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1) Cash dividends are viewed as a distribution ofthe most recent earnings. How are stock dividends viewed? 2) Why is the date of acquisition of subsidiary stock important under the purchase method? Answer: The date of acquisition of subsidiary stock […]

1) What are the major classifications of increases and decreases in expendable fund resources? 2) Poole Company owns a 90% interest in Solumbra Company. The consolidated income statement drafted by the controller of Poole Company appeared as follows: Poole Company […]

1) If the functional currency is determined to be the U.S. dollar and its financial statements are prepared in the local currency, SFAS 52, requires which of the following procedures to be followed? a.Translate the financial statements into U.S. dollars […]

1) Describe two methods for treating the preacquisition revenue and expense items of a subsidiary purchased during a fiscal period. 2) The December 31, 2013, balance sheet of the Deng, Danielson, and Gibson partnership, along with the partners residual profit […]

1) What are some of the methods commonly used in allocating income and losses to the partners? 2) The unadjusted trial balance for the general fund of the City of Hogs Breath at June 30, 2014, is as follows: Debits […]

On January 1, 2014, Deal Mart owed Money Bank $1,600,000, under an 8% note with three years remaining to maturity. Due to financial difficulties, Deal Mart was unable to pay the previous years interest. Money Bank agreed to settle Deal […]

1) P Corporation paid $420,000 for 70% of S Corporations $10 par common stock on December 31, 2013, when S Corporations stockholders equity was made up of $300,000 of Common Stock, $90,000 of Other Contributed Capital and $60,000 of Retained […]

1) Is it important to maintain separate accounts for a partners outstanding loan and capital ac-counts? Explain why or why not. 2) Why are budgeted revenues and expenditures formally recorded in the records of the general fund but not in […]

1) When there have been intercompany sales of depreciable property, workpaper entries are necessary to accomplish several financial reporting objectives. Identify three of these financial reporting objectives for depreciable property. 2) Discuss the methods used to record changes in partnership […]

1) Describe the tax treatment of partnership income. 2) Describe the attitude of the FASB toward the IASB (International Accounting Standards Board). Answer: In a 1998 report of the FASB regarding the future of international accounting, the FASB described its […]

1) David, Paul, and Burt are partners in a CPA firm sharing profits and losses in a ratio of 2:2:3, respectively. Immediately prior to liquidation, the following balance sheet was prepared: AssetsLiabilities & Equities Cash$ 100,000Liabilities $280,000 Noncash assets580,000David, Capital160,000 […]

1) P Company acquires all of the voting stock of S Company for $930,000 cash. The book values of S Companys assets are $800,000, but the fair values are $840,000 because land has a fair value above its book value. […]

1) What are the revenue-recognition criteria for expendable fund entities? How do these criteria differ from revenue-recognition criteria for profit-oriented enterprises? 2) At State College, where football has long reigned asking and fans are near fanatical in their attendance, the […]

1) On February 1, 2014, Hillary Company filed a petition for reorganization under the bankruptcy statutes. The court approved the plan on September 1, 2014, including the following provisions: 1>Accrued expenses of $21,930, representing priority items, are to be paid […]

1) If a subsidiary has both common and preferred stock outstanding, a parent must own a controlling interest in a.both the subsidiary’s common and preferred stock to justify consolidation b.the subsidiary’s common stock to justify consolidation c.the subsidiary’s common stock […]

1) What are the duties of a trustee in a liquidation proceeding? 2) When a subsidiary issues additional shares of stock to noncontrolling stockholders and such issuance results in an increase in the book value of the parents share of […]

Shrek, Donkey, and Muffin are partners with capital balances of $135,000, $90,000, and $60,000, respectively. The partners share profits and losses equally. For an investment of $120,000 cash, Fiona is to be admitted as a partner with a one-fourth interest […]

1) Describe how changes in estimates should be treated in interim financial statements. 2) Pratt Company, who owns an 80% interest in Smurfe Company, purchased $2,000,000 of Smurfes 8% bonds at 106 on December 31, 201The bonds pay interest on […]

1) On January 1, 2013, Prosser Company acquired 90% of the common stock of Simone Company for $720,000 and 20% of the preferred stock for $70,000.On this date,Simone Company reported the following account balances: Common stock ($10 par value)$600,000 Preferred […]

1) Prime Industries acquired an 80 percent interest in Sands Company by purchasing 24,000 of its 30,000 outstanding shares of common stock at book value of $105,000 on January 1, 2013. Sands reported net income in 2013 of $45,000 and […]

1) On November 30, 2013, Piani Incorporated purchased for cash of $25 per share all 400,000 shares of the outstanding common stock of Surge Company. Surge ‘s balance sheet at November 30, 2013, showed a book value of $8,000,000. Additionally, […]

