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  Exercises Topic:Journal Entries for Government-Wide Financial Statements ? Capital Assets LO: 2 1.The City of Hebron is preparing its Government-Wide financial statements from its Fund financial statements. The City identifies Capital Assets with a book value of $200,000 at the beginning of the year that are depreciated at the rate of $20,000 per.
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Topic: Translation of Financial Statements LO: 1 2.Assume that our subsidiary reports the following financial statements in Euros (€): Subsidiary (in €) Income statement: Sales 1,500,000 Cost of goods sold (900,000) Gross Profit 600,000 Operating expenses (390,000) Net income 210,000   Statement of retained earnings: BOY retained earnings 787,500 Net income 210,000 Dividends (21,000) Ending retained earnings 976,500 Balance sheet: Assets Cash 426,900 Accounts receivable 348,000 Inventory 447,000 PPE, net 826,800 Total Assets 2,048,700 Liabilities and Stockholders’ Equity Current Liabilities 254,400 Long-term Liabilities.
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Problems Topic:Journal Entries to Yield Government-Wide Financial Statements from Fund Financial Statements LO:2 1.The City of Mirrenis preparing its Government-Wide financial statements for the year. Its accountant must prepare a number of journal entries to recognize assets and liabilities previously omitted from the Fund financial statements and to recognize revenues and expenses for.
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Topic: Accounting for Foreign Currency Transactions LO: 1 11.Assume that our company incurs a Euro-denominated payable when the exchange rate is $1.40:€1 and that the $US weakens to $1.45:€1 before the payable is paid. a.Our company will not recognize the gain until the payable is paid. b.Our company will not recognize the loss.
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Topic: Translation Process LO: 1 11.Which of the following best describes the cumulative translation adjustment? a.The cumulative translation adjustment is a plug figure to balance the trial balance. b.Changes in the cumulative translation adjustment are reflected in net income for the period. c.The cumulative translation adjustment reflects changes in the fair values of marketable.
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Topic: Consolidation on Date of Acquisition LO: 2 3.Company X acquires a 70% interest in Company Y for a purchase price of $403,900. The fair market value of Company Y is $577,000 on the acquisition date. The excess of the purchase price over the book value of Company X’s Stockholders’ Equity is.
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Topic: Fund Accounting Journal Entries – Issuance and Repayment of Bond LO:4 6.Assume that a city issues a $500,000 bond at par. The city, subsequently, pays $20,000 in interest onthe bond and $10,000 of the principal. Required: Prepare the journal entries to record the issuance of the bondand the subsequent payments. Topic: Fund Accounting.
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Problems Topic: Use of Futures Contracts to Hedge Cotton Inventory – Fair Value Hedge LO: 2 1.On July 1, 2014a cotton wholesaler purchases 2million pounds of cotton inventory at an average cost of $1.20 per pound. To protect the inventory from a possible decline in cotton prices, the company sells cotton futures contracts.
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Exercises Topic:Interpretation of Noncontrolling Interest Footnote LO: 2 1.Connections Company reports the following table in the footnotes to its 2013 annual report (dollars in millions, except per share amounts, and shares in thousands): Years ended Dec. 31, 2013 2012 2011 Noncontrolling Interest Balance at beginning of year 37,499 32,566 28,610 Net income attributable to non controlling interest 7,007 6,455 5,353 Other comprehensive income (loss) 403     (330) 305 Total comprehensive income 7,410 6,125 5,658 Distributions.
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Topic: Preparation of Fund Financial Statements LO:5 2.Assume that at the beginning of the fiscal year, the City of Maxwellreports the following balances in its accounts for the General Fund: General Fund Beginning Balances: DR CR Cash 4,830 Receivables: Real Estate & Personal Property 450 Intergovernmental 5,400 Payables 180 Deferred Revenues 5,850 Fund Balances: Assigned 1,350 Unassigned 3,300 10,680 10,680 Required:Using the journal entries you record for Problem 1 (above): Prepare the pre-closing trial balance for.
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Chapter 8:Consolidation of Foreign Subsidiaries Multiple Choice Topic: Functional Currency LO: 1 1.Which of the following provides the best definition of a functional currency? a.The currency thatis the most useful to companies in order to transact business. b. The currency of the primary economic environment in which the subsidiary operates c.The currency with the least fluctuation.
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  Exercises Topic:Determination of Variable Interest Entity LO: 1 1.Assume a Legal Entity’s capital structure consists of the following accounts: Short-term note payable $  100,000 Long-term note payable 400,000 Mandatorily redeemable preferred stock 150,000 Common stock 40,000 Additional paid-in capital 100,000 Retained earnings 20,000 Total liabilities and equity $810,000 Required:  What is the maximum amount of expected losses that the Legal Entity can expect to sustain without being considered.
