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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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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: 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: 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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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: 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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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: Consolidated Financial Statements and Goodwill Impairment LO: 2, 3 4.  HubertEnterprises acquired Lyons, Inc. on January 1, 2014.  The $450,000 excess of cost over book value of Lyons' net assets was partly attributable to a patent undervalued by $200,000. The patent has a 10-year life.  The remaining excess is considered goodwill. .
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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: 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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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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. Problems Topic: Intercompany Inventory Sales LO: 1 1.Parent purchased Subsidiary on January 1, 2013. The excess of investment cost over book value was allocated as follows: Equipment (20-year life)$110,000 Customer list (10-year life)  192,500 Patent (10-year life)  137,500 Goodwill  110,000 Total$550,000 Parent regularly sells merchandise to Subsidiary.  In 2015, inter-company sales amounted to $48,070, with $14,253 of deferred profit.
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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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Problems Topic: Equity Method Acquisition and Consolidating Entries LO:1, 2 1.  IovineCo. acquires, at book value, AriasEnterprises on January 2, 2013, by issuing 35,000 common shares, $1 par, with a market value on the acquisition date of $4per share.  The separate financial statements of the parent and subsidiary, for the year ended December.
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Topic: Intercompany Sale of Land LO: 2 3.  During 2015, Parent sells land to Subsidiary for $92,950.  The land had a book value of $71,500.The land is then sold to a third party for $135,850 in 2019. Required: a.Prepare the consolidation entry related to the land sale for 2015. b. Prepare the consolidation entry related.
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Topic: Consolidated Financial Statements LO: 2 3.  On January 1, 2013, IrmgardCompany acquired Louise Co. by issuing 55,000 shares of its common Stock with a market value of $40 per share.  A building on Louise's books was undervalued by $200,000, resulting in annual amortization of $20,000. Also, there was an unrecorded customer.
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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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Topic: Intercompany Inventory Sales LO: 1 2.Parent purchased Subsidiary on January 1, 2014. The excess of investment cost over book value of $210,000 was allocated entirely to a 10-year royalty agreement. Subsidiary regularly sells merchandise to Parent.  In 2015, inter-company sales amounted to $123,960, with $27,558 of deferred profit remaining in ending inventory. .
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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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Exercises Topic: Intercompany Sale of Land LO: 2 1.  During 2013, Subsidiary sells land to Parent for $84,500.  The land had a book value of $65,000.The land is then sold to a third party for $123,500 in 2017. Parent uses the equity method for the 100% investment. Required: a. Prepare the consolidation entry related to.
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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: 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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Chapter 5:Consolidated Financial Statements with Less than 100% Ownership Multiple Choice Multiple Choice – Theory Topic: Goodwill Impairment Allocation LO: 2 1.Allocation of goodwill impairment losses to the parent and the noncontrollinginterests should be based on: a.Relative interests of parent and noncontrolling interests in the carrying value of goodwill b. Parent and noncontrollinginterests relative ownership percentages in.
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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: Intercompany Profit Elimination LO: 3 11.On November 8, 2013, Power Corp. sold land to Wood Co., its wholly owned subsidiary. The land cost $61,500 and was sold to Wood for $89,000. From the perspective of the combination, when is the gain on the sale of the land realized? a.Proportionately over a designated.
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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.$75,000 d.None of the above answers is.
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Topic: Journal Entries for an Account Receivable Denominated in Swiss Francs ($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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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: 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 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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The following information applies to Questions 21 - 25. On January 1, 2013, Sheldon, Inc. acquired the outstanding voting common stock of SteffenCorp. for $472,500. Of this payment, $35,000 was allocated to undervalued equipment (with a five-year life).  Any remaining excess was attributable to goodwill. During 2013, Sheldon bought inventory for $70,000.
