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13-3Accounts are listed below for a foreign subsidiary that maintains its books in its local currency.  The equity interest in the subsidiary was acquired in a purchase transaction.  In the space provided, indicate the exchange rate that would be used to translate the accounts into dollars assuming the functional currency.
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Problems 9-1On January 1, 2010, Page Company acquired an 80% interest in Sterling Company for $1,070,000. Sterling reported common stock of $1,000,000 and retained earnings of $400,000 on this date. Any difference between implied value and the book value interest acquired is attributable to land. Other information available for Sterling Company is.
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8-7Petty Company acquired 85% of the common stock of Selmon Company in two separate cash transactions. The first purchase of 108,000 shares (60%) on January 1, 2009, cost $735,000. The second purchase, one year later, of 45,000 shares (25%) cost $330,000. Selmon Company’s stockholders’ equity was as follows: December 31December 31                                     2009           2010  Common.
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How are foreign currency exchange gains and losses from hedging a forecasted transaction handled? What is a put option, and how might it be used to hedge a forecasted transaction? Define a derivative instrument, and describe the keystones identified by the FASB for the ac-counting for such instruments. Differentiate between forward-based derivatives and.
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Questions from the Textbook 1.As mentioned in Chapter 1, the project on business combinations was the first of several joint projects undertaken by the FASB and the IASB in their move to converge standards globally. Nonetheless, complete convergence has not yet occurred, and there are those who believe it to be.
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11.Sousa Corporation is an 80% owned subsidiary of Phillips Company. Sousa purchased bonds of Phillips Company for $103,000. Phillips Company reported the bond liability on the date of purchase at $100,000 less unamortized discount of $5,000. Assuming that the constructive gain or loss is material, the consolidated income statement should.
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Problems 12-1On November 1, 2010, Dorsey Company sold inventory to a company in England. The sale was for 600,000 British pounds and payment will be received on February 1, 2011. On November 1, Dorsey entered into a forward contract to sell 600,000 British pounds on February 1 at the forward rate.
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10-5Donnelly Corporation incurred major losses in 2010 and entered into voluntary Chapter 7 bankruptcy in the early part of 2011. By June 1, all assets were converted into cash, the secured creditors were paid, and $150,000 in cash was left to pay the remaining claims as follows. Accounts payable              $   48,000 Claims.
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9-6On January 1, 2010, Pippin Company acquired 80% of Skylark Company's common stock for $210,000 and 70% of Skylark's preferred stock for $80,000. Skylark Company reported the following stockholders' equity on this date: Preferred stock, 8%, Par value $20$ 100,000 Common stock, Par value $50200,000 Premium on common stock30,000 Retained earnings    80,000 Total$410,000 The preferred stock.
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12-8           Consider the following information: 1.On November 1, 2011, a U.S. firm contracts to sell equipment (with an asking price of 500,000 pesos) in Mexico. The firm will take delivery and will pay for the equipment on February 1, 2012. 2.On November 1, 2011, the company enters into a forward contract to.
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9-4On January 1, 2010, Powell Company purchased 80% of the common stock of Southern Company for $400,000. Southern Company reported common stock of $200,000 ($10 par value), other contributed capital of $60,000, and retained earnings of $120,000 on this date. The difference between implied value and the book value interest.
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11.Selected data for a segment of a business enterprise are to be separately reported in accordance with SFAS No. 131 when the revenues of the segment is 10% or more of the combined a.net income of all segments reporting profits. b.external and internal revenue of all reportable segments. c.external revenue of all reportable.
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Chapter 8 Changes in Ownership Interest Multiple Choice 1.When the parent company sells a portion of its investment in a subsidiary, the workpaper entry to adjust for the current year’s income sold to noncontrolling stockholders includes a a.debit to Subsidiary Income Sold. b.debit to Equity in Subsidiary Income. c.credit to Equity in Subsidiary Income. d.credit to Subsidiary.
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Chapter 14 Reporting for Segments and for Interim Financial Periods 1.A component of an enterprise that may earn revenues and incur expenses, and about which management evaluates separate financial information in deciding how to allocate resources and assess performance is a(n) a.identifiable segment. b.operating segment. c.reportable segment. d.industry segment. 2.An entity is permitted to aggregate operating segments.
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Problems 8-1Piper Company purchased Snead Company common stock through open-market purchases as follows: Acquired   Date  Shares      Cost 1/1/091,500$  50,000 1/1/103,300$  90,000 1/1/116,600$250,000 Snead Company had 12,000 shares of $20 par value common stock outstanding during the entire period. Snead had the following retained earnings balances on the relevant dates: January 1, 2009$  90,000 January 1, 201030,000 January.
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Short Answer Questions from the Textbook 1. What requirements must be satisfied if a foreign subsidiary is to be consolidated? 2.What is meant by an entity’s functional currency and what are the economic indicators identified by the FASB to provide guidance in selecting the functional currency? 3.The __________is the functional currency of.
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11.The exchange rate quoted for future delivery of foreign currency is the definition of a(n): a.direct exchange rate. b.indirect exchange rate. c.spot rate. d.forward exchange rate. 12.A transaction loss would result from: a.an increase in the exchange rate applicable to an asset denominated in a foreign currency. b.a decrease in the exchange rate applicable to a liability.
