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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.
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 .
Short Answer Questions from the Textbook 1.From a consolidated point of view, when should profit be recognized on intercompany sales of depreciable assets? Nondepreciable assets? 2.In what circumstances might a consolidated gain be recognized on the sale of assets to a nonaffiliate when the selling affiliate recognizes a loss? 3.What is the essential.
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.
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.
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.
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.
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.
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.
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,.
8.One of the officers of a corporation that had just received a discharge in bankruptcy said, “Good, now we don’t owe anyone.” Is he correct? 9.What are the duties of a trustee in a liquidation proceeding? 10.What is the purpose of a combining work paper prepared by a trustee? 11.What.
An outside party issued a note to Affiliate X, who then sold the note to Affiliate Y. Y discounted the note at an unaffiliated bank, endorsing it with recourse. Which party is primarily liable and which party is contingently liable for the note? Cash dividends are viewed as a distribution of.
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.
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.
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.
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.
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.
7-5On January 1, 2011, Pinkel Company purchased equipment from its 80%-owned subsidiary for $2,400,000. On the date of the sale, the carrying value of the equipment on the books of the subsidiary company was $1,800,000. The equipment had a remaining useful life of six years on January 2011. On January.
12-8 Consider the following information: 1.On November 1, 2011, a U.S. firm contracts to sell equipment (with an asking price of 500,000 pesos) in Mexico. The firm will take delivery and will pay for the equipment on February 1, 2012. 2.On November 1, 2011, the company enters into a forward contract to.
11.The following balance sheet accounts of a foreign subsidiary at December 31, 2011, have been translated into U.S. dollars as follows: Translated at Current RatesHistorical Rates Accounts receivable, current$ 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.
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.
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.
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.
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.
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.
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.
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..
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.
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.
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.
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.
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.
11.On January 1, 2006, Parent Company purchased 32,000 of the 40,000 outstanding common shares of Sims Company for $1,520,000. On January 1, 2010, Parent Company sold 4,000 of its shares of Sims Company on the open market for $90 per share. Sims Company’s stockholders’ equity on January 1, 2006, and.
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. .
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.
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.
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.
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.
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.
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.
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.
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..
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.
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.
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.
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.
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.
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.
7-8On January 1, 2010, Peine Company acquired an 80% interest in the common stock of Stine Company on the open market for $3,000,000, the book value at that date. On January 1, 2011, Peine Company purchased new equipment for $58,000 from Stine Company. The equipment cost $36,000 and had an estimated.
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.
