1) Buddy, a dog, is cared for by a trust set up by his owner’s will. The following
transactions occurred for the trust.
1>The trust was established with $100,000 from his owner’s estate, by deposit to a
savings account.
2>A check is written to Paws and Claws Puppy Farm to cover the first month of
Buddy’s room and board, for $680.
3>A check is received for interest earned on the savings account amounting to $417.
4>Buddy dies. Paws and Claws sends a final room and board bill for $430, with
additional charges for Buddy’s burial of $270. The invoice is paid.
5>The balance of the trust is turned over to the Humane Society, as prescribed by
Buddy’s owner’s will, and the trust is closed.
Required:
Prepare the journal entries for the listed transactions. Disregard the impact of estate and
income taxes.
2) On January 1, 2010, Platt Corporation purchased a 30% interest in Sandig Company
for $450,000. On this date, the fair values of Sandig’s assets and liabilities are assumed
to be the same as their book values. Platt will account for Sandig using the equity
method. Sandig’s adjusted trial balance at the date of acquisition and year end were as
follows:
DebitsDecember 31January 1
Current assets$160,000$120,000
Noncurrent assets420,000460,000
Expenses390,000
Dividends (paid June 30) 40,000
Total$1,010,000
Credits
Current Liabilities$90,000$120,000
Capital stock250,000250,000
Beginning Retained earnings140,000140,000
Sales 530,000
Total $1,010,000
Required:
1>What is Platt’s investment income from Sandig for the year ending December 31,
2010?
2>Calculate Platt’s investment in Sandig at year end December 31, 2010 .
3) A pre-closing trial balance included the following account balances for Simpli City:
Due from other funds$ 3,500
Fund balance – unassigned14,000
Estimated revenues20,000
Revenues22,000
Appropriations18,000
Expenditures – current year19,000
Expenditures – prior year1,500
Other Financing Source – Nonreciprocal transfer in1,000
Required:
Prepare the necessary closing entries for the General Fund.
4) Tillman Fabrications has five operating segments, as summarized below:
Required:
Determine which of the operating segments of Tillman Fabrications are reportable
segments for the period shown.
5) The following data relate to Falcon Corporation’s industry segments:
Sales to
ExternalIntersegment
Industry SegmentCustomers Sales Assets
Oil Exploration$80,000$$310,000
Refinery240,000720,000
Plastics20,000$20,000120,000
Chemicals220,000160,000980,000
Solar Power20,00075,000270,000
Totals$580,000$255,000$$2,400,000
Required:
1> Which of Falcon’s operating segments would be considered reporting segments
under the “revenue” test?
2> Which of Falcon’s operating segments would be considered reporting segments
under the “asset” test?
6) On January 2, 2011 Palta Company issued 80,000 new shares of its $5 par value
common stock valued at $12 a share for all of Sudina Corporation’s outstanding
common shares. Palta paid $5,000 for the direct combination costs of the accountants.
Palta paid $18,000 to register and issue shares. The fair value and book value of
Sudina’s identifiable assets and liabilities were the same. Summarized balance sheet
information for both companies just before the acquisition on January 2, 2011 is as
follows:
Palta Sudina
Cash$75,000$60,000
Inventories160,000200,000
Other current assets200,000250,000
Land175,000125,000
Plant assets-net 1,500,000 750,000
Total Assets$2,110,000$1,385,00
Accounts payable$100,000$155,000
Notes payable700,000330,000
Capital stock, $2 par600,000250,000
Additional paid-in capital450,00050,000
Retained Earnings 260,000 600,000
Total Liabilities & Equity$2,110,000$1,385,000
Required:
1>Prepare Palta’s general journal entry for the acquisition of Sudina assuming that
Sudina survives as a separate legal entity.
2>Prepare Palta’s general journal entry for the acquisition of Sudina assuming that
Sudina will dissolve as a separate legal entity.
7) Journalize the following utility transactions in the Hazzard County Enterprise Fund:
1>The utility sold $4,000,000 of 6.5% revenue bonds at 98 on July 1, 2011 (an interest
payment date). The bond proceeds are to be used for new plant construction and the
issue will mature in 20 years. Interest is paid semi-annually on July 1 and January 1 .
2>Depreciation for the year-ended December 31, 2011 included $300,000 for buildings
and $190,000 for equipment.
3>The utility paid $600,000 in construction costs for the new plant.
The plant is still under construction.
4>Interest on the revenue bonds was accrued at year-end, December 31, 2011 .
Straight-line amortization is used for bond discounts and premiums.
8) Plum Corporation paid $700,000 for a 40% interest in Satin Company on January 1,
2011 when Plum’s stockholders’ equity was as follows:
10% cumulative preferred stock, $100 par$ 500,000
Common stock, $10 par value300,000
Other paid-in capital 400,000
Retained earnings 800,000
Total stockholders’ equity$2,000,000
On this date, the book values of Plum’s assets and liabilities equaled their fair values
and there were no dividends in arrears.
Required: Calculate the amount recorded in the Investment in Satin Company and the
amount of implied Goodwill in this transaction.
9) At December 31, 2010, the stockholders’ equity of Godwin Corporation and its
80%-owned subsidiary, Goldberg Corporation, are as follows:
GodwinGoldberg
Common stock, $10 par value$20,000$12,000
Retained earnings8,0006,000
Totals$28,000$18,000
Godwin’s Investment in Goldberg is equal to 80 percent of Goldberg’s book value.
Goldberg Corporation issued 225 additional shares of common stock directly to
Godwin on January 1, 2011 at $28 per share.
Required:
1> Compute the balance in Godwin’s Investment in Goldberg account on January 1,
2011 after the new investment is recorded.
2> Determine the increase or decrease in goodwill from Godwin’s new investment in
the 225 Goldberg shares. Use four decimal places for the ownership percentage.
Assume the fair value and book value of Goldberg’s assets and liabilities are equal.
10) At January 1, 2010, the stockholders’ equity of Raven Corporation and its
60%-owned subsidiary, Trunk Corporation, are as follows:
RavenTrunk
Common stock, $10 par value$700,000$400,000
Retained earnings800,00050,000
Totals$1,500,000$450,000
Trunk’s net income for 2010 was $40,000. No dividends were declared or paid in 2010 .
Raven’s Investment in Trunk account balance on December 31, 2010 was equal to its
underlying equity on December 31, 2010 . Trunk Corporation issued 10,000 additional
shares of common stock directly to Raven on January 1, 2011 at $22 per share.
Required:
1> Compute the balance in Raven’s Investment in Trunk account on January 1, 2011
after its purchase of the additional Trunk shares.
2> Determine the increase or decrease in goodwill stemming from Raven’s investment
in the 10,000 Trunk shares. Assume the fair value and book value of Trunk’s assets and
liabilities are equal.