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Explain what is meant by the “two-transaction method” in recording exporting or importing trans-actions. What support is given for this method? Describe a forward exchange contract. Explain the effects on income from hedging a foreign currency exposed net asset position or net liability position. What criteria must be satisfied for a foreign currency.
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Short Answer Questions from Textbook Define “constructive retirement of debt.” How is the total constructive gain or loss computed? The gain or loss on the constructive retirement of debt is recognized subsequently by the individual companies. Explain. Allocating the gain or loss on constructive bond retirement between the purchasing and issuing companies is.
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10.Assuming that the temporal method is used, how are revenue and expense items in foreign currency financial statements converted? 11.A translation adjustment results from the process of translating financial statements of a foreign subsidiary from its functional currency into dollars. Where is the translation adjustment reported in the financial statements.
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Chapter 9 Intercompany Bond Holdings and Miscellaneous Topics— Consolidated Financial Statements Multiple Choice 1.Which of the following methods of allocating the gain or loss on an intercompany bond retirement is the soundest conceptually? a.The gain (loss) is allocated to the company that issued the bonds. b.The gain (loss) is allocated to the company that purchased the.
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Chapter 12 Accounting for Foreign Currency Transactions And Hedging Foreign Exchange Risk Multiple Choice 1.A discount or premium on a forward contract is deferred and included in the measurement of the related foreign currency transaction if the contract is classified as a: a.hedge of a net investment in a foreign entity. b.hedge of an exposed asset.
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11.The following balance sheet accounts of a foreign subsidiary at December 31, 2011, have been translated into U.S. dollars as follows:       Translated at        Current RatesHistorical Rates Accounts receivable, current$   600,000$   660,000 Accounts receivable, long-term300,000324,000 Inventories carried at market180,000198,000 Goodwill     190,000     220,000 $1,270,000$1,402,000 What total should be included in the translated balance sheet at December 31, 2011, for the.
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13-6           Bass Corporation, a U.S. Company, formed a subsidiary with a new company in London on January 1, 2011, by investing 500,000 British pounds in exchange for all of the subsidiary’s common stock. The subsidiary purchased land for 100,000 pounds and a building for 300,000 pounds on July 1, 2011..
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Problems 13-1Ramsey, Inc. owns a company that operates in France. Account balances in francs for the subsidiary are shown below: 2011 January 1December 31 Cash and Receivables              24,000              26,000 Supplies              1,000              500 Property, Plant, and Equipment              52,500              49,000 Accounts Payable              (11,500)              (5,500) Long-term Notes Payable              (19,000)              (11,000) Common Stock              (30,000)              (30,000) Retained Earnings              (17,000)              (17,000) Dividends-Declared & Paid on Dec 31             .
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5.Which method of translation is used to convert the financial statements when a foreign subsidiary operates in a highly inflationary economy? 6.Define remeasurement. 7.Under the current rate method, how are assets and liabilities that are stated in a foreign currency translated? 8.Under the current rate method, describe how the various.
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21.Which of the following does not have to be disclosed in interim reports? a.Seasonal costs or expenses. b.Significant changes in estimates. c.Disposal of a segment of a business. d.All of these must be disclosed. 22.For interim financial reporting, the effective tax rate should reflect AnticipatedExtraordinary Tax CreditsItems a.YesYes b.YesNo c.NoYes d.NoNo 23.Companies using the LIFO method may encounter a liquidation of base.
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n JETER/ ADVANCED ACCOUNTING CHAPTER 11: INTERNATIONAL FINANCIAL REPORTING STANDARDS MULTIPLE CHOICE—Conceptual 1.              The goals of the International Accounting Standards Committee include all of the following except a.To improve international accounting. b.To formulate a single set of auditing standards to be applied in all countries. c.To promote global acceptance of its standards. d.To harmonize accounting practices between countries. 2.             .
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Problems 14-1The following information is available for Torrey Company for 2011: a.In early April Torrey made major repairs to its equipment at a cost of $90,000. These repairs will benefit the remainder of 2011 operations. b.At the end of May, Torrey sold machinery with a book value of $35,000 for $45,000. c.An inventory loss.
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13-8 On January 1, 2011, Roswell Systems, a U.S.-based company, purchased a controlling interest in Swiss Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2011 financial statements stated in Swiss francs are given below. SWISS MANAGEMENT CONSULTANTS Comparative Balance Sheets January 1 and December 31, 2011                                                                                                                       Jan..
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Chapter 10 Insolvency – Liquidation and Reorganization Multiple Choice 1.A corporation that is unable to pay its debts as they become due is: a.bankrupt. b.overdrawn. c.insolvent. d.liquidating. 2.When a business becomes insolvent, it generally has three possible courses of action. Which of the following is not one of the three possible courses of action? a.The debtor and its creditors.
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12-4        On October 1, 2010, Nance Company purchased inventory from a foreign customer for 750,000 units of foreign currency (FCU) due on January 31, 2011. Simultaneously, Nance entered into a forward contract for 750,000 units of FC for delivery on January 31, 2011, at the forward rate of $0.75. Payment.
