Archives

SA1–1 SPECIAL APPENDIX 1 UNDERSTANDING THE ISSUES 1. (a) Company E net income ……………………. $35,000 Parent’s share ………………………………… × 30% $10,500 Less: Equipment amortization {[$170,000 – ($500,000 × 30%)] ÷ 5} …. (4,000) Investment income ………………………….. $ 6,500 (b) Beginning […]

SPECIAL APPENDIX 2 UNDERSTANDING THE ISSUES 1. (a) No equity investment would be shown in this case. The Primary Beneficiary could own various debt or equity securities, but it is not required in order to consolidate. (b) The consolidation is […]

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PROBLEM 1-6 Total consideration for Sylvester: Cash ………………………………………………………………………………. $580,000 Less fair value of net […]

1–1 CHAPTER 1 UNDERSTANDING THE ISSUES 1. (a) Product extension—manufacturer ex- pands product lines in boating industry. (b) Vertical forward—manufacturer buys distribution outlets (c) Conglomerate—unrelated businesses (d) Vertical backward—manufacturer ac- quires a supplier (e) Vertical forward—an entertainment company acquires outlets […]

CHAPTER 10 UNDERSTANDING THE ISSUES 1. If the U.S. dollar strengthens relative to a FC, this means that the dollar commands more FC. The direct exchange rate will change in that 1 FC will be worth fewer dollars. If a […]

10–13 Ch. 10—Problems PROBLEM 10-3 (1) The foreign currency transaction: March April Sales (200,000 euros × $1.180) ……………………………………….. $236,000 $ — Cost of goods sold ………………………………………………………….. 160,000 — Gross profit ……………………………………………………………………. $ 76,000 $ — Exchange gain (loss): 200,000 euros […]

CHAPTER 11 UNDERSTANDING THE ISSUES 1. If major cash inflows and/or outflows are not denominated in the entity’s domestic currency, this is a strong indicator that another currency is the functional currency. The company’s financing, sales, and ex- penditure activities […]

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PROBLEM 11-4 Retained Earnings—Parent …………………………………………. 832,500 Investment in Spruco …………………………………………….. 832,500 To eliminate the […]

CHAPTER 12 UNDERSTANDING THE ISSUES 1. Viewing an interim period as an integral part of a larger annual period has several benefits. The allocation of expense under this viewpoint provides information that al- lows for more meaningful and insightful predictions […]

12–19 Ch. 12—Problems PROBLEM 12-3 Radix, Inc. Interim Income Statements For the For the Second Year-To-Date Quarter Ended Ended June 30, 2011 June 30, 2011 Net sales (see Schedule A) …………………………………………. $2,690,000 $4,050,000 Cost of sales (see Schedule B) …………………………………….. […]

13–1 CHAPTER 13 UNDERSTANDING THE ISSUES 1. Partnerships are generally less formal than other types of organizations and yet it is important to consider a number of factors in a partnership agreement. Individual part- ners have more legal exposure in […]

Ch. 13—Problems 13–16 PROBLEMS PROBLEM 13-1 Allocation of $280,000 of Partnership Income Cumulative Rockford Skeeba Tapinski Total Profit and loss percentage ……………. 35% 25% 40% Salary ………………………………………… $50,000 $40,000 $55,000 $145,000 Bonus based on sales ………………….. 15,000 160,000 Bonus (see […]

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Problem 14-2, Concluded (4) The capital of the original partnership plus the contribution of […]

CHAPTER 14 UNDERSTANDING THE ISSUES 1. A major concern is that the value used as a basis for establishing the price an incoming partner should pay is the fair value of the ship ($500,000 versus $400,000). existing partnership’s net assets. […]

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Problem 15-4, Concluded (e) Encumbrances ……………………………………………………………….. 276,000 Fund Balance—Assigned ………………………………………….. 276,000 To record encumbrances. […]

15–1 CHAPTER 15 UNDERSTANDING THE ISSUES 1. GASB Statement No. 34 stipulates a new reporting model that includes two separate, but related sets of financial statements. The first set, the fund financial statements, focuses on reporting activity as a collection […]

16–19 Ch. 16—Problems PROBLEM 16-7 (1) b, f (2) b, e (3) d, b (4) a, c PROBLEM 16-8 (1) Entries in the Internal Service Fund: Expenses—Claims and Judgments ………………………………………… 4,000,000 Cash …………………………………………………………………………….. 2,300,000 Claims and Judgments Liability ………………………………………… 1,700,000 […]

Ch. 16—Problems 16–1 16–1 CHAPTER 16 UNDERSTANDING THE ISSUES 1. Capital projects funds are used to account for the inflows and outflows of financial re- sources raised and expended to acquire major capital assets used by the general government. This […]

CHAPTER 17 UNDERSTANDING THE ISSUES 1. The new reporting model adopts full accrual accounting for the government-wide statements for both governmental and business-type activi- ties. Therefore, a conversion of the govern- mental fund activity is necessary in order to present […]

18–1 CHAPTER 18 UNDERSTANDING THE ISSUES 1. Separating the accounting for current activ- ities into restricted and unrestricted funds allows for detailed reporting of resources and spending. This is often done to satisfy donors and/or grantors who require de- tailed […]

