1) Explain and justify the difference between the treatment of estimated uncollectible
taxes in fund accounting and the treatment of estimated bad debts in commercial
accounting.
2) The following events take place:
1>Interest payments in the amount of $20,000 that are the responsibility of the Debt
Service Fund are paid by the General Fund.
2>The Internal Service Fund bills the Special Revenue Fund $25,000 for services
performed.
3>The Special Revenue Fund transfers $10,000 to the Internal Service Fund as a
temporary loan.
4>The General Fund transfers $150,000 to start an Internal Service Fund.
Required:
Identify the interfund activity as a loan, services provided and used, interfund transfer,
or interfund reimbursement and prepare entries in general journal form to record the
transactions on the records of the fund involved.
3) Explain the potential advantages of a stock acquisition over an asset acquisition.
4) In recent months, virtually every topic that has come to the attention of the standard
setters has been undertaken as a joint effort of the FASB and the IASB rather than as an
individual effort by one of the two boards. List and discuss some of the joint projects
that fall into this category.
5) P Company purchased 80% of the outstanding common stock of S Company on
January 2, 2013, for $380,000. Balance sheets for P Company and S Company
immediately after the stock acquisition were as follows:
P CompanyS Company
Current assets$ 166,000$ 96,000
Investment in S Company380,000-0-
Plant and equipment (net)560,000224,000
Land 40,000 120,000
$1,146,000$440,000
Current liabilities$ 120,000$ 44,000
Long-term notes payable-0-36,000
Common stock480,000160,000
Other contributed capital244,00064,000
Retained earnings 302,000 136,000
$1,146,000$440,000
S Company owed P Company $16,000 on open account on the date of acquisition.
Required:
Prepare a consolidated balance sheet for P and S Companies on the date of acquisition.
Any difference between the value implied by the purchase price of the investment and
the book value of net assets acquired relates to subsidiary land. The book values of S
Company’s other assets and liabilities are equal to their fair values.
6) Do you think that you would ever resort to filing for bankruptcy relief yourself? Why
or why not?