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LO8 Exercise 10 On November 1, 20X5, US Frigatebird Company sold an airplane worth $1 million Australian dollars to Australian company Heron Inc. to be delivered on February 1, 20X6 in Sydney.  In order hedge foreign exchange, Frigatebird entered into a 90 day forward contract on the same day for the amount.
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Use the following information for questions 12 and 13. Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and Carnes receive salary allowances of $10,000 and $20,000, also respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1..
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LO5 Exercise 4 Note to Instructor: This exam item is a continuation of Exercise 3 and proceeds forward with Searle’s second year of operations. Searle Corporation, a British subsidiary of Peake Corporation (a US company) was formed by Peake on January 1, 20X5 in exchange for all of the subsidiary's common stock. Searle.
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LO4 11. Which one of the following operating segment disclosures is not required by SFAS 131? a. Assets. b. Equity. c. Intersegment sales. d. Extraordinary items. LO5 12. Which one of the following operating segment information items is not directly named by SFAS 131 to be reconciled to consolidated totals? a. Assets. b. Liabilities. c. Revenues. d. Profit or loss. LO6 13. Which one of the following items does SFAS 131 require to be.
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LO7 Exercise 8 Seagull Corporation is preparing its interim financial statements for the third quarter of calendar 2006. The following trial balance information is available for third quarter: Account Debit Credit Cash $ 98,000 Accounts Receivable 285,000 Inventory 750,000 Fixed assets 600,000 Accounts Payable 300,000 Common Stock 50,000 Retained Earnings 80,000 Sales $ 4,400,000 Administrative expense 312,000 Cost of goods sold 2,650,000 Loss on sale of securities sold on July 30 75,000 Annual equipment overhaul costs paid on August 1 60,000 Totals $ 4,830,000 $ 4,830,000 Additional.
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LO3 Exercise 5 Required: Using the information from Exercise 4 above: Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $36,000. Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the.
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LO7 Exercise 7 On January 1, 20X4, Pearl Corporation, a US firm, acquired a 70% interest in Segar Corporation, a foreign company, for $120,000, when Segar’s stockholders’ equity consisted of 300,000 local currency units (LCU) and retained earnings of 100,000 LCU. At the time of the acquisition, Segar’s assets and liabilities were.
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LO2 Exercise 3 The balance sheet of the Omar, Paolo, and Quek partnership on November 1, 2006 (before commencement of partnership liquidation) was as follows: Cash $ 58,000 Accounts payable $ 34,000 Inventory 60,000 Notes payable 62,000 Loan to Omar 8,000 Omar, capital(40%) 24,000 Loan to Quek 14,000 Paolo, capital(25%) 26,000 Plant assets-net 70,000 Quek, capital (35%) 64,000 Total assets $ 210,000 Total liab./equity $ 210,000 Liquidation events in November were as follows: - The inventory was sold for $10,000 above.
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LO2 Exercise 1 Cesar and Damon share partnership profits and losses at 60% and 40%, respectively. The partners agree to admit Egan into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Egan are: Cesar (60%) $ 300,000 Damon (40%) 300,000 Total $ 600,000 Required: 1. Prepare the journal entry(s) for the admission of Egan.
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LO2 Exercise 1 For each of the 12 accounts listed in the table below, select the correct exchange rate to use when either remeasuring or translating a foreign subsidiary for its US parent company. Codes C = Current exchange rate H = Historical exchange rate A = Average exchange rate US dollar is the functional currency The foreign currency is the functional currency 1. Accounts receivable 2. Marketable debt securities   carried at.
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LO7 Exercise 9 Pelican Corporation, a US company, owns 100% of Swiftlet Corporation, an Australian company. Swiftlet's equipment was acquired on the following dates (amounts are stated in Australian dollars): Jan. 01, 20X1 Purchased equipment for A$40,000 Jul. 01, 20X1 Purchased equipment for A$80,000 Jan. 01, 20X2 Purchased equipment for A$50,000 Jul. 01, 20X2 Sold equipment.
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LO5 Exercise 5 The following data relate to Crake Corporation’s industry segments. (Crake HQ represents the corporate headquarters). All other segments are geographical sales segments. Attribute Europe Russia China Japan Crake HQ External sales $ 35,000 $ 24,000 $ 33,000 $ 0 $ 0 Intersegment Sales 2,000 1,000 4,000 0 0 Expenses 27,000 18,000 29,000 5,000 12,000 Assets assigned 20,000 22,000 30,000 14,000 15,000 Income from Equity investee 5,000 Required: 1. Prepare a report which reconciles the reportable segment profits to total consolidated profits assuming that corporate expenses are not allocated to the.
