill merchandize at cost)
1. The home office sent $5,000 cash to a branch.
2. The home office shipped inventory costing $35,000 to the branch
3. Branch purchases inventory from outside vendors totaled $30,000 on terms 2/10, n/30.
4. Branch sales on account were $50,000, which costs $35,000
5. The home office allocated $2,000 in adverting expense to the branch
6. Branch collections on accounts receivable were $40,000.
7. Branch operating expenses of $4,000 were incurred and paid.
8. The branch remitted $15,000 to the home office.
The Journal entry in the book of the Branch for each transaction includes: choose one of the four
Txn A B C D
1 Dr. home office and Cr. Dr. Cash and Cr. Investment Dr. Cash and Cr. home None
Cash by 5,000 in Branch by 5,000 office by 5,000
2 Dr. Investment in br. Dr. Inventory and Cr. Home Dr. Shipment from HO and None
And Cr. Inventory by office by 35,000 Cr. Home office by 35,000
35,000
3 Dr. Inventory and Cr. Dr. Inventory and Cr. cash Dr. Purchase and Cr. None
Account payable by by 30,000 Account payable by 30,000
30,000
4 Dr A/R and Cr. Inventory Dr. Cash and Cr. Sales by Dr. A/R and Cr. Inventory None
by 50,000 50,000 by 35,000
5 Dr. Adv. Expense and Dr. Adv. Expense and Cr. Dr. Investment in br and Cr. None
Cr. Home office by 2,000 cash by 2,000 Home office by 2,000
6 Dr. cash and Cr. Home Dr. Cash and Cr. A/R by Dr. A/R and Cr. Sales by none
office by 40,000 40,000 40,000
7 Dr. Operating Exp. And Dr. Operating Exp and Cr. Dr operating Exp and none
Cr. Cash By 4,000 Homeoffice by 4000 Investment in Br. By 4000
8 Dr. Investment in Br. Dr. Home office and Cr. Dr. cash and Cr. Home None
And Cr. Cash By 15,000 Cash by 15,000 office by 15,000