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ESSAY 1.Two types of intercompany stock purchases significantly complicate the consolidation process. The first occurs when the subsidiary issues added shares of stock in a public issue and the parent buys a portion of the shares. The second occurs when the subsidiary purchases outstanding shares of the parent company. Required: a. Discuss the current.
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10.On January 1, 20X1, Parent Company purchased 85% of the common stock, 8,500 shares, of Subsidiary Company for $317,500. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $50,000, $100,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. On January.
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10.Lion Corporation, a U.S. firm, entered into several foreign currency transactions during the year. Determine the effect of each transaction on net income for that current accounting year only. Bear has a June 30 year end. Required: a. On January 15, Lion sold $30,000 (Canadian) in merchandise to a Canadian firm, to be.
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6.Abercrombe Co., a U.S. firm, formed a German company in 20X4 by purchasing the common stock of the newly formed Dolce Inc. The functional currency of Dolce is the euro. During their first three years, Dolce experienced the following activity in retained earnings: 20X4 Net loss 100,000 euros 20X5 Net income 200,000 euros January 1, 20X6 Dividend 50,000 euros 20X6 Net.
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12.              On November 1, 20X1, a U.S. company sold merchandise to a foreign firm for 100,000 FCs with payment to be made on January 31, 20X2, in FCs. To hedge against fluctuations in exchange rates, the firm entered into a forward exchange contract on December 1, 20X1 to sell 100,000.
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MULTIPLE CHOICE 1.The functional currency approach adopted by FASB 52 requires: a. separate statements be maintained by the domestic parent company and the foreign branch both in their own currencies b. separate statements be maintained by the domestic parent company and the foreign branch with the foreign branch translated into the functional currency c. results from foreign.
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ESSAY 1.Differentiate between the following monetary systems: floating system, controlled float system and tiered system. 2.Describe the disclosures required by the FASB of firms using derivatives as foreign currency hedges. 3.Explain how the risks differ for holders and writers of foreign exchange options. Additionally, describe the difference between American and European options. Finally,.
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11.Which of the following is NOT true regarding foreign statement translation using the current or temporal method? a. All assets and all liabilities are translated at the current exchange rate at the date of translation. b. Monetary assets and liabilities are translated at the current exchange rate at the date of translation. c. Equity accounts other.
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3.Paula Inc. purchased an 80% interest in the Sharon Co. for $480,000 on January 1, 20X1, when Sharon Co. had the following stockholders' equity: Common stock, $10 par $200,000 Retained earnings   300,000      Total equity $500,000 Any excess is attributable to goodwill. On January 1, 20X3, Sharon Co. purchased a 10% interest in the Paula Inc. at.
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2.Parrot, Inc. purchased a 60% interest in Swallow Company on January 1, 20X1, for $204,000. Any excess of cost was attributable to goodwill. On January 1, 20X4, Swallow purchased 2,400 of its shares held by noncontrolling stockholders for $50 per share. Swallow equity balances on various dates were as follows: January 1, December.
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11.On January 1, 20X1, Parent Company purchased 85% of the common stock, 8,500 shares, of Subsidiary Company for $317,500. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $50,000, $100,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. On January.
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6.On January 1, 20X1, Parent Company purchased 8,000 shares of the common stock of Subsidiary Company for $350,000. On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $150,000 and $200,000 respectively. On January 1,.
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31.Hugh, Inc. purchased merchandise for 300,000 FC from a British vendor on November 30, 20X3. Payment in British pounds is due January 31, 20X4. Exchange rates to purchase 1 FC is as follows: Nov. 30, 20X3 Dec. 31, 20X3 Spot $1.65 $1.62 30 day $1.64 $1.59 60 day $1.63 $1.56 In the December 31, 20X3 income statement, what amount should Hugh report.
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ESSAY 1.A subsidiary company may have preferred stock as part of its equity structure. Further, suppose that the preferred stock is cumulative and in arrears on dividends. Required: a. What is the impact of the preferred stock on the excess of cost over book value on the original controlling investment in common stock? b. What is.
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21.A debit balance in a parent's cumulative translation adjustment after the first year of owning a foreign subsidiary suggests which of the following is true? a. The exchange rate has strengthened relative to the U.S. dollar. b. The exchange rate has weakened relative to the U.S. dollar. c. The foreign entity had net income but there.
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6.What are the two primary approaches to the harmonization of accounting standards? Which method would be more beneficial, and why? 7.A common method of taxation is the value added tax (VAT). Provide a description of how this tax is applied. 8.Given the political nature of accounting standards setting in the U.S., what.
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5.On January 1, 20X1, Prism Company purchased 7,500 shares of the common stock of Sight Company for $495,000. On this date, Sight had 20,000 shares of $10 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $200,000 and $300,000 respectively. On January 1,.
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8.              On January 1, 20X1, Parent Company purchased 9,000 shares of the common stock of Subsidiary Company for $405,000. On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $150,000 and $200,000 respectively. On January.
