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advanced financial accounting
Questions and Answers of
Advanced Financial Accounting
The debt service fund does not use budgetary accounts. What is the logic for not doing so?
The debt service fund does not use budgetary accounts. What is the logic for not doing so?
The debt service fund does not use budgetary accounts. What is the logic for not doing so?
Select the best answer for each of the following multiple-choice questions. (Nos. 1, 5, and 7–10 are AICPA adapted.)1. The encumbrances control account of a governmental unit is increased when a
Go to the GASB Web site at http://www.gasb.org. Write a brief description of the mission of the GASB, its relation to the FASB, and the current project agenda of the GASB board. Are there any
Rexcam is a partnership owned by Wilson, Watts, and Franklin that manufactures special machine tools used primarily in injection molding applications. The partnership had operated very profitably for
Radix, Inc., operates primarily as a distributor of components for gasoline compressors. In the first quarter of 2015, the company reported a gross profit of $248,000 on net sales of $1,360,000.
McClure Manufacturing reported a pretax loss from operations of $45,000 for the first quarter of 2017. The estimated effective annual tax rate at that time was based on the following information:1. A
Baxter Holdings reported pretax income from continuing operations of $800,000 in the first quarter of the current year. At that point, projected pretax income for the rest of the year was $1,000,000.
Baxter Holdings reported pretax income from continuing operations of $800,000 in the first quarter of the current year. At that point, projected pretax income for the rest of the year was $1,000,000.
Campione Manufacturing acquired an 80% interest in DaLuca Distributors, a foreign corporation established on November 1, 2010, for 650,000 foreign currency units (FC). Campione acquired its 80%
Techno Builders has acquired a 70% interest in the equity of a foreign company, Prefabco, whose functional currency is the FC. Although Prefabco began operations in June 2012 when 1 FC equaled $1.95,
Baxter Industries, Inc., is a U.S. company that has a wholly owned subsidiary. The subsidiary maintains its book and records in a foreign currency (FC) and the majority of its local expenses such as
Brico Enterprises, a U.S. corporation, acquired an 80% interest in Bandar Distributors in June 2012 when 1 FC equaled $1.62. Bandar is a foreign corporation whose functional currency is the FC. The
Since a primary beneficiary’s share of VIE income is not based on common stock ownership, how might it be calculated?
On January 1, 2016, Ashland Company purchases a 25% interest in Cramer Company for $195,000. Ashland Company prepares the following determination and distribution of excess schedule:The following
Turf Company purchases a 30% interest in Minnie Company for $90,000 on January 1, 2015, when Minnie has the following stockholders’ equity:The excess cost was due to a building that is being
Company R purchases a 25% interest in Company E on January 1, 2014, at its book value of $20,000. From 2014 through 2018, Company E earns a total of $200,000. From 2019 through 2023, it loses
Company R purchases a 25% interest in Company E on January 1, 2014, at its book value of $20,000. From 2014 through 2018, Company E earns a total of $200,000. From 2019 through 2023, it loses
Company E reports net income of $100,000 for 2015. Assume the income is earned evenly throughout the year. Dividends of $10,000 are paid on December 31. What will Company R report as investment
Company E reports net income of $100,000 for 2015. Assume the income is earned evenly throughout the year. Dividends of $10,000 are paid on December 31. What will Company R report as investment
Company R owns a 30% interest in Company E, which it acquires at book value. Company E reports net income of $50,000 for 2015 (ignore taxes). There is an intercompany sale of equipment at a gain of
Assume the same facts as for Question 1 above. The fair value of the investment in Company E is $220,000 on December 31, 2015. Answer the following questions assuming the investment is recorded using
Company R pays $170,000 for a 30% interest in Company E on January 1, 2015. Company E’s total stockholders’ equity on that date is $500,000. The excess price is attributed to equipment with a
Shelby Corporation purchases 90% of the outstanding stock of Borner Company on January 1, 2015, for $603,000 cash. At that time, Borner Company has the following stockholders’ equity balances:
The following diagram depicts the relationships among Mary Company, John Company, and Joan Company on December 31, 2018:Mary Company purchases its interest in John Company on January 1, 2016, for
The audit of Barns Company and its subsidiaries for the year ended December 31, 2016, is completed. The working papers contain the following information:a. Barns Company acquires 4,000 shares of Webo
Myles Corporation and its subsidiary, Downer Corporation, have the following trial balances as of December 31, 2017:Myles Corporation acquires its 60% interest in Downer Corporation for $348,000 on
The following diagram depicts the investment affiliations among Companies M, N, and O:The following facts apply to 2017 operations:All investments are made at a price equal to book value.1. Prepare
Baker Company acquires an 80%interest in the common stock of Cain Company for $440,000 on January 1, 2015. The price is equal to the book value of the interest acquired. Baker Company maintains its
You have secured the following information for Companies A, B, and C concerning their internally generated net incomes (excluding subsidiary income) and dividends paid:1. Assume Company A acquires an
The following comparative statements of stockholders’ equity are prepared for Nolan Corporation:Tarman Corporation acquires 60% of Nolan Corporation common stock for $12 per share on January 1,
Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 5,000 additional new shares:Prior to the sale of additional shares, the parent owned 90,000 shares.
Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 20,000 additional new shares to noncontrolling shareholders:At that time, the parent company owned
Subsidiary Company S had the following stockholders’ equity on December 31, 2017, prior to distributing a 10% stock dividend:The fair value of the shares distributed is $50 each. What is the effect
Brian Construction Company has the following stockholders’ equity on January 1, 2015, the date on which Roller Company purchases an 80% interest in the common stock for $720,000:Brian Construction
Rob Company purchases a 90% interest in Venus Company for $418,500 on January 1, 2017. Any excess of cost over book value is attributed to equipment, which is being depreciated over 20 years. Both
Rob Company purchases a 90% interest in Venus Company for $418,500 on January 1, 2017. Any excess of cost over book value is attributed to equipment, which is being depreciated over 20 years. Both
Rob Company purchases a 90% interest in Venus Company for $418,500 on January 1, 2017. Any excess of cost over book value is attributed to equipment, which is being depreciated over 20 years. Both
Company S has the following stockholders’ equity on January 1, 2019:The preferred stock is cumulative and has dividends one year in arrears on January 1, 2019.Company P purchased an 80% interest in
Company P purchased an 80% interest (8,000 shares) in Company S for $800,000 on January 1, 2015. Company S’s equity on that date was $900,000. Any excess of cost over book value was attributed to
Refer to the preceding facts for Penske’s acquisition of Stock common stock. Penske accounts for its investment in Stock using the simple equity method, including income tax effects. During 2017,
Refer to the preceding facts for Penske’s acquisition of Stock common stock. Penske uses the simple equity method to account for its investment in Stock. During 2016, Stock sells $30,000 worth of
Refer to the preceding facts for Parson’s acquisition of Solar common stock. Parson uses the simple equity method to account for its investment in Solar. During 2017, Solar sells $40,000 worth of
Refer to the preceding facts for Parson’s acquisition of Solar common stock. Parson uses the simple equity method to account for its investment in Solar. During 2016, Solar sells $30,000 worth of
Billing Enterprises purchases a 90% interest in the common stock of Rush Corporation on January 1, 2015, for an agreed-upon price of $495,000. Billing issues $400,000 of bonds to Rush shareholders
Duckworth Corporation purchases an 80% interest in Panda Corporation on January 1, 2017, in exchange for 5,000 Duckworth shares (market value of $18) plus $155,000 cash. The fair value of the NCI is
Company S is an 80% owned subsidiary of Company P. On January 1, 2015, Company P sells equipment to Company S at a $50,000 profit. Assume a 30% corporate tax rate and an 80% dividend exclusion. The
Company S is an 80% owned subsidiary of Company P. For 2015, Company P reports internally generated income before tax of $100,000. Company S reports an income before tax of $40,000. A 30% tax rate
Company P has internally generated net income of $200,000 (excludes share of subsidiary income). Company P has 100,000 shares of outstanding common stock. Subsidiary Company S has a net income of
Penn Company leased a production machine to its 80%-owned subsidiary, Smith Company. The lease agreement, dated January 1, 2015, requires Smith to pay $18,000 each January 1 for three years. There is
Plessor Industries acquired 80% of the outstanding common stock of Slammer Company on January 1, 2015, for $320,000. On that date, Slammer’s book values approximated fair values, and the balance of
Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2017, Press held merchandise
Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2016, Press held merchandise
Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2017, Press held merchandise
Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2016, Press held merchandise
The problem below is an example of a question of the CPA ‘‘Other Objective Format’’ type as it was applied to the consolidations area. A mark-sensing answer sheet was used on the exam. You
Grande Machinery Company purchased, for cash, a $60,000 custom machine on January 1, 2015. The machine has an estimated 5-year life and will be straight-line depreciated with no salvage value. The
Refer to the preceding facts for Purple’s acquisition of Salmon common stock. On January 1, 2017, Salmon held merchandise sold to it from Purple for $12,000. This beginning inventory had an
Refer to the preceding facts for Purple’s acquisition of Salmon common stock. On January 1, 2016, Salmon held merchandise sold to it by Purple for $14,000. This beginning inventory had an
Refer to the preceding facts for Panther’s acquisition of Sandin common stock. On January 1, 2016, Sandin held merchandise sold to it from Panther for $20,000. During 2016, Panther sold merchandise
Refer to the preceding facts for Panther’s acquisition of Sandin common stock. On January 1, 2016, Panther held merchandise sold to it from Sandin for $12,000. This beginning inventory had an
Refer to the preceding facts for Packard’s acquisition of Stude common stock. On January 1, 2016, Packard held merchandise acquired from Stude for $10,000. This beginning inventory had an
Refer to the preceding facts for Packard’s acquisition of Stude common stock. On January 1, 2016, Packard held merchandise acquired from Stude for $10,000. This beginning inventory had an
Henderson Window Company was a privately held corporation until January 1, 2015. On January 1, 2015, Cool Glass Company acquired a 70% interest in Henderson at a price well in excess of book value.