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LO3 Exercise 2 On February 1, 2005, Flores, Gilroy, and Hansen began a partnership in which Flores and Hansen contributed cash of $25,000; Gilroy contribute property with a fair value of $50,000 and a tax basis $40,000.  Gilroy receives a 5% bonus of partnership income.  Flores and Hansen receive salaries of $10,000.
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LO2  Exercise 1 The accountant for Oyster Corporation has assigned most of the company’s assets to its three segments as follows: Motion pictures $ 1,520,000 Communications 2,400,000 Publishing 320,000 Total $ 4,240,000 The unassigned assets consist of $640,000 of unallocated goodwill and $240,000 of assets attached to the corporate headquarters. For internal decision-making purposes, goodwill is not assigned to the segments and.
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Multiple Choice Questions LO1 1. Under the Uniform Partnership Act, loans made by a partner to the partnership are treated as a. advances to the partnership for which interest shall be paid from the date of the advance. b. advances to the partnership that are carried in the partners' capital accounts. c. Accounts Payable of the partnership for which.
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LO7 Exercise 6 Curlew Corporation has several accounting issues with respect to its interim financial statements for the first quarter of calendar 2007. For each of the independent situations given below, state whether or not the method proposed by Curlew is acceptable. Justify each answer with appropriate reasoning. 1. Curlew will not perform a.
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LO3 Exercise 6 Grech, Harris, and Ivers have a retail partnership business selling personal computers. The partners are allowed an interest allocation of 8% on their average capital. Capital account balances on the first day of each month are used in determining weighted average capital, regardless of additional partner investment or withdrawal.
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LO7 Exercise 7 Rail Corporation is preparing its interim financial statements for the third quarter of calendar 2006. The following information was gathered for the third quarter: 1. Credit sales for the quarter $2,000,000 2. Cash sales for the quarter 500,000 3. Inventories, July 1 (FIFO cost method) 250,000 4. Cash purchases of inventory during the quarter 400,000 5. Inventory purchases made on account for the.
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LO7 Exercise 8 Peatey Corporation, a US company, acquired a 30% interest in Selby Corporation of Switzerland on January 1, 20X3 for $3,300,000 when Selby’s stockholders’ equity in Swiss francs (SF) consisted of 7,000,000 SF Capital Stock and 3,000,000 SF Retained Earnings. The exchange rate for Swiss francs was $.66 on January.
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LO5 Exercise 3 Peake Corporation, a US company, formed a British subsidiary on January 1, 20X5 by investing £450,000 in exchange for all of the subsidiary’s no-par common stock. The British subsidiary, Searle Corporation, purchased real property on April 1, 20X5 at a cost of £500,000, with £100,000 allocated to land and.
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LO8 Exercise 10 Avocet Corporation is preparing its first quarterly interim report. It is subject to a corporate income tax rate of 20% on the first $50,000 of taxable income and 35% on taxable income above $50,000. Its estimated pretax accounting income for 2007, by quarter, is: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2006 Total Estimated Income $ 75,000 $ 165,000 $ 143,000 $ 120,000 $ 503,000 Avocet expects to earn and.
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LO2 11. Accounts for uncollectible accounts are converted into US dollars at a. historical rates when the US dollar is the functional currency. b. current rates only when the US dollar is the functional currency. c. historical rates regardless of the functional currency. d. current rates regardless of the functional currency. LO3 12. Lorikeet Corporation has a foreign subsidiary located in a country.
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LO3 Exercise 3 The profit and loss sharing agreement for the Quade, Reid, and Scott partnership provides for a $15,000 salary allowance to Reid. Residual profits and losses are allocated 5:3:2 to Quade, Reid, and Scott, respectively. In 2006, the partnership recorded $120,000 of net income that was properly allocated to the.
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LO2 12. Hara, Ives, and Jack are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $10,000 that is set aside for contingent expenses. The balance sheet and residual profit.
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LO2 Exercise 3 The following data relate to Plover Corporation’s industry segments: Industry Segment Sales to External Customers Inter- segment Sales Segment Assets Oil Exploration $ 40,000 $ 156,000 Refinery 120,000 360,000 Plastics 10,000 $ 10,000 60,000 Chemicals 110,000 80,000 570,000 Solar Power 10,000 36,000 138,000 Totals $ 290,000 $ 126,000 $ 1,284,000 Required: 1. Which of Plover's operating segments would be considered reporting segments under the “revenue” test? 2. Which of Plover's operating segments would be considered reporting segments under the “asset” test? .
