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advanced financial accounting
Questions and Answers of
Advanced Financial Accounting
A parent company acquired an 80% interest in a subsidiary on July 1, 2015. The subsidiary closed its books on that date. The subsidiary reported net income of $60,000 for 2015, earned evenly during
A parent company acquired an 80% interest in a subsidiary on July 1, 2015. The subsidiary closed its books on that date. The subsidiary reported net income of $60,000 for 2015, earned evenly during
Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 10,000 shares of its own stock for 80% of the common stock of Sentinel. The stock has a
Use the preceding information for Purnell’s purchase of Sentinel common stock.Assume Purnell exchanges 19,000 shares of its own stock for 80% of the common stock of Sentinel. The stock has a market
Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 16,000 shares of its own stock for 100% of the common stock of Sentinel. The stock has a
Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 22,000 shares of its own stock for 100% of the common stock of Sentinel. The stock has a
Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 22,000 shares of its own stock for 100% of the common stock of Sentinel. The stock has a
Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $300,000 cash. Palto has the following balance sheet immediately
Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $400,000 cash. The shares of the noncontrolling interest have a
Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 100% of the Saleen common stock for $400,000 cash. Palto has the following balance sheet
Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 100% of the Saleen common stock for $500,000 cash. Palto has the following balance sheet
Small Company acquired a controlling interest in Big Company. Private Company had the following balance sheet on the acquisition date:The shareholders of Small Company requested 300 Big Company
Modern Company acquires the net assets of Frontier Company for $ 1,300,000 on January 1, 2015. A business valuation consultant arrives at the price and deems it to be a good value.RequiredUsing the
Hanson Company issues 10,000 shares of $10 par common stock for the net assets ofMarcus Incorporated on December 31, 2016. The stock has a fair value of $65 per share. Acquisition costs are $10,000,
Hanson Company issues 10,000 shares of $10 par common stock for the net assets ofMarcus Incorporated on December 31, 2016. The stock has a fair value of $65 per share. Acquisition costs are $10,000,
Sentry, Inc., acquires for $2,300,000 in cash, the net assets of New Equipment Company. The acquisition is made on December 31, 2015, at which time New Equipment has prepared the following balance
Part A. Garman International wants to expand its operations and decides to acquire the net assets of Iris Company as of January 1, 2016. Garman issues 10,000 shares of its $5 par value common stock
Heinrich Company, owned by Elennor and Al Heinrich, has been experiencing financial difficulty for the past several years. Both Elennor and Al have not been in good health and have decided to find a
Heinrich Company, owned by Elennor and Al Heinrich, has been experiencing financial difficulty for the past several years. Both Elennor and Al have not been in good health and have decided to find a
Tweeden Corporation is contemplating the acquisition of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31,
Jack Company is a corporation that was organized on July 1, 2015. The June 30, 2020, balance sheet for Jack is as follows:The experience of other companies over the last several years indicates that
Kiln Corporation is considering the acquisition of Williams Incorporated. Kiln has asked you, its accountant, to evaluate the various offers it might make to Williams Incorporated. The December 31,
Moon Company is contemplating the acquisition of Yount, Inc., on January 1, 2015. If Moon acquires Yount, it will pay $730,000 in cash to Yount and acquisition costs of $20,000.The January 1, 2015,
Bar Corporation has been looking to expand its operations and has decided to acquire the assets of Vicker Company and Kendal Company. Bar will issue 30,000 shares of its $10 par common stock to
Anton Company acquired the net assets of Hair Company on January 1, 2015, for $600,000. Using a business valuation model, the estimated value of Anton Company was $650,000 immediately after the