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Topic:Journal Entries for an Account Payable Denominated in Canadian Dollars ($USStrengthens) LO: 1 3.Assume that your company purchases inventories from a Canadian supplier on November 3. The invoice specifies that payment is to be made on February 1 in Canadian dollars ($CAD) in the amount of $10,000 (CAD). Your company operates on.
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Topic:Consolidation of Foreign Subsidiary using Current-Rate Method LO:1 2.Assume that our company owns a subsidiary operating in Great Britain. The subsidiary maintains is books in Pound sterling (£) as its functional currency. Following are the subsidiary’s financial statements (in £) for the most recent year: Subsidiary (in  £) Income statement: Sales 5,100,000 Cost of goods sold (3,060,000) Gross.
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Chapter 7:Accounting for Foreign Currency Transactions and Derivatives Multiple Choice Topic: Accounting for Foreign Currency Transactions LO: 1 1.Which of the following best describes the effects of foreign currency fluctuations on the financial statements of companies with foreign currency-denominated assets and liabilities? a.Fluctuations in the $US value of foreign currency-denominated assets and liabilities affect both.
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Topic: Consolidation Worksheet for Loss on Constructive Retirement of Subsidiary’s Debt with no AAP LO: 2 Assume that a Parent company acquires a 75% interest in its Subsidiary on January 1, 2014.  On the date of acquisition, the fair value of the 75% controlling interest was $1,200,000 and the fair value of.
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Problems Topic: Consolidation of Foreign Subsidiary Using Current-Rate Method LO:1,3 1.Assume that our company owns a subsidiary operating in France. The subsidiary maintains is books in Euros (€) as its functional currency. Following are the subsidiary’s financial statements (in €) for the most recent year: Subsidiary (in €) Income statement: Sales 900,000 Cost of goods sold (540,000) Gross Profit 360,000.
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Exercises Topic:Translation of Income Statement LO: 1 1.Assume that our subsidiary’s income statement in Euros (€) is reported as follows for the year: Income statement: In Euros (€) Sales 1,500,000 Cost of goods sold (900,000) Gross Profit 600,000 Operating expenses (390,000) Net income 210,000 Also assume the following exchange rates: $/€ BOY Rate $1.40 EOY rate $1.50 Avg. rate $1.45 Required:  Translate the income statement into $US using the current-rate method.   .
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Topic: Acquisition Accounting Premium LO: 1 21.What is the acquisition accounting premium (AAP)? a.  $475,000 b.  $375,000 c.  $400,000 d.  $425,000 Topic: Goodwill LO: 1 22.Buzz’s property, plant and equipment balance is undervalued by $500,000.  Woodyhas assigned a useful life of 50 years.  Determine the total goodwill to be recognized at acquisition date. a.$125,000 b.$80,000 c.$75,000 d.None of the above answers is.
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Problems Topic: Consolidation Subsequent to Date of Acquisition – Upstream Intercompany Inventory Sale LO: 2,3 1.In January 1, 2013,CameronCompany acquired an 80% interest in TalismanCompany for a purchase price that was $275,000 over the book value of Talisman’s Stockholders’ Equity on the acquisition date.  The Cameronallocated the excess to the following [A] assets: [A].
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Topic:Journal Entries for Government-Wide Financial Statements ? Deferred Revenues and Compensated Absences LO:2 3.The City of Madisonis preparing its Government-Wide financial statements from its Fund financial statements.The City records Deferred Revenue with a book value of $200,000 and Compensated Absences of $30,000 at the beginning of the year. During the year, these.
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Chapter 6:Consolidation of Variable Interest Entities and Other Intercompany Investments Multiple Choice Topic: Special Purpose Entities LO: 1 1.Which of the following are typical characteristics of special purpose entities? a.It is legally distinct from the sponsoring company and may be bankruptcy remote. b. It is only allowed to engage in a highly restricted set of activities. c.When.
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Topic: Fund Accounting Journal Entries – Accounting for Inventories (Purchases Method) LO: 4 8.Assume that a town purchases $5,000 of supplies on account toward the end of the year. A year-endaudit reveals that $1,000 of the inventories remain unused. Required: Prepare the journal entry for the purchase of the inventories and the year-end.
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Topic: Measurement Focus LO: 3 11.“Current Financial Resources” include: a.Only cash assets. b.Both cash and investments. c.All assets and liabilities. d.Only current liabilities. e. None of the abovecompletely describe the concept of “current financial resources.”   Topic: Modified Accrual Basis of Accounting LO: 3 12.Under the “modified accrual basis of accounting”: a.Revenues are recognized when they are both measurable and.