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LO5 Exercise 9 A summary balance sheet for the Vail, Wacker Yang partnership on December 31, 2006 is shown below. Partners Vail, Wacker, and Yang allocate profit and loss in their respective ratios of 4:5:7. The partnership agreed to pay partner Yang $227,500 for his partnership interest upon his retirement from the.
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Multiple Choice Questions LO1 1. A US firm has a Belgian subsidiary that uses the British pound as its functional currency.  Under FASB statement No. 52, the US dollar from Belgian unit’s point of view will be a. a foreign currency. b. its local currency c. its current rate method currency d. its reporting currency LO1 2. Selvey Inc. is a completely.
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LO2 Exercise 1 The balance sheet of the Alba, Blick, and Calvo partnership on January 1, 2006 (the date of partnership dissolution) was as follows: Cash $ 2,000 Liabilities $ 4,010 Other assets 13,000 Loan from Alba 500 Loan to Calvo 1,000 Alba, capital (20%) 990 Blick, capital(40%) 4,500 Calvo, capital(40%) 6,000 Total assets $ 16,000 Total liab./equity $ 16,000 In January, other assets with a book value of $8,000 were sold for $5,000 in cash. Required: Determine.
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LO5 Exercise 5 Note to Instructor: This exam item is similar to Exercise 3 except that the exchange rates have been changed and the temporal method is used instead of the current rate method. The Pearce Corporation, a US corporation, formed a British subsidiary on January 1, 20X7 by investing £550,000 in exchange.
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Multiple Choice Questions LO1 1. Similar operating segments may be combined if the segments have similar economic characteristics. Which one of the following is a similar economic characteristic under SFAS 131? a. The segments’ management teams. b. The tax reporting law sections. c. The distribution method for products or services. d. The expected rates of return and risk for the segment’s.
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Multiple Choice Questions LO1 1. Which statement is correct in describing the rank order of payments as specified by the Uniform Partnership Act? a. Payments to partners with loans to the partnership are ranked equally with payments to other creditors. b. Payments to partners with loans to the partnership are ranked ahead of payments to partners without.
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LO4 Exercise 5 On November 1, 20X5, Albatross Corporation, a calendar-year US corporation, invested in a purely speculative contract to purchase 1 million euros on January 30, 20X6, from Munich Company, a German brokerage firm. Albatross agreed to purchase 1,000,000 euros from Munich at a fixed price of $1.020 per euro. Munich.
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LO8 Exercise 9 Stilt Corporation estimates its income by calendar quarter as follows for 2007: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2007 Total Estimated Income $ 30,000 $ 40,000 $ 40,000 $ 50,000 $ 160,000 Income tax rates applicable to Stilt: From: $     0 to $50,000 15% From: $50,001 to $75,000 25% Over: $75,000 35% Required: Determine Stilt’s effective tax rate. .
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LO2 Exercise 2 For internal decision-making purposes, Crane Corporation’s operating segments have been identified as follows: Operating Segment Revenues Operating Profit or Loss Identifiable Assets Appliances $ 100,000 $ ( 20,000 ) $ 60,000 Clothing 120,000 ( 70,000 ) 50,000 Lawn and Garden 92,000 5,000 15,000 Auto Accessories 110,000 12,000 22,000 Service Contracts 55,000 ( 5,000 ) 10,000 Catalog Sales 200,000 11,000 50,000 Home Furnishings 300,000 20,000 100,000 Tools 250,000 24,000 25,000 $ 1,227,000 $ ( 23,000 ) $ 332,000 Required: 1. In applying the “reported profit or loss” test to identify reporting segments, what is the test value for Crane Corporation? 2. Using the "reported profit or loss" test, which of Crane's.
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LO3 Exercise 3 On November 1, 20X3, the Penguin Corporation, a US corporation, purchased an extruding machine from Shearwater Corporation, a UK company. The purchase price was $10,000 and Penguin agreed to pay in pounds on February 1, 20X4. Both corporations are on a calendar year accounting period. Assume that the spot.
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LO4 Exercise 4 On November 1, 20X3, Petrel Corporation, a calendar-year US corporation, invested in a purely speculative contract to purchase 1 million yen on January 30, 20X4, from the Karoke Trading Company, a Japanese brokerage firm. Petrel agreed to purchase 1,000,000 yen from Karoke at a fixed price of $0.0100 per.
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LO3 Exercise 4 Evans, Fitch, and Gault operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2006 is $300,000 for Evans, $250,000 for Fitch, and $325,000 for Gault. An 8% interest allocation is provided to each partner. Evans and Fitch.
