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
January 1 and July 1 and mature on December 31, 201Pratt Company uses the cost
method to account for its investment in Smurfe.Selected balances from December 31,
2013 accounts of the two companies are as follows:
Pratt_____Smurfe____
Investment in Smurfe 8% bonds$2,120,000$ —-
Bond discount —-300,000
Interest payable —- 800,000
8% bonds payable —- 20,000,000
Interest expense —- 1,700,000
Gain or loss on constructive
retirement of bonds —- —-
Required:
Prepare in general journal form the workpaper eliminations related to the bonds to
consolidated the financial statements of Pratt and its subsidiary for the year ended
December 31, 2013 and 2014.
3) Name the three stages of concern to the accountant in accounting for importexport
transactions. Briefly explain the accounting for each stage.
4) Publicly owned companies are usually required to file some type of quarterly
(interim) report as part of the agreement with the stock exchanges that list their stock.
Indicate two problems with interim reporting and GAAPs position on this reporting.
5) Expendable fund entities prepare closing entries at the end of each period just as
business enterprises do. Describe the necessary closing entries for expendable funds.
6) How does the FASBs conceptual framework influence the development of new
standards?
7) 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 $160,000, determine the amount of cash to be
distributed to each partner assuming all partners are personally solvent. Complete the
worksheet and clearly indicate the amount of cash to be distributed to each partner in
the spaces provided.
NoncashDavidPaulBurt
Cash Assets LiabilitiesCapitalCapitalCapital
Beginning Bal.100,000580,000280,000160,000160,00080,000