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MULTIPLE CHOICE 1.The best definition for direct quotes would be "direct quotes measure a. how much foreign currency must be exchanged to receive 1 domestic currency." b. current or spot rates." c. how much domestic currency must be exchanged to receive 1 foreign currency." d. exchange rates at a future point in time." 2.A U.S. company purchases medical lab equipment.
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9.Wolters Corporation is a U.S. corporation that purchased 50,000 chocolate bars from a foreign manufacturer on 6/1/X9 for 80,000 foreign currency units, to be paid on 9/1/X9. On 6/1/X9 Wolters also entered into a forward contract to purchase 80,000 foreign currency units on 9/1/X9. Wolters has a July 31 year.
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7.On January 1, 20X1, Parent Company purchased 8,000 shares of the common stock of Subsidiary Company for $350,000. On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $150,000 and $200,000 respectively. On January 1,.
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4.On January 1, 20X1, Prism Company purchased 7,500 shares of the common stock of Sight Company for $495,000. On this date, Sight had 20,000 shares of $10 par common stock authorized, 10,000 shares issued and outstanding. Other paid-in capital and retained earnings were $200,000 and $300,000 respectively. On January 1,.
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4.CableTech, a US corporation, owns 100% of the Canadian company, Fiber Quebec. The Canadian dollar is the currency of record and the functional currency. Required: What currency exchange rate would be used to translate Fiber Quebec's accounts into US Dollars? Choose from current, simple average, weighted average, or historical. a. Prepaid Insurance _______________________ b. Land _______________________ c. Common Stock _______________________ d. Bonds Payable _______________________ e. Sales _______________________ f. Goodwill _______________________ g. Allowance.
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11.Which of the following accounting situations is treated virtually identically under both U.S. and International accounting standards? a. earnings per share b. Inventory c. plant, property and equipment d. business combinations 12.A value added tax generally results in a. taxes applied only at the wholesale level. b. taxes applied at each stage, from production to final sale. c. taxes applied only at the retail level. d. double.
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PROBLEM 1.On September 15, 20X2, Wall Company, a U.S. firm, purchased a piece of equipment from a foreign firm for 500,000 FCs. Payment for the equipment was to be made in FCs on January 15, 20X3. The spot rates on selected dates were as follows: Date Spot Rate 9/15/X2 1FC=$0.30 12/31/X2 1FC=$0.33 1/15/X3 1FC=$0.315 Required: a. Assuming that the US Corp. has.
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ESSAY 1.How does a multinational corporation differ from a domestic firm involved in international business? 2.Explain the goal of harmonization of accounting systems. 3.Why is the availability of comparable accounting statements important to multinational firms? 4.An issue that affects comparability between multinational corporations is the treatment of transfer pricing. Provide a description of transfer.
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21.Which of the following statements is not true regarding forward contracts that cover periods of time different from the settlement period (transaction date to the settlement date)? a. If the forward contract expires before the settlement date, the gain or loss will partially offset the gain or loss on the foreign currency.
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MULTIPLE CHOICE 1.The Internal Revenue Code regulates transfer pricing in the United States by encouraging the use of a transfer price that a. reflects what the price would have been if the underlying transaction was between unrelated parties. b. shifts all income to the United States based company. c. maximizes parent taxable income regardless of where the.
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PROBLEM 1.Discuss the factors that may be considered in determining if a Mexican subsidiary of a U.S. firm has the peso or the dollar as its functional currency. The subsidiary only manufactures component parts that are shipped to the U.S. firm's final production plant in Detroit. 2.List the two primary objectives of.
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10.On January 1, 20X1, Parent Company acquired 90% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had total owners' equity of $270,000, including retained earnings of $100,000. On January 1, 20X1, any excess of cost over book value is attributable to the undervaluation of land, building,.
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11.Given the following information for a 90 day contract: US Dollars   FC  Value Today 3,750 5,000 Interest Rate 4% 7% 3 months interest 37.50 87.50 Value in 3 months ?? ?? The spot rate today is 1 FC = .75 What will be the forward rate? a. 1FC = .75 US Dollars b. 1FC = .57 US Dollars c. 1FC = .745 US Dollars d. 1FC = .70 US Dollars 12.A U.S. firm.
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PROBLEM 1.On 1/1/X1 Poncho acquired an 80% interest in Stroller for $560,000 when Stroller’s equity consisted of $530,000 paid-in capital and $100,000 Retained Earnings. Any excess of purchase price over was attributed to goodwill. On January 1, 20X6, Stroller had the following stockholders' equity: Common stock ($20 par) $180,000 Paid-in capital in excess of.
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16.              Red & Blue Company, a U.S. corporation, agreed to purchase merchandise from a British vendor on January 1, 20X4. The goods will be shipped on January 31, 20X4 and payment of 200,000 British pounds is due February 28, 20X4. On January 1, USA signed an agreement with a foreign.
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