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Irmgard Louise Sales revenue   $3,600,000 $1,950,000 Cost of goods sold (2,520,000) (1,170,000) Gross profit      1,080,000 780,000 Operating expenses       (684,000)         (507,000) Equity income 198,000 _ Net Income $   594,000 $273,000 Retained Earnings, 1/1/13    $1,830,500 $1,007,500 Net income 594,000 273,000 Dividends      (32,040)      (40,950) Retained Earnings, 12/31/13 $2,392,460 $1,239,550 Cash and receivables    $   772,275 $   954,850 Inventory         698,400 581,100 Equity investment 2,357,050 Property, plant & equipment (Net)    3,719,520 1,075,100 Total Assets $7,547,245 $2,611,050 Accounts payable     $   281,020 $185,900 Accrued liabilities          313,200 243,100 Notes payable 1,250,000 650,000 Common stock 407,000 130,000 Additional paid-in capital 2,903,565 162,500 Retained Earnings, 12/31/13 2,392,460 1,239,550 Total Liabilities.
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Ceaver Celig Sales revenue   $1,250,000 $750,000 Cost of goods sold    (900,000) (450,000) Gross profit        350,000 300,000 Operating expenses           (187,500) (195,000) Equity income 80,000             _ Net Income $   242,500 $  105,000 Retained Earnings, 1/1/14    $1,608,000 $387,500 Net income 242,500 105,000 Dividends      (38,000)   (15,750) Retained Earnings, 12/31/14 $1,812,500 $476,750 Cash and receivables    $   402,050 $367,250 Inventory         485,000 223,500 Equity investment 914,250 Property, plant & equipment (Net)    2,583,000 413,500 Total Assets $4,384,300 $1,004,250 Accounts payable     $   304,000 $71,500 Accrued liabilities 338,625 93,500 Notes payable          250,000 250,000 Common stock 222,000 50,000 Additional paid-in capital       1,457,175 62,500 Retained.
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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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  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: 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: Equity Method Acquisition and Consolidating Entries LO:1, 2 2. On January 1, 2014, MeyerCompany acquired MacNeillCorporation by issuing 42,500 shares of its $1 par common Stock with a market value of $7.50per share.  A building on MacNeill'sbooks was undervalued by $20,000, resulting in annual amortization of $1,000. Also, there was an.
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  Topic: Intercompany Sale of Land LO: 2 3. Parent acquired Subsidiary on January 1, 2013at a price $150,000 in excess of book value. Of that excess, $100,000 was allocated to an unrecorded patent with a 10-year life, with the remainder to goodwill.  In 2014, Subsidiary sold to Parent land having a book.
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Topic: Consolidated Financial Statements LO: 2 5.On January 2, 2012, Ceaver, Inc. acquired CeligEnterprises as a wholly-owned subsidiary, paying an excess of $400,000 over the book value of Celig'snet assets.  Part of the excess was attributable to a building with a 10-year life undervalued by $250,000. The rest was goodwill.  The 2014financial.
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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: 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: Intercompany Sale of Depreciable Assets LO: 3 4.Parent acquired Subsidiary on January 1, 2014at a price $150,000 in excess of book value.  Of that excess, $100,000 was allocated to an unrecorded Customer List with a 10-year life, with the remainder to Goodwill.  On January 2017, Subsidiary sold equipment to Parent for.
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Chapter 4:Consolidated Financial Statements and Intercompany Transactions Multiple Choice Multiple Choice – Theory Topic: Intercompany Inventory Sales LO:1 1.During 2015, MajorCompany sold merchandise to its 100%-owned subsidiary, Minor Company.During that year, all of the merchandise was resold to outside customers.  If no consolidation entries are made, which of the following will be incorrect in consolidated.
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Exercises Topic:Journal Entries for an Account Payable Denominated in Mexican Pesos ($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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The following information applies to Questions 31-35. On April 1, 2014, NarrowCompany sold equipment to its wholly owned subsidiary, ThatchCorporation.At the time of the transfer, the asset had a cost of $240,000 and accumulated depreciation of $90,000.The selling price was $204,000. The two companies agreed on a ten-year estimated remaining life. Thatch's.
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