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Short Answer Questions from the Textbook Define currency exchange rates and distinguish between “direct” and “indirect” quotations. Explain why a firm is exposed to an added risk when it enters into a transaction that is to be settled in a foreign currency. Name the three stages of concern to the accountant in accounting.
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Chapter 13 Translation of Financial Statements of Foreign Affiliates Multiple Choice 1.When translating foreign currency financial statements for a company whose functional currency is the U.S. dollar, which of the following accounts is translated using historical exchange rates? Notes PayableEquipment a.YesYes b.YesNo c.NoNo d.NoYes 2.Under the temporal method, monetary assets and liabilities are translated by using the exchange rate.
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Problems 10-1On January 1, 2011, Bargain Mart owed City Bank $1,600,000, under an 8% note with three years remaining to maturity. Due to financial difficulties, Bargain Mart was unable to pay the previous year’s interest. City Bank agreed to settle Bargain Mart’s debt in exchange for land having a fair market.
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11.Which statement with respect to gains and losses on troubled debt restructuring is correct? a.Creditors losses on restructuring are extraordinary. b.Debtor’s gains and losses on asset transfers and debtor’s gains on restructuring are combined and treated as extraordinary. c.Debtor gains and creditor losses on restructuring are extraordinary, if material in amount. d.Debtor losses on.
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14-4Logan Company prepares quarterly financial statements. The following information is available concerning calendar year 2011: Estimated full-year earnings$3,000,000 Full-year permanent differences: Penalty for pollution150,000 Estimated dividend income exclusion60,000 Actual pretax earnings, 1/1/11 to 3/31/11480,000 Nominal income tax rate40% Required: Compute the income tax provision for the first quarter of 2011. 14-5           XYZ Corporation has eight industry segments with sales,.
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Short Answer Questions from the Textbook 1.List the primary types of contractual agreements between a debtor company and its creditors and briefly explain what is involved in each of them. 2.Distinguish between a voluntary and involuntary bankruptcy petition. 3.Distinguish among fully secured, partially se-cured, and unsecured claims of creditors. 4.Five priority.
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21.              Under IFRS, the entry to record depreciation expense on the asset at December 31, 2011 will include a credit to accumulated depreciation of a.€1,440,000. b.€1,200,000 c.€800,000. d.€600,000. 22.              Accounting terminology that differs between IFRS and US GAAP include all of the following except a.the use by IFRS of “turnover” for revenue. b.the use by IFRS of.
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Business Ethics Question from the Textbook A vice president of marketing for your company has been charged with embezzling nearly $100,000 from the company. The vice president allegedly submitted fraudulent vendor invoices in order to receive payments. As the vice president of marketing for the company, the vice president is authorized.
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9-8On January 2, 2010, Palmer Corporation purchased 80% of the outstanding common stock and 30% of the outstanding cumulative, nonparticipating, preferred stock of Sears Company for $800,000 and $140,000, respectively. At this date, Sears Company reported account balances of $800,000 in common stock, $400,000 in preferred stock and $200,000 in.
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10-8On February 1, 2011, Hilton Company filed a petition for reorganization under the bankruptcy statutes. The court approved the plan on September 1, 2011, including the following provisions: 1.Accrued expenses of $21,930, representing priority items, are to be paid in full. 2.Hilton Company is to exchange accounts receivable in the face amount.
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Short Answer Question from the Textbook 1.Identify three types of transactions that result in a change in a parent company’s ownership interest in its subsidiary. 2.Why is the date of acquisition of subsidiary stock important under the purchase method? 3.When a parent company has obtained control of a subsidiary through several purchases and.
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11.              IFRS and US GAAP differ with regard to financial statement presentation in all of the following except a.IFRS generally requires that assets be listed in order of increasing liquidity while US GAAP requires that assets be listed in order of decreasing liquidity. b.US GAAP requires expenses to be listed by function.
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8-4Pelky made the following purchases of Stark Company common stock: DateSharesCost 1/1/1070,000 (70%)$1,000,000 1/1/1110,000 (10%)160,000 Stockholders’ equity information for Stark Company for 2010 and 2011 follows: 20102011 Common stock, $10 par value              $1,000,000              $1,000,000 1/1 Retained earnings              300,000              380,000 Net income               110,000              140,000 Dividends declared, 12/15                    (30,000)                   (40,000) Retained earnings, 12/31                   380,000                   480,000 Total stockholders’ equity,.
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5.Why is it important to distinguish between up-stream and downstream sales in the analysis of intercompany profit eliminations? 6.In what period and in what manner should profits relating to the intercompany sale of depreciable property and equipment be recognized in the consolidated financial statements? 7.Define consolidated retained earnings using the analytical approach. Business.
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Exercise from the Textbook Exercise 11-1 Component Depreciation SMC Company purchases a building for $100,000. Included in this cost are $12,000 for electrical systems and $15,000 for the roof. The building is expected to have a 40 year useful life, but the electrical system will last for 20 years and the roof.
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