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modern advanced accounting
Questions and Answers of
Modern Advanced Accounting
On November 20, 2017, International Foods, a U.S. company, agreed to purchase merchandise from a Hong Kong supplier at a price of HK\($10,000,000.\) The merchandise will be delivered on January 10,
On June 25, 2017, GlobalAgra Inc., a U.S. company, received a purchase order from a Swiss customer for delivery of merchandise on July 10, 2017, at a price of CHF10,000,000, payable in Swiss francs
On December 10, 2017, Robin Franchises, a U.S. company, received a purchase order from a U.K. customer for delivery of merchandise on January 15, 2018. The price of the merchandise is 8,000,000,
Constellation Brands, a U.S. company, purchases merchandise from a German supplier on a regular basis. On April 1, 2016, Constellation purchased 14,000 for delivery on June 30, 2016, in anticipation
Bectel, Inc. expects to sell merchandise for C\($1,000,000\) to a Canadian customer at the end of November, 2017. In anticipation of this forecasted transaction, on August 30, 2017, Bectel sold
Below is an excerpt from the 2013 statement of comprehensive income of Unilever Group (in millions):Requireda. For each year 2013, 2012, and 2011, calculate the translation gain (loss) before the
Krispy Kreme Doughnuts, Inc. has franchises operating outside the U.S. and invests in derivatives to hedge its foreign currency risk. Although it tries to hedge its various positions, on December 16,
On January 1, 2016, Safetyway Group,a LO1 U.S. company, formed a Swiss subsidiary, TEurope AG. The subsidiary issued all of its currently outstanding common stock on that date. Selected accounts from
Pennymarkets Corporation, a U.S. firm, acquired Super-Valu, on January 1, 2016. Super-Valu is a Swedish company that has been in existence for several years, and whose functional currency is the U.S.
Costless Group has a subsidiary in France, ABC Stores. ABC Stores’ beginning and ending trial balances, in its functional currency, the euro, are below.Additional information (in thousands):1.
Suppose that on January 1, 2017, La-Z-Boy Inc. established a subsidiary in Ireland, La-Z-Boy Ireland, to design, manufacture and distribute specialized furniture in the European market. Its condensed
Costsave Corporation, a U'S. company, acquired Denner, a discount supermarket chain in Switzerland, on J anuary 1, 2017. Denner is a subsidiary of Costsave, and its results are consolidated with
Comparative balance sheets and the intervening statement of income for Sears Canada Inc. appear below. Sears Canada is a subsidiary of Sears Holdings Corporation, a U.S. corporation. All amounts are
Grupo Comercial Chedraui is a food retailer headquartered in Mexico. While it has several subsidiaries, only one is located outside of Mexico. Bodega Latina Co. is a chain of self-service stores
On January 1, 2016, the U.K. subsidiary of U.S. International Corporation had the following condensed balance sheet, in pounds sterling (in millions):The exchange rate on January 1, 2016 was
StopnShop was organized in Hong Kong on January 1, 2017, with a capital stock issue that yielded HK\($100\) million. The exchange rate at that date was \($0.10/HKS.\) Transactions for 2017 and the
On January 1, 2017, the Phillips Company acquired all of the outstanding shares of Standard, Ltd., a U.K. firm, for £8,000,000 in cash. At the end of 2017, the two companies presented the condensed
A subsidiary of a U.S. company began operations on January 1, 2017, in a country whose currency is identified as hyperinflationary. The subsidiary’s local currency (LC) is its functional currency.