Lakecraft Company has the following balance sheet on December 31, 2015, when it is acquired for $950,000 in cash by Argo Corporation:All assets have fair values equal to their book values. The
Avery Company acquires the net assets of Iowa Company on July 1, 2015. The net assets acquired include plant assets that are provisionally estimated to have a fair value of $600,000 with a 10-year
Norton Corporation agrees to acquire the net assets of Payco Corporation. Just prior to the acquisition, Payco’s balance sheet is as follows:Fair values agree with book values except for the
Norton Corporation agrees to acquire the net assets of Payco Corporation. Just prior to the acquisition, Payco’s balance sheet is as follows:Fair values agree with book values except for the
Pederson Company acquires the net assets of Shelby Company by issuing 100,000 of its $1 par value shares of common stock. The shares have a fair value of $20 each. Just prior to the acquisition,
What are the accounting ramifications of each of the three following situations involving the payment of contingent consideration in an acquisition?a. P Company issues 100,000 shares of its $50 fair
Pam Company acquires the net assets of Jam Company for an agreed-upon price of $900,000 on July 1, 2015. The value is tentatively assigned as follows:Values are subject to change during the
Refer to the information presented in P12–17 and your answer to part a of P12–17.RequiredPrepare a schedule providing a proof of the translation adjustment.Data from Exercises 17On January 1,
Series Corporation issued $500,000 par value, 10-year bonds at 104 on January 1, 20X1, which Independent Corporation purchased. On January 1, 20X5, Playoff Corporation purchased $200,000 of Series
Pepper Enterprises owns 95 percent of Salt Corporation. On January 1, 20X1, Salt issued $200,000 of five-year bonds at 115. Annual interest of 12 percent is paid semiannually on January 1 and July 1.
Sun Corporation was created on January 1, 20X2, and quickly became successful. On January 1, 20X6, its owner sold 80 percent of the stock to Planet Company at underlying book value. At the date of
Following are the consolidated balance sheet accounts of Primer Inc. and its subsidiary, Sore Corporation, as of December 31, 20X6 and 20X5.Additional Information1. On January 20, 20X6, Primer issued
Stage Company operates on a calendar-year basis, reporting its results of operations quarterly. For the first quarter of 20X1, Stage reported sales of $240,000 and operating expenses of $180,000 and
Princeton Products Corporation acquired 90 percent ownership of Stanford Company on October 20, 20X2, through an exchange of voting shares. Princeton Products issued 8,000 shares of its $10 par stock
Powder Corporation acquired 70 percent of Solid Company’s stock on December 31, 20X7, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 30 percent
Poom Manufacturing used cash to acquire 75 percent of the voting stock of Satellite Industries on January 1, 20X3, at underlying book value. At that date, the fair value of the noncontrolling
Pillow Company holds 70 percent of the common shares of Sheet Corporation. Trial balances for the two companies on December 31, 20X7, are as follows:At the beginning of 20X7, Pillow held inventory
On November 3, 20X2, PRD Corporation acquired 2 JRS Company bonds ($1,000 face value) at a cost of 105. PRD classifies them as available-for-sale securities. On this same date, PRD decides to hedge
On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. SunTime’s December 31, 20X1,
Using the data presented in P10–22,RequiredPrepare a worksheet to develop a consolidated statement of cash flows using the direct method for computing cash flows from operations.Data from Exercises
On January 1, 20X1, Prize Corporation paid Morton Advertising $116,200 to acquire 70 percent of Statue Company’s stock. Prize also paid $45,000 to acquire $50,000 par value 8 percent, 10-year bonds
Pea Corporation acquired 80 percent of Split Company’s stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of
Punk Corporation purchased 90 percent of Soul Company’s voting common shares on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to
Porter Company purchased 60 percent ownership of Service Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent
Purple Manufacturing purchased 60 percent of the ownership of Socks Corporation stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was
Phone Corporation holds 80 percent of Smart Company’s voting shares, acquired on January 1, 20X1, at underlying book value. On January 1, 20X4, Phone purchased Smart bonds with a par value of
