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) What are dividends in a bankruptcy proceeding?
3) Why do financial statement users (financial analysts, for example) need information
about seg need hyphen ments of a firm?
4) Pell Company purchased 90% of the stock of Salton Company on January 1, 2007,
for $1,860,000, an amount equal to $60,000 in excess of the book value of equity
acquired. All book values were equal to fair values at the time of purchase (i.e., any
excess payment relates to subsidiary goodwill). On the date of purchase, Salton
Companys retained earnings balance was $200,000. The remainder of the stockholders
equity consists of no-par common stock. During 2014, Salton Company declared
dividends in the amount of $40,000, and reported net income of $160,000. The retained
earnings balance of Salton Company on December 31, 2013 was $640,000. Pell
Company uses the cost method to record its investment. No impairment of goodwill
was recognized between the date of acquisition and December 31, 2014.
Required:
Prepare in general journal form the workpaper entries that would be made in the
preparation of a consolidated statements workpaper on December 31, 2014.
5) Are the adjustments to the noncontrolling interest for the effects of intercompany
profit eliminations illustrated in this text necessary for fair presentation in accordance
with generally accepted accounting principles? Explain.
6) Are fiduciary funds governmental funds or proprietary funds? Explain.
Portney, Grey, and Ross are partners with capital balances of $80,000, $200,000, and
$120,000, respectively. Profits and losses are shared in a 3:2:1 ratio. Grey decided to
withdraw and the partnership revalued its assets. The value of inventory was decreased
by $20,000 and the value of land was increased by $50,000. Portney and Ross then
agreed to pay Grey $230,000 for his withdrawal from the partnership.7) Required:
Prepare the journal entry to record Greys withdrawal under the
Abonus method.
Bfull goodwill method.
8) What capital assets (if any) of ONNOs need not be depreciated?
9) Why is it important to distinguish between up-stream and downstream sales in the
analysis ofintercompany profit eliminations?
10) How are dividends declared and paid by a subsidiary during the year eliminated in
the consolidated work papers under each method of ac-counting accountingfor
investments?