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Topic: Purchase of PPE Assets LO: 4 21.Which of the following statements is true? a.PPE assets that are purchased by a government are recorded as assets in fund-based financial statements and are depreciated over their estimated useful lives. b.PPE assets that are purchased by a government are recorded as assets in fund-based financial statements,.
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  Topic:Consolidation Subsequent to Date of Acquisition – Downstream Intercompany Inventory Sale LO: 2,3 2.Assume that, on January 1, 2014, a parent company acquired a 70% interest in its subsidiary for a purchase price that was $125,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent allocated.
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Problems Topic: Fund Accounting Journal entries – Series of Transactions LO:4 1.Following are a number of events relating to the City of Maxwell(all amounts in $1,000s). a.The citizens approve the following budget for the year: Estimated revenues $23,678 Estimated other financing sources 4,000 Appropriations (23,184) Budgetary fund balance $   4,494 b.The City records the following revenues (on account) and other financing sources (paid.
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Topic:Fund Accounting Journal Entries – Closing Entries LO: 4 4.Assume that a city records $540,000 of encumbrances outstanding as of the end of the year. Required:  Prepare the journal entries to close the encumbrance account and to reestablish the encumbrance in the succeeding year, assuming that encumbrances lapse at year-end (i.e., budgetary authority.
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Chapter 10:Government Accounting: Government-Wide Financial Statements Multiple Choice Topic: Comprehensive Annual Financial Report LO: 1 1.Which of the following component are required in the Comprehensive Annual Financial Report? a.Fund Financial Statements b. Government-wide financial statements c.Management discussion and analysis d. band c e. a, b, and c Topic: Government-Wide Financial Statements LO: 2 2.  Which of the following statements is correct about.
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Topic: Statement of Net Assets LO: 2 11.Which of the following statements about the Statement of Net Assets is false? a.The difference between assets and liabilities must be labeled as net assets, and cannot be labeled as equity, net fund balance, or other similar label. b.Assets are presented in order of liquidity and liabilities.
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Topic: Preparation of Statement of Activities LO:2 5.The City of San Almosreports the following revenues for the fiscal year: Real Estate And Personal Property Taxes $38,164 Motor Vehicle And Other Excise Taxes 1,988 Grants And Contributions Not Restricted 1,956 The City also reports the following revenues from fees it charges for services and operating grants and contributions.
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Topic:Use of Futures Contracts to Hedge a Forecasted Transaction – Cash Flow Hedge LO: 2 2.Assume that, as of July 1, Pete’s PajamaCo, Inc. plans to purchase 100,000 lbs. of cotton on October 1 at the prevailing spot rate. To hedge this forecasted transaction, PetepurchasesOctober futures contracts in July for 100,000 lbs..
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Topic: Translation of Financial Statements – Computation Using Direct Method LO: 1 7.Assume that our subsidiary reports the following: BOY Net assets €4,657,500 Net income €966,000 Dividends €(96,600) BOY Cumulative Translation Adjustment $1,798,946 Also assume the following exchange rates for the year ($:€1): BOY Rate $1.30 EOY rate $1.40 Avg. rate $1.35 Dividend rate $1.39 Required: Compute the Cumulative Translation Adjustment balance at the end-of-year.
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Chapter 9:Government Accounting: Fund-Based Financial Statements Multiple Choice Topic: Fund Financial Statements LO: 5 1.Which of the following best describes the notion of “accountability”? a.Accountability refers to the requirement that governments maintain an appropriate chart of accounts to aid them in the maintenance of their accounting records. b. Accountability is based on the belief that.
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Topic: Consolidation Subsequent to Date of Acquisition LO: 2 5.Assume that, on January 1, 2013,ArthurCompany acquires a 60% interest in GustavCompany for a purchase price that was $300,000 over the book value of the Gustav’sStockholders’ Equity on the acquisition date. Arthurallocated the excess to the following [A] assets: [A] Asset Initial Fair Value Useful Life.
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Topic: Accounting for Noncontrolling Interests LO: 1,2 31.What is the amount reported as noncontrolling equity at the end of the year? a.$151,000 b.$148,500 c.$120,000 d.$153,500 The following information pertain to questions 32 and 33 Assume the following facts are about a parent and its 70% owned subsidiary company:  Parent Subsidiary Net income $100,000 $60,000 Common shares outstanding 20,000 14,000 (20,000 = 70% owned by.