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LO5 Exercise 10 A summary balance sheet for the Almond, Brandt, and Clack partnership on December 31, 2006 is shown below. Partners Almond, Brandt, and Clack allocate profit and loss in their respective ratios of 2:1:1. The partnership agreed to pay partner Brandt $135,000 for his partnership interest upon his retirement from.
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LO2&3 Exercise 4 For internal decision-making purposes, Falcon Corporation identifies its industry segments by geographical area. For 2006, the total revenues of each segment are provided below. There are no intersegment revenues. Total Revenues Canada $ 22,000,000 United States 76,000,000 Mexico 10,000,000 South America 9,000,000 China 2,000,000 Russia 1,500,000 Australia 3,000,000 European Union 12,000,000 Other European 14,000,000 Total revenues $ 149,500,000 Required: 1. Which operating segments will be considered reporting segments based on the revenue test? 2. What is the test.
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LO5 Exercise 6 Note to Instructor: This exam item is a continuation of Exercise 6 and proceeds forward with Seakam’s second year of operations. Seakam Corporation, a British subsidiary of Pearce Corporation (a US company) was formed by Pearce on January 1, 20X7 in exchange for all of the subsidiary's common stock. Seakam.
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LO7 Exercise 6 0n June 1, 20X5, Stork Industries purchases an option contract for $5,000 on 10,000 gallons of aviation gas to minimize its purchasing cost price exposure.  At the time, the market price is $2.50 per gallon and the option price of $2 per gallon will expire 6 months later.  Stork.
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LO5 Exercise 2 On January 1, 20X5, Pegler Corporation, a US company, acquired 100% of Selmic Corporation of Canada, paying an excess of 90,000 Canadian dollars over the book value of Selmic’s net assets. The excess was allocated to undervalued equipment with a three-year remaining useful life. Selmic’s functional currency is the.
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LO7 Exercise 7 On November 1, 20X5, US Pelican Company entered into a 90 day forward contract of 200,000£ pounds to hedge a commitment to purchase special equipment on February 1, 20X6 from a British firm Raven Inc.  Assume Pelican uses a 12% interest rate.  The relevant exchange rates are of dollars.
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LO3 Exercise 2 On October 15, 20X5, Ibis Corporation, a French company, ordered merchandise listed on the Internet for 20,000 Euros from Spoonbill Corporation, a US corporation, which immediately accepted the order.  The Euro rate was $1.20 US on October 15.   On November 15, 20X5 Spoonbill shipped the goods and billed Ibis.
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LO8 Exercise 9 On November 1, 20X3, Gannet Corporation purchased 5,000 television sets for its merchandise inventory from Seoul, a South Korean firm, at a total quoted cost of 600,000,000 won (W). On this date, the spot rate for won was $1 = 750W. On the same day, Gannet invested $900,000 cash.
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LO7  Exercise 10 Peregrine Falcon Inc., a US company, owns 100% of Starling Corporation, a New Zealand company. Starling's equipment was acquired on the following dates (amounts are stated in New Zealand dollars): Jan. 01, 20X1 Purchased equipment for NZ$40,000 Jul. 01, 20X1 Purchased equipment for NZ$80,000 Jan. 01, 20X2 Purchased equipment for NZ$50,000 Jul..
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LO8 Exercise 8 On November 1, 20X3, Darter Corporation, a US corporation, purchased from Jacana Corporation, a Mexican company, some machinery that cost 1,000,000 pesos. The invoice was payable in pesos on January 30, 20X4. To hedge against rapid changes in the peso, Darter entered into a forward exchange contract on November.
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LO2 Exercise 2 The partnership of Dale, Edgar, and Fred was dissolved, and by July 1, 2006, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on July 1, 2006 (with partner residual profit and loss sharing percentages) was as follows: Cash $ 10,000 Fred, capital(30%) $   40,000 Dale, capital(40%) (20,000) Edgar,.
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LO5 Exercise 8 A summary balance sheet for the partnership of Ivory, Jacoby and Kato on December 31, 2006 is shown below. Partners Ivory, Jacoby and Kato allocate profit and loss in their respective ratios of 9:6:10. Assets Cash $ 50,000 Inventory 75,000 Marketable securities 120,000 Land 80,000 Building-net 400,000 Total assets $ 725,000 Equities Ivory, capital $ 425,000 Jacoby, capital 225,000 Kato, capital 75,000 Total equities $ 725,000 The partners agree to admit Lange for a one-tenth.
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LO3 Exercise 7 The profit and loss sharing agreement for the Sealy, Teske, and Ubank partnership provides that each partner receive a bonus of 5% on the original amount of partnership net income if net income is above $25,000. Sealy and Teske receive a salary allowance of $7,500 and $10,500, respectively. Ubank.
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