Plug Corporation purchased $100,000 par value bonds of its subsidiary, Spark Company, on December 31, 20X5, from Lemon Corporation for $102,800. The 10-year bonds bear a 9 percent coupon rate, and
Police Corporation purchased 70 percent of Station Company’s voting shares on January 1, 20X4, at underlying book value. On that date it also purchased $100,000 par value 12 percent Station bonds,
School Perfume Company issued $300,000 of 10 percent bonds on January 1, 20X2, at 110. The bonds mature 10 years from issue and have semiannual interest payments on January 1 and July 1. Parsons
Private Manufacturing Company acquired 90 percent of Secret Corporation’s outstanding common stock on December 31, 20X5, for $1,152,000. At that date, the fair value of the noncontrolling interest
Puzzle Corporation purchased 75 percent of Sunday Company’s common stock at underlying book value on January 1, 20X3. At that date, the fair value of the noncontrolling interest was equal to 25
Patio Corporation owns 60 percent of the stock of Stone Container Company, which it acquired at book value in 20X1. At that date, the fair value of the noncontrolling interest was equal to 40 percent
The trial balance data presented in P8–24 can be converted to reflect use of the cost method by inserting the following amounts in place of those presented for Patio Corporation:Stone reported
Panther Enterprises owns 80 percent of Strike Corporation’s voting stock. Panther acquired the shares on January 1, 20X4, for $234,500. On that date, the fair value of the noncontrolling interest
Planet Corporation held 80 percent of Sun Corporation’s outstanding common shares on December 31, 20X2, which it had acquired at underlying book value. When the shares were acquired, the fair value
Penny Manufacturing Company acquired 75 percent of Saul Corporation stock at underlying book value. At the date of acquisition, the fair value of the noncontrolling interest was equal to 25 percent
Using the data presented in P10–20:Requireda. Prepare a worksheet to develop a consolidated statement of cash flows for 20X4 using the direct method of computing cash flows from operations.b.
The following 20X2 consolidated statement of cash flows is presented for Printing Company and its subsidiary, Sons Delivery:Printing acquired 60 percent of the voting shares of Sons Delivery in 20X1
Pole Manufacturing Corporation issued stock with a par value of $67,000 and a market value of $503,500 to acquire 95 percent of Spencer Corporation’s common stock on August 30, 20X1. At that date,
Pie Corporation paid $319,500 to acquire 90 percent ownership of Slice Company on April 1, 20X2. At that date, the fair value of the noncontrolling interest was $35,500. On January 1, 20X2, Slice
Assume the same facts as in E8–1 and prepare entries using straight-line amortization of bond discount or premium.Data from Exercises 1Pretzel Corporation owns 60 percent of Stick Corporation’s
Pagle Corporation holds 80 percent of Standard Company’s common shares. The companies report the following balance sheet data for December 31, 20X1:An 8 percent annual dividend is paid on the Pagle
Assume the same facts as in E8–9 but prepare entries using straight-line amortization of bond discount or premium.Data from Exercises 9Packed Corporation owns 70 percent of Snowball Enterprises’
Protecto Corporation purchased 60 percent of Strand Company’s outstanding shares on January 1, 20X1, for $24,000 more than book value. At that date, the fair value of the noncontrolling interest
Power Corporation acquired 100 percent of Strip Corporation in a nontaxable transaction. The following selected information is available for Strip Corporation at the acquisition date:Strip
In its consolidated cash flow statement for the year ended December 31, 20X2, Plant Corporation reported operating cash inflows of $284,000, financing cash outflows of $230,000, investing cash
Pecan Corporation’s controller has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for the year ended December 31, 20X4. Pecan
Poison Corporation holds 70 percent of Snake Company’s voting common shares but none of its preferred shares. Summary balance sheets for the companies on December 31, 20X1, are as follows:Neither
Polly Corporation owns 80 percent of Sonny Corporation’s stock and 90 percent of Daughter Company’s stock. The companies file a consolidated tax return each year and in 20X5 paid a total tax of
Pond Corporation holds 75 percent of the voting shares of Spring Services Company. Assume Pond accounts for this investment using the equity method. During 20X7, Pond sold inventory costing $60,000