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Problem 19-5, Concluded Event Fund Journal Entry (8) Plant Fund for Fund Balance—Restricted …………………………. […]

19–1 CHAPTER 19 UNDERSTANDING THE ISSUES 1. The measurement focuses used by public universities under GASB Statement No. 34 are both the flows of financial resources and the flows of economic resources. Pri- vate universities use a measurement focus of […]

2–21 Ch. 2—Problems Problem 2-2, Concluded (3) Roland Company and Subsidiary Downes Company Consolidated Balance Sheet July 1, 2016 Assets Current assets: Other assets ………………………………………………………………. $ 80,000* Inventory (including $20,000 adjustment) ………………………. 200,000 $ 280,000 Long-lived assets: Land (including $50,000 […]

2–1 CHAPTER 2 UNDERSTANDING THE ISSUES 1. (a) Jacobson has a passive level of own- ership and in future periods will record dividend income of only 15% of Bil- trite’s declared dividends. Jacobson will also have to adjust the investment […]

2–35 Ch. 2—Problems Problem 2-10, Concluded (2) Palto Company and Subsidiary Saleen Company Worksheet for Consolidated Balance Sheet January 1, 2015 Eliminations Consolidated Balance Sheet and Adjustments Balance Palto Saleen Dr. Cr. NCI Sheet Cash ………………………………… 161,000 ………… …………. ………… […]

20–1 CHAPTER 20 UNDERSTANDING THE ISSUES 1. Several of the important goals of estate planning are to identify and clearly commu- nicate the desires and wishes of the dece- dent, maximize the value of the estate’s net assets, minimize the […]

21–13 Ch. 21—Problems Problem 21-1, Concluded Based on a comparison of the above effective interest rates (3.11% vs. 3.09%), it is apparent that the creditor has made a concession. Therefore, the restructuring qualifies as a troubled debt restructuring. June 30, […]

CHAPTER 21 UNDERSTANDING THE ISSUES 1. Given a restructuring that is not under bankruptcy law, the gain on restructuring is measured as the amount by which the book value of the debt, including accrued inter- est, exceeds the total of […]

3-79 Ch. 3—Problems Problem 3A-1, Concluded See solution to Problem 3-2 for value analysis, D&D schedule, and amortization schedules. Eliminations and Adjustments: (CY) Eliminate the current-year entries made in the investment account and in the subsidiary income account. (EL) Eliminate […]

3-21 Ch. 3—Problems Problem 3-1, Continued Simple Equity Method Sophisticated Equity Method Cost Method Eliminations 2015 (CY1) Subsidiary Income ….. 48,000 Subsidiary Income …….. 44,000 No conversion Eliminated current- Investment in Investment in needed first year year entries. Solvo Company […]

3-61 Ch. 3—Problems Problem 3-14, Concluded Eliminations and Adjustments: (CY1) Current-year subsidiary income. (CY2) Current-year dividend. (EL) Eliminate controlling interest in subsidiary equity. (D) Distribute excess according to D&D schedule. (A) Amortize excess using amortization schedule. PROBLEM 3-15 (1) Company […]

CHAPTER 3 UNDERSTANDING THE ISSUES 1. (a) Subsidiary Income = $40,000. Investment in Subsidiary ($500,000 + $40,000 – $5,000) = $535,000. (b) Subsidiary Income ($40,000 – $7,000 amortization) = $33,000. come has, in the past, been shown as an expense. […]

3-41 Ch. 3—Problems Problem 3-8, Continued (2) Detner International and Subsidiary Hardy Company Worksheet for Consolidated Financial Statements For Year Ended December 31, 2017 Eliminations Consolidated Controlling Consolidated Trial Balance and Adjustments Income Retained Balance Detner Hardy Dr. Cr. Statement […]

CHAPTER 4 UNDERSTANDING THE ISSUES 1. The intercompany sale will cause both sales and costs of goods sold to be over- stated by $50,000 on the consolidated in- come statement. The amount remaining in ending inventory will cause cost of […]

4–21 Ch. 4—Problems Problem 4-3, Concluded Eliminations and Adjustments: (CY1) Current-year subsidiary income. (CY2) Current-year dividend. (EL) Eliminate controlling interest in subsidiary equity. (D/NCI) Distribute excess and NCI adjustment. (A) Amortize excess. (IS) Eliminate intercompany sales during current period. (IA) […]

4–41 Ch. 4—Problems Problem 4-9, Concluded Eliminations and Adjustments: (CV) Adjust investment for change in Sunco retained earnings, 90% × $50,000 = $45,000. (CY2) Eliminate the entry recording the parent’s share of the subsidiary’s cash dividend. (CY3) Eliminate the intercompany […]

4–55 Ch. 4—Problems Problem 4-13, Continued (2) Amortization Schedule Account adjustments Annual Current Prior to be amortized Life Amount Year Years Total Key Buildings 20 $ 5,000 $ 5,000 $ 5,000 $10,000 A1 Equipment 5 10,000 10,000 10,000 20,000 A2 […]

