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
Paul, Capital160,000
_______Burt, Capital 80,000
Total Assets$680,000Total Liabilities & Equities $680,000
Required:
Assuming the noncash assets are sold for $300,000, determine the amount of cash to be
distributed to each partner. Complete the worksheet and clearly indicate the amount of
cash to be distributed to each partner in the spaces provided. No cash is available from
any of the three partners.
NoncashDavidPaulBurt
Cash Assets LiabilitiesCapitalCapitalCapital
Beginning Bal.100,000580,000280,000160,000160,00080,000
2) Define noncontrolling (minority) interest. List three methods that might be used for
reporting the noncontrolling interest in a consolidated balance sheet, and state which is
preferred under the SFAS No. 160[topic 810].
3) Explain why a partnership is viewed in accounting as a separate economic entity.
4) P Company purchased 90% of the common stock of S Company on January 2, 2014
for $900,000. On that date, S Companys stockholders equity was as follows:
Common stock, $20 par value$400,000
Other contributed capital100,000
Retained earnings450,000
During 2014, S Company earned $200,000 and declared a $100,000 dividend. P
Company uses the partial equity method to record its investment in S Company. The
difference between implied and book value relates to land.
Required:
Prepared, in general journal form, all eliminating entries for the preparation of a
consolidated statements workpaper on December 31, 2014.
5) Define a fund as the term is applied in accounting for the activities of governmental
units and other nonbusiness organizations.
6) Condensed balance sheets for Rich Company and Jordan Company on January 1,
2013 are as follows:
RichJordan
Current Assets$ 440,000$200,000
Plant and Equipment (net) 1,080,000 340,000
Total Assets$1,520,000$540,000
Total Liabilities$ 230,000$ 80,000
Common Stock, $10 par value840,000240,000
Other Contributed Capital300,000130,000
Retained Earnings 150,000 90,000
Total Equities$1,520,000$540,000
On January 1, 2013 the stockholders of Rich and Jordan agreed to a consolidation
whereby a new corporation, Cannon Company, would be formed to consolidate Rich
and Jordan. Cannon Company issued 70,000 shares of its $20 par value common stock
for the net assets of Rich and Jordan. On the date of consolidation, the fair values of
Rich’s and Jordan’s current assets and liabilities were equal to their book values. The
fair value of plant and equipment for each company was: Rich, $1,270,000; Jordan,
$360,000.
An investment banking house estimated that the fair value of Cannon Company’s
common stock was $35 per share. Rich will incur $45,000 of direct acquisition costs
and $15,000 in stock issue costs.
Required:
Prepare the journal entries to record the consolidation on the books of Cannon
Company assuming that the consolidation is accounted for as an acquisition.
7) There are three levels of influence or control by an investor over an investee,
delete ,which determine the appropriate accounting treatment. Identify and briefly
describe the three levels and their accounting treatment.
8) Identify three types of transactions that result in a change in a parent companys
ownership interest in its subsidiary.