On January 1, 2015, Bactin Corporation acquired 10% of Oakton Company for
$100,000. On that date, the total book value and fair value of Oakton’s net assets was
$900,000. Any difference between cost and fair value is attributable to goodwill. In
2015, Oakton reported net income of $60,000 and paid dividends of $30,000. On
January 1, 2016, Bactin Corporation bought another 10% of Oakton for $100,000, and
on that date, the book value and fair value of Oakton’s net assets still was $900,000 (the
fair value of Oakton did not change during 2015). Bactin concluded that its 20%
ownership now allowed it to significantly influence Oakton’s operations. In 2016,
Oakton reported net income of $80,000 and paid dividends of $40,000.
Required:
Prepare all journal entries for Bactin for 2015 and 2016, assuming no change in fair
value of the Oakton stock during that time period.
In preparation for developing its statement of cash flows for the year just ended,
D-Rose Distributors collected the following information:
Required:
1) In D-Rose’s statement of cash flows, what were net cash inflows (or outflows) from
investing activities?
2) In D-Rose’s statement of cash flows, what were net cash inflows (or outflows) from
financing activities?
A company uses the allowance method to account for bad debts. What is the effect on
each of the following accounts of the collection of an account previously written off?
The Rink offers annual $200 memberships that entitle members to unlimited use of
ice-skating facilities and locker rooms. Each new membership also entitles the member
to receive ten “20% off a $5 meal” coupons that are redeemable at the Rink’s snack bar.
The Rink estimates that approximately 80% of the coupons will be redeemed, and that,
if the coupons weren’t redeemed, $5 meals still would be discounted by 5% because of
ongoing promotions.
Calculate how much of the transaction price should be allocated to each performance
obligation in the contract. Show your work.
A disclosure note in the annual financial statements of Macy’s Inc. included the
following:
“Future maturities of long-term debt, other than capitalized leases and premium on
acquired debt, are shown below:” For how many years subsequent to the current year
must Macy’s report these amounts? Name at least two other items that must be
disclosed for a company’s long-term debt.
DCL Industries purchased a supply of mechanical components from E Corporation on
November 1, 2016. In payment for the $48,000 purchase, DCL issued a one-year
installment note to be paid in equal monthly payments at the end of each month. The
payments include interest at the rate of 12%. Required:
1> Prepare the journal entry for DCL’s purchase of the components on November 1,
2016.
2> Prepare the journal entry for the first installment payment on November 30, 2016.
3> What is the amount of interest expense that DCL will report in its income statement
for the year ended December 31, 2016?
Rice Industries owns a manufacturing plant in a foreign country. Political unrest in the
country indicates that Rice should investigate for possible impairment. Below is
information related to the plant’s assets ($ in millions):
The amount of impairment loss that Rice should recognize according to U.S. GAAP and
IFRS, respectively, is:
In early December of 2016, Blue Corp. purchased $40,000 of Yellow Company
common stock, which constitutes less than 3% of Yellow’s outstanding shares. Blue
accounts for the Yellow investment as available for sale. By December 31, 2016, the
value of the Yellow investment had fallen to $30,000, and Blue recorded an unrealized
loss. By December 31, 2017, the value of the Yellow investment had fallen to $15,000,
and Blue determined that it can no longer assert that it has both the intent and ability to
hold the shares long enough for their fair value to recover, so Blue recorded an OTT
impairment. By December 31, 2018, fair value had recovered to $20,000. Prepare
appropriate entry(s) at December 31, 2017, and indicate how the scenario will affect net
income, OCI, and comprehensive income.