5–21 Ch. 5—Problems Problem 5-5, Continued Intercompany Inventory Profit Deferral Parent Parent Parent Sub Sub Sub Amount Percent Profit Amount Percent Profit Beginning ………………………… $20,000 30% $6,000 — 0% — Ending …………………………….. 25,000 30 7,500 — 0 — Subsidiary Stark […]

CHAPTER 5 UNDERSTANDING THE ISSUES 1. The first approach that could be used to reduce the overall consolidated interest cost but maintain the subsidiary as the deb- tor would have the parent advancing $1,000,000 to the subsidiary so that the […]

5–57 Ch. 5—Problems Problem 5-15, Concluded (CL1a) Eliminate the intercompany interest expense and revenue on factory lease: Original balance ………………………………………………………………… $103,770 First lease payment ……………………………………………………………. (25,000) First-year interest (12% × $78,770) ………………………………………. 9,452 Second lease payment ……………………………………………………….. (25,000) Balance for […]

5–41 Ch. 5—Problems PROBLEM 5-12 Determination and Distribution of Excess Schedule Company Parent NCI Implied Price Value Fair Value (80%) (20%) Fair value of subsidiary ………………… $562,500 $450,000 $112,500 Less book value of interest acquired: Common stock ($1 par) …………… […]

6–1 CHAPTER 6 UNDERSTANDING THE ISSUES 1. (a) Investing activities—Purchase of Sub Company ($900,000 – $50,000) ……………. $(850,000) (b) Investing activities—Purchase of Sub Company ($500,000 – $50,000) ……………. $(450,000) Noncash financing activities—Issuance of notes payable ………………………………. 400,000 (c) Investing activities—Cash […]

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Problem 6-9, Concluded Parson Company and Subsidiary Solar Company Worksheet for Consolidated Financial Statements […]

6–21 Ch. 6—Problems Problem 6-5, Concluded Eliminations and Adjustments: (IS) Eliminate intercompany sales. (BI) Adjustment for beginning inventory profit: Sold by Mercer (0.25 × $2,500) = $ 625 Sold by Dawn (0.40 × $2,000) = 800 Total $1,425 (EI) Adjustment […]

CHAPTER 7 UNDERSTANDING THE ISSUES 1. Equity prior to sale of new shares ……………………………………………………………………… $200,000 Equity gained by sale ………………………………………………………………………………………. 650,000 Total equity after sale ………………………………………………………………………………………. $850,000 Parent interest ………………………………………………………………………………………………… × 60% Parent equity ………………………………………………………………………………………………….. $510,000 Price paid ………………………………………………………………………………………………………. 650,000 […]

7–21 Ch. 7—Problems Problem 7-2, Concluded Eliminations and Adjustments: (CY1) Eliminate the current-year entries for subsidiary income. (CY2) Eliminate current-year entries for subsidiary dividends. (EL) Eliminate 90% of Craft Company equity balances at the beginning of the year against the […]

7–35 Ch. 7—Problems Problem 7-7, Continued Titan Corporation and Subsidiaries Boat Corporation and Engine Corporation Worksheet for Consolidated Financial Statements For Year Ended December 31, 2018 (Concluded) Eliminations Consolidated Controlling Consol. Trial Balance and Adjustments Income NCI NCI Retained Balance […]

8–35 Ch. 8—Problems Problem 8-6, Continued Mary Company and Subsidiaries John Company and Joan Company Worksheet for Consolidated Financial Statements For Year Ended December 31, 2018 (Concluded) Consoli- Eliminations Consolidated Controlling dated Trial Balance and Adjustments Income Retained Balance Mary […]

8–21 Ch. 8—Problems Problem 8-3, Continued Palo Company and Subsidiary Sheila Company Worksheet for Consolidated Financial Statements For Year Ended December 31, 2018 Eliminations Consolidated Controlling Consolidated Trial Balance and Adjustments Income Retained Balance Palo Sheila Dr. Cr. Statement NCI […]

CHAPTER 8 UNDERSTANDING THE ISSUES 1. The stock dividend will result in the following entry being made by the subsidiary: Retained Earnings (10,000 shares × $50 per share) ………………. 500,000 Common Stock ($1 par, 10,000 shares × $1) …………………….. 10,000 […]

9–1 CHAPTER 9 UNDERSTANDING THE ISSUES 1. Aside from the operational issues associated with parent and subsidiary relationships, sever- al accounting issues become apparent. First, assume that the accounting principles the sub- sidiary uses may differ in certain respects from […]

DM–13 Derivatives Module—Problems PROBLEM M-2 (1) Corn Futures September 1 September 30 October 31 November 5 Number of bushels. …………………… 1,000,000 1,000,000 1,000,000 1,000,000 Spot price per bushel …………………. $2.5000 $2.5380 $2.5680 $2.5685 Futures price per bushel …………….. $2.5100 $2.5420 […]

DM–1 DERIVATIVES MODULE UNDERSTANDING THE ISSUES 1. The intrinsic value of a forward contract to sell a commodity or currency is determined by comparing the spot rate/price at the date of inception of the forward to the spot rate/price at […]