Assume the same facts as in Exercise 11, but in addition, assume that Saratoga is itself in need of cash. It discounts the note received from Windsor at First Bank on July 1, 2017, at a discount rate
Saratoga Company owns 80% of the outstanding common stock of Windsor Company. On May 1, 2017, Windsor Company arranges a 1-year, $50,000 loan from Saratoga Company. The loan agreement specifies that
Peninsula Company owns an 80% controlling interest in Sandbar Company. Sandbar regularly sells merchandise to Peninsula, which then sells to outside parties. The gross profit on all such sales is
The separate income statements of Danner Company and its 90%-owned subsidiary, Link Company, for the year ended December 31, 2016, are as follows:The following additional facts apply:a. On January 1,
Hilton Corporation sold a press to its 80%-owned subsidiary, Agri Fab Inc., for $5,000 on January 1, 2016. The press originally was purchased by Hilton on January 1, 2015, for $20,000, and $6,000 of
Wavemasters Inc., owns an 80% interest in Sayner Development Company. In a prior period, Sayner Development purchased a parcel of land for $50,000. During 2015, it constructed a building on the land
Hide Corporation is a wholly owned subsidiary of Seek Company. During 2015, Hide sold all of its production to Seek Company for $400,000, a price that includes a 25% gross profit. 2015 was the first
Company S is an 80%-owned subsidiary of Company P. Company S needed to borrow $500,000 on January 1, 2015. The best interest rate it could secure was 10% annual. Company P has a better credit rating
Subsidiary Company S is 80% owned by Company P. Company S sold a machine with a book value of $100,000 to Company P for $150,000. The asset has a 5-year life and is depreciated under the
Company S is 80% owned by Company P. Near the end of 2015, Company S sold merchandise with a cost of $6,000 to Company P for $7,000. Company P sold the merchandise to a nonaffiliated firm in 2016 for
During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. What specific adjustments are needed on the
The trial balances of Campton Corporation and Dorn Corporation as of December 31, 2015.On January 1, 2015, Campton purchases 90% of the outstanding stock of Dorn Corporation for $630,000. The
Harvard Company purchases a 90% interest in Bart Company for $720,000 on January 1, 2015. The investment is accounted for under the cost method. At the time of the purchase, a building owned by Bart
Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 35,000 shares of its $20 fair value common stock for 80% of Fast Air’s common
Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 35,000 shares of its $20 fair value common stock for 80% of Fast Air’s common
Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 35,000 shares of its $20 fair value common stock for 80% of Fast Air’s common
Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 25,000 shares of its $20 fair value common stock for 100% of Fast Air’s common
Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 40,000 shares of its $20 fair value common stock for 100% of Fast Air’s common
Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 40,000 shares of its $20 fair value common stock for 100% of Fast Air’s common
Refer to the preceding information for Paulcraft’s acquisition of Switzer’s commonstock. Assume that Paulcraft pays $420,000 for 70% of Switzer common stock. Paulcraft usesthe cost method to
Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $400,000 for 80% of Switzer common stock. Paulcraft uses the cost method to
Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $400,000 for 80% of Switzer common stock. Paulcraft uses the cost method to
Refer to the preceding common information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $440,000 for 80% of Switzer common stock. Paulcraft uses the simple
Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $420,000 for 100% of Switzer common stock. Paulcraft uses the simple equity
Jeter Corporation purchases 80% of the outstanding stock of Super Company for $275,000 on July 1, 2015. Super Company has the following stockholders’ equity on July 1, 2015:The fair values of
Sandin Company prepares the following balance sheet on January 1, 2015:On this date, Prescott Company purchases 8,000 shares of Sandin Company’s outstanding stock for a total price of $270,000.
The trial balances of Charles Company and its subsidiary, Lehto, Inc., are as follows on December 31, 2017:On January 1, 2015, Charles Company exchanges 20,000 shares of its common stock, with a fair
Palto issues 20,000 of its $5 par value common stock shares, with a fair value of $35 each, for a 100% interest in Sword Company on January 1, 2015. The balance sheet of Sword Company on that date is
Lucy Company issues securities with a fair value of $468,000 for a 90% interest in Diamond Company on January 1, 2015, at which time Diamond Company has the following balance sheet:It is believed
Albers Company acquires an 80% interest in Barker Company on January 1, 2015, for $850,000. The following determination and distribution of excess schedule is prepared at the time of purchase:Albers
Kraus Company has the following balance sheet on July 1, 2016:On July 1, 2016, Neiman Company purchases 80% of the outstanding common stock of Kraus Company for $310,000. Any excess of book value
Kraus Company has the following balance sheet on July 1, 2016:On July 1, 2016, Neiman Company purchases 80% of the outstanding common stock of Kraus Company for $310,000. Any excess of book value
Whitney Company acquires an 80% interest in Masters Company common stock on January 1, 2015. Appraisals of Masters’ assets and liabilities are performed, and Whitney ends up paying an amount that
Parker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet:The excess of the price paid over book value is
A parent company acquired an 80% interest in a subsidiary on January 1, 2015, at a price high enough to result in goodwill. Included in the assets of the subsidiary are inventory with a book value of
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