Power Corporation owns 75 percent of Surge Company’s stock; no intercompany purchases or sales were made in 20X4. For the year, Power and Surge reported sales of $300,000 and $200,000 and cost of
Pond Corporation holds 75 percent of the voting shares of Spring Services Company. During 20X7, Pond sold inventory costing $60,000 to Spring Services for $90,000, and Spring Services resold
Point Company holds 80 percent ownership of Shoot Company. The consolidated balance sheets as of December 31, 20X3, and December 31, 20X4, are as follows:The 20X4 consolidated income statement
On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $151,200. Ship’s net assets on the date of acquisition were 700,000 kroner
Refer to the data in Exercise E12–5.Requireda. Prepare a proof of the translation adjustment computed in Exercise E12–5.b. Where is the translation adjustment reported on Popular Creek’s
Refer to the data in Exercise E12–5, but assume that the dollar is the functional currency for the foreign subsidiary.RequiredPrepare a schedule remeasuring the December 31, 20X1, trial balance
Refer to the data in Exercise E12–5, but now assume that the exchange rates were as follows:The receivable from Popular Creek Corporation is denominated in Swiss francs. Popular Creek’s books
Shames Company is located in London, England. The local currency is the British pound (£). On January 1, 20X8, Pit Company purchased an 80 percent interest in Shames for $400,000, which resulted in
Refer to the data in Exercises E12–5 and E12–7.Requireda. Prepare a proof of the remeasurement gain or loss computed in Exercise E12–7.b. How should this remeasurement gain or loss be reported
Putter Corporation owns 70 percent of the voting common stock of Sand Company. At December 31, 20X1, the companies reported the following:During 20X1, Sand sold inventory costing $70,000 to Putter
On January 1, 20X1, Par Company purchased all the outstanding stock of South Bay Company, located in Canada, for $120,000. On January 1, 20X1, the direct exchange rate for the Canadian dollar (C$)
Stuff Company is a subsidiary of Pland Corporation and is located in Madrid, Spain, where the currency is the euro (€). Data on Stuff’s inventory and purchases are as follows:The beginning
Pole Company sold inventory to South Ltd., an English subsidiary. The goods cost Pole $8,000 and were sold to South for $12,000 on November 27, payable in British pounds (£). The goods are still on
Refer to the information in P12–17. Assume the U.S. dollar is the functional currency, not the krone.Requireda. Prepare a schedule remeasuring the trial balance from Norwegian kroner into U.S.
Refer to the information in P12–21. Assume that the dollar is the functional currency.Requireda. Prepare a schedule remeasuring Silva Company’s December 31, 20X4, trial balance from reals to
Refer to the information in P12–23. Assume the U.S. dollar is the functional currency.Requireda. Prepare a schedule remeasuring the December 31, 20X3, trial balance of Salina Ranching from
On January 1, 20X4, Plum Corporation acquired Silva Company, a Brazilian subsidiary, by purchasing all its common stock at book value. Silva’s trial balances on January 1, 20X4, and December 31,
Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, located in Australia, on January 1, 20X3. The purchase price in Australian dollars (A$) was A$200,000, and
Solo Co. Ltd., located in Mexico City, is a wholly owned subsidiary of Partner Inc., a U.S. company. At the beginning of the year, Solo’s condensed balance sheet was reported in Mexican pesos (MXP)
Refer to the information given in P12–17 and your answer to part a of P12–18.RequiredPrepare a schedule providing a proof of the remeasurement gain or loss. For this part of the problem, assume
What are the nine funds that local and state governments generally use? Briefly state the purpose of each fund.
What is a VHWO’s basis of accounting for assets with and without donor restrictions?
Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31, 20X1, for $2,340,000. At the date of acquisition, Sword reported common stock with a par
Pot Company acquired 65 percent of Seed Corporation’s voting common stock on June 20, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 35
Prime Company holds 80 percent of Suspect Company’s stock, acquired on January 1, 20X2, for $160,000. On the acquisition date, the fair value of the noncontrolling interest was $40,000. Suspect
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