1) A new truck was ordered for the sanitation department at a cost of $122,200 on
September 3, 2013.
Required:
(A) Prepare the required journal entry in the General Fund for the Fund Financial
Statements.
(B) Prepare the required journal entry for the Government-Wide Financial Statements.
2) The following information pertains to inventory held by a company on December 31,
2013.
What is the amount of inventory loss shown on the income statement under U.S.
GAAP?
A.$0.
B.$3,000.
C.$14,000.
D.$10,000.
E.$8,400.
3) Pell Company acquires 80% of Demers Company for $500,000 on January 1, 2014.
Demers reported common stock of $300,000 and retained earnings of $210,000 on that
date. Equipment was undervalued by $30,000 and buildings were undervalued by
$40,000, each having a 10-year remaining life. Any excess consideration transferred
over fair value was attributed to goodwill with an indefinite life. Based on an annual
review, goodwill has not been impaired.
Demers earns income and pays dividends as follows:
Assume the EQUITY METHOD is applied.
Compute Pell’s income from Demers for the year ended December 31, 2014.
A) $74,400.
B) $73,000.
C) $42,400.
D) $41,000.
E) $80,000.
4) A five-year lease is signed by the City of Wachovia for equipment with a seven-year
life. The asset will be returned to the lessor at the end of the lease. The present value of
the lease is $20,000, and annual payments of $5,411.41 are payable beginning on the
date the lease is signed. The interest portion of the second payment is $1,604.75. The
equipment is to be used in City Hall and was purchased from appropriated funds of the
General Fund.
What should be recorded in the General Fund on the date the lease is signed?
A.Option A
B.Option B
C.Option C
D.Option D
E.Option E
5) On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as
follows:
On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the
outstanding common shares of Spraz. The loan was to be paid in ten equal annual
principal payments, plus interest, beginning December 31, 2014. The excess
consideration transferred over the underlying book value of the acquired net assets was
allocated 60% to inventory and 40% to goodwill.
What is consolidated noncurrent assets at January 2, 2014?
A) $195,000.
B) $192,200.
C) $186,600.
D) $181,000.
E) $169,800.
6) On January 1, 2012, Jones Company bought 15% of Whitton Company. Jones paid
$150,000 for these shares, an amount that exactly equaled the proportionate book value
of Whitton. On January 1, 2013, Whitton acquired 80% ownership of Jones. The
following data are available concerning Whitton’s acquisition of Jones:
Excess fair value over book value (assigned to trademarks) is amortized over 20 years.
The initial value method is used by both companies.
The following information is available regarding Jones and Whitton:
What would be included in a consolidation worksheet entry for 2013?
A.Debit treasury stock, $135,000.
B.Credit treasury stock, $135,000.
C.Debit treasury stock, $150,000.
D.Credit treasury stock, $150,000.
E.Debit common stock, $150,000.
7) Natarajan, Inc. had the following operating segments, with the indicated amounts of
segment revenues and segment expenses:
According to the profit or loss test, which segments would require disaggregation?
A.A, B, D, and E.
B.A, B, C, and E.
C.A, B, and D.
D.A and D.
E.A only.
8) On January 1, 2013, Jackie Corp. purchased 30% of the voting common stock of Rob
Co., paying $2,000,000. Jackie properly accounts for this investment using the equity
method. At the time of the investment, Rob’s total stockholders’ equity was $3,000,000.
Jackie gathered the following information about Rob’s assets and liabilities whose book
values and fair values differed:
Any excess of cost over fair value was attributed to goodwill, which has not been
impaired. Rob Co. reported net income of $300,000 for 2013, and paid dividends of
$100,000 during that year.
How much goodwill is associated with this investment?
A) $(500,000.)
B) $ 0.
C) $ 650,000.
D) $1,000,000.
E) $2,000,000.
9) Ryan Company owns 80% of Chase Company. The original balances presented for
Ryan and Chase as of January 1, 2013 are as follows:
Assume Chase reacquired 8,000 shares of its common stock from outsiders at $10 per
share.
What is Ryan’s percent ownership in Chase after the acquisition of the treasury shares
(rounded)?
A) 80%.
B) 95%.
C) 64%.
D) 76%.
E) 69%.
10) West Corp. owned 70% of the voting common stock of East Co. East owned 60% of
Compass Co. West and East both used the initial value method to account for their
investments. The following information was available from the financial statements and
records of the three companies:
Operating income included unrealized intra-entity gains (which are related to inventory
transfers) but did not include dividend income from investment in subsidiary.
What amount should have been reported for consolidated net income?
A.$1,285,000.
B.$1,331,700.
C.$1,349,000.
D.$1,315,000.
E.$1,314,900.
11) Car Corp. (a U.S.-based company) sold parts to a Korean customer on December
16, 2013, with payment of 10 million Korean won to be received on January 15, 2014.
The following exchange rates applied:
Assuming a forward contract was entered into, at what amount should the forward
contract be recorded at December 31, 2013? Assume an annual interest rate of 12% and
a fair value hedge. The present value for one month at 12% is .9901
A.$200
B.$295
C.$495
D.$500
E.$9,300
12) On January 1, 2012, Jones Company bought 15% of Whitton Company. Jones paid
$150,000 for these shares, an amount that exactly equaled the proportionate book value
of Whitton. On January 1, 2013, Whitton acquired 80% ownership of Jones. The
following data are available concerning Whitton’s acquisition of Jones:
Excess fair value over book value (assigned to trademarks) is amortized over 20 years.
The initial value method is used by both companies.
The following information is available regarding Jones and Whitton:
Compute the amount allocated to trademarks recognized in the January 1, 2013
consolidated balance sheet.
A.$80,000.
B.$100,000.
C.$76,000.
D.$16,000.
E.$-0-
13) On January 1, 2014, Palk Corp. and Spraz Corp. had condensed balance sheets as
follows:
On January 2, 2014, Palk borrowed the entire $84,000 it needed to acquire 80% of the
outstanding common shares of Spraz. The loan was to be paid in ten equal annual
principal payments, plus interest, beginning December 31, 2014. The excess
consideration transferred over the underlying book value of the acquired net assets was
allocated 60% to inventory and 40% to goodwill.
What is consolidated current assets at January 2, 2014?
A) $127,000.
B) $129,800.
C) $143,800.
D) $148,000.
E) $135,400.