Kreeger Group is a U.S. retailer with subsidiaries in several countries. One of its subsidiaries, Organic Unlimited, is headquartered in the U.K. but does most of its business in euro markets. The
On February 1, 2016, Pathway Inc., a U.S. company, acquired all of the outstanding shares of Super-barn Supermarkets, an Australian chain, for A\($100\) million in cash. Superbarn’s assets and
Shopwell is a U.K. grocery chain that is a subsidiary of Premium Products, a U.S. company. Premium's fiscal year ends January 31. On February 1, 2015, Shopwell's inventory balance consisted of
Asda is a U.K. supermarket chain that is a subsidiary of Wal-Mart Inc., a U.S. company. Wal-Mart's fiscal year ends January 31. On Feb- ruary 1, 2015, Asda reports facilities with original cost of 30
U.S. Industries has a subsidiary in Switzerland. The subsidiary's financial statements are maintained in Swiss francs (CHF). Exchange rates (\($/CHF)\) for selected dates are as follows:The following
Asda is a British supermarket chain owned by Wal-Mart Stores, Inc. Assume that the following data relate to Asda's activities for 2017 (in millions)..Exchange rates (\($/£)\) during 2017
Massmart Holdings Ltd. is a South African subsidiary of Wal-Mart Inc., selling high volume, low margin branded consumer goods to customers in twelve countries in Africa. Massmart's accounts are
On January 2, 2016, Maddox Corporation, headquartered in the U.S., established a wholly-owned subsidiary in Mexico City. An initial investment of \($1,000,000\) was made on that date; the exchange
Oliver Corporation decided on January 1, 2017, that its Canadian subsidiary's functional currency is the Canadian dollar rather than the U.S. dollar. On that date, the net assets of its Canadian
The Thode Company established a wholly-owned subsidiary in Saudi Arabia on January 1, 2016, when the exchange rate was \($0.30/riyal\) (SAR). Of Thode's initial SAR200,000,000 investment, SAR
Herbalife Ltd: has a subsidiary in Spain, Herbalife International Espafia, S.A., whose functional currency is the euro. Relevant translated data for the subsidiary appear below.Requireda. Calculate
Carrefour S.A. is a global retailer headquartered in France. Carrefour has a subsidiary in Hong Kong, Carrefour Asia Ltd., which operates retail stores in Asia. Assume that Carrefour Asia Ltd. has a
The Luh Company's 2017 cash flow statement appears below, in its functional currency, New Taiwan dollars (NT\($).Additional information:1. Exchange rates: January 1, 2017: \($0.042/NT$;\) December
Fairview Corporation, a U.S. company, has a wholly-owned subsidiary in Mexico. The subsidiary's functional currency is the Mexican peso, and translation to U.S. dollars is appropriate. The subsidiary
On September 10, 2017, the Globe Trading Company invested \($3,000,000\) to establish a small sales subsidiary in Lima, Peru. The subsidiary converted \($3,000,000\) into 10,000,000 new sols (S/) and
Consider two companies with subsidiaries in Venezuela, a country that has been identified as hyperinflationary. U.S. Mart’s reporting currency is the U.S. dollar, and it uses U.S. GAAP to
Sunny Valley Resort has owned 80 percent of Mountain Lodging, Inc. since Mountain Lodging's inception. The condensed consolidated balance sheets of Sunny Valley Resort at December 31, 2017 and 2016
Plaza Hotels acquired a 90 percent interest in Stardust Casinos on January 1, 2017 for \($51,100,000.\) The fair value of the 10 percent noncontrolling interest at the date of acquisition was
A German subsidiary of a U.S. parent reports its accounts in euros. Its functional currency, however, is the Swedish krona. You are responsible for changing the subsidiary’s accounts into U.S.
At the end of 2017, an Italian subsidiary of a U.S. parent reports €1,000,000 in equipment purchased when the exchange rate was \($1.40,\) and €3,000,000 in equipment purchased when the exchange
Assume the subsidiary’s functional currency is the euro. What is the translation gain or loss for 2017?a. \($128,000\) lossb. \($134,000\) lossc. \($128,000\) gaind. \($134,000\)
Assume the subsidiary’s functional currency is the U.S. dollar. What is the remeasurement gain or loss for 2017?a, \($162,000\) lossb. \($30,000\) lossc. \($162,000\) gaind. \($30,000\)
A subsidiary’s accounts are measured in euros. Assume the leverage ratio is ending total liabilities divided by ending total assets. The current ratio is ending current assets divided by ending
Assume the U.S. dollar has been steadily weakening with respect to the euro. Your client, a U.S. company with a subsidiary in Germany, wants to