1) The gain or loss on the constructive retirementof debt is recognized subsequently by the individual companies. Explain. 2) GASB 45 requires that the expected future costs of retiree health costs be recognized in the current period. Prior to this, […]

1) In accounting for expendable fund entities, revenue is ordinarily not recognized until: a.it can be objectively measured and it is available to finance expenditures of the current period b.a transaction has taken place and the earnings process is complete […]

1) Park Company acquired an 80% interest in the common stock of Southdale Company for $1,540,000 on July 1, 201 Southdale Company’s stockholders’ equity on that date consisted of: Common stock$800,000 Other contributed capital400,000 Retained earnings330,000 Required: Compute the total […]

1) The Protection Act of 2005 requires individuals, but not businesses, to undergo a means test before they can seek Chapter 7 relief. Do you believe this change should be applied to businesses as well? Why or why not? 2) […]

1) Explain the purposes of encumbrance accounting. Might encumbrance accounting be used by commercial enterprises? 2) How does the adoption of a budget for a general fund entity differ from the adoption of a budget by a commercial unit? Answer: […]

1) Describe the guidelines to be used in determining (a) what constitutes an operating segment, and (b) whether a specific operating segment is a significant segment. 2) Polly, Inc. owns 80% of Saffron, Inc. During 2014, Polly sold goods with […]

1) In a partnership liquidation, the final cash distribution to the partners should be made in accordance with the: a.partners’ profit and loss sharing ratio b.balances of the partners’ capital accounts c.ratio of the capital contributions by the partners d.ratio […]

1) In accounting for and reporting inventory in the financial statements, the “Reserve for Inventory” account is used under a.the consumption method b.the purchase method c.both the consumption and purchase methods d.none of these 2) A parent company uses the […]

1) 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 if the current rate method is used to […]

1) Customers’ meter deposits which cannot be spent for normal operating purposes would be classified as restricted cash in the balance sheet of which fund? a.Internal Service b.Trust c.Agency d.Enterprise 2) Puma Company owns 80% of the common stock of […]

The following balance sheet information is for the partnership of Abel, Boule, and Cayman:1) Cash$ 210,000Liabilities$ 510,000 Other assets1,500,000 Abele, Capital (40%)300,000 Boule, Capital (40%)480,000 Cayman, Capital (20%) 420,000 $1,710,000$1,710,000 Figures shown parenthetically reflect agreed profit and loss sharing percentages. […]

1) There have been several recent cases of a CEO or CFO resigning or being ousted for misrepresenting academic credentials. For instance, during February 2006,the CEO of RadioShack resigned by mutual agreement for inflating his educational background. During 2002, Veritas […]

1) A composition agreement is an agreement between the debtor and its creditors whereby the creditors agree to: a.accept less than the full amount of their claims b.delay settlement of the claim until a later date c.force the debtor into […]

1) Explain how to account for the difference between implied and book value interest of an in-vestment in preferred stock of a subsidiary. 2) The Shady Tree Company is preparing to announce their quarterly earnings numbers. The company expects to […]

1) What is the justification for preparing consolidated financial statements when, in fact, it is apparent that the consolidated group is not a legal entity? 2) What journal entry, if any, would the parentcompany make to record the receipt of […]

1) Explain and justify the difference between the treatment of estimated uncollectible taxes in fund accounting and the treatment of estimated bad debts in commercial accounting. 2) The following events take place: 1>Interest payments in the amount of $20,000 that […]

1) On December 31, 2014, the following account balances, among others, were included in the preclosing trial balance of the General Fund of the City of Springfield. Estimated Revenue$2,960,000 Expenditures1,950,000 Encumbrances530,000 Expenditures2013300,000 Reserve for Encumbrances (1)830,000 Appropriations2,850,000 Revenue3,220,000 Reserve for […]

1) From a consolidated entity point of view, the constructive gain or loss on the open market purchase of a parent company’s bonds by a subsidiary company is a.considered realized at the date of the open market purchase b.realized in […]

1) On May 1, 2013, the Phil Company paid $1,200,000 for 80% of the outstanding common stock of Sage Corporation in a transaction properly accounted for as an acquisition. The recorded assets and liabilities of Sage Corporation on May 1, […]

1) Which of the following statements related to pledges is incorrect? a.Pledges are signed commitments to contribute specific amounts of money on a future date or in installments b.Pledges are recorded as revenues when a promise to give is nonrevocable […]

1) There are eleven categories of government fund entities that fall under three subheadings. Describe the subheadings of government fund entities. 2) In which fund of a hospital are medical equipment and related longterm obligations recorded? Would your answer be […]

1) Describe the basic procedure for computing in-come income tax provisions for interim financial state-ments statements – unless not rolled to this line. 2) On December 31, 2013, Pinta Company purchased 80% of the outstanding common stock of Snead Company […]