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Problems Topic:Consolidation Worksheet for Gain on Constructive Retirement of Subsidiary’s Debt with no AAP LO: 2 Assume that a Parent company acquires a 90% interest in its Subsidiary on January 1, 2014.  On the date of acquisition, the fair value of the 90% controlling interest was $1,440,000 and the fair value of the.
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Topic: Consolidation Subsequent to Date of Acquisition LO: 2 4.Assume that, on January 1, 2014, LanderCompany acquired a 90% interest in BrinkmanCompany for a purchase price that was $300,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date.Landerallocated the excess to the following [A] assets: [A] Asset Initial Fair Value Useful.
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Topic:Use of Futures Contracts to Hedge a Receivable Denominated in a Foreign Currency – Fair Value Hedge LO: 2 3.In August, our company sells inventory to a customer in Germany, receivable in Euros (€). The receivable is €200,000 and the exchange rate on the date of sale is $1.40:€1.Payment is due in.
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Topic: Journal Entries for an Account Receivable Denominated in Swiss Francs ($US Fluctuates). LO: 1 5.Assume that your company sells products to a customer located in Switzerland on November 20. The invoice specifies that payment is to be made on February 20 in Swiss Francs (CHF) in the amount of CHF 4,000..
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Topic: Remeasurement of Financial Statements LO:2 5.Assume that our company owns a subsidiary operating in Germany. The subsidiary has adopted the Euro (€) as its functional currency. Following are the subsidiary’s financial statements (in €) for the most recent year: Subsidiary (in €) Income statement: Sales 9,000,000 Cost of goods sold (5,400,000) Gross Profit 3,600,000 Operating expenses (1,920,000) Depreciation (420,000) Remeasurement gain or.
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Topic: Consolidation Subsequent to Date of Acquisition – Upstream Intercompany Inventory Sale LO: 2, 3   6.On January 1, 2014, BaldwinCompany acquired a80% interest in KnappCompany for a purchase price that was $125,000 over the book value of the Knapp’s Stockholders’ Equity on the acquisition date.  Baldwinallocated the excess to the following.
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Topic: Consolidation on Date of Acquisition LO: 1 3.MastersonCompany acquires a80% interest in its subsidiary for a purchase price of $620,800. The excess of the purchase price over the book value of the subsidiary’s Stockholders’ Equity is allocated to a building (in PPE, net) that the parent believes is worth $50,000 more.
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Topic:Translation of Financial Statements LO: 1 3.Assume that our subsidiary reports the following financial statements in Euros (€): Subsidiary (in €) Income statement: Sales 1,125,000 Cost of goods sold (675,000) Gross Profit 450,000 Operating expenses (292,500) Net income 157,500 Statement of retained earnings: BOY retained earnings 590,625 Net income 157,500 Dividends (15,750) Ending retained earnings 732,375 Balance sheet: Assets Cash 320,175 Accounts receivable 261,000 Inventory 335,250 PPE, net 620,100 Total Assets 1,536,525 Liabilities and Stockholders’ Equity Current.
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Exercises Topic:Journal Entries for an Account Payable Denominated in Mexican Pesos ($US Weakens) LO: 1 1.Assume that your company purchases inventories from a supplier on December 15. The invoice specifies that payment is to be made on March 15 in Euros in the amount of 10,000 Euros. Your company operates on a calendar.
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Topic: Accounting for Derivative Financial Instruments LO: 2 21.If a forward or futures contract is to be an effective hedge of a net asset or future cash flow: a.Then the net settlement value of the forward or futures will increase and decrease in value in the same direction to the fair value of.
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Topic:Translation of Financial Statements LO: 1 4.Assume that our subsidiary reports the following financial statements in Brazilian Real (R$): Subsidiary (in R$) Income statement: Sales 1,500,000 Cost of goods sold (900,000) Gross Profit 600,000 Operating expenses (390,000) Net income 210,000 Statement of retained earnings: BOY retained earnings 787,500 Net income 210,000 Dividends (21,000) Ending retained earnings 976,500 Balance sheet: Assets Cash 426,900 Accounts receivable 348,000 Inventory 447,000 PPE, net 826,800 Total Assets 2,048,700.
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Topic: Remeasurement of Financial Statements LO:2 6.Assume that our company owns a subsidiary operating in Switzerland. The subsidiary has adopted the Swiss Franc (CHF) as its functional currency. Following are the subsidiary’s financial statements (in CHF) for the most recent year: Income statement: Sales 2,700,000 Cost of goods sold (1,620,000) Gross profit 1,080,000 Operating expenses (576,000) Depreciation (126,000) Remeasurement gain or loss Net.
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