1) Explain the purposes of encumbrance accounting. Might encumbrance accounting be
used by commercial enterprises?
2) How does the adoption of a budget for a general fund entity differ from the adoption
of a budget by a commercial unit?
3) On July 15, Pinta, Inc. purchased 88,500,000 yen Pinta of parts from a Tokyo
company paying 20% down, and the balance is due in 90 days. Interest is payable at a
rate of 8% on the unpaid balance. The exchange rate on July 15, was $1.00 = 118
Japanese yen. On October 13, the exchange rate was $1.00 = 114 Japanese yen.
Required:
Prepare journal entries to record the purchase and payment of this foreign currency
transaction in U.S. dollars.
4) If a parent company elects to use the partial equity method rather than the cost
method to record its investments in subsidiaries, what effect will this choice have on the
consolidated financial statements? If the parent company elects the complete equity
method?
5) How does the existence of preferred stock affectthe calculation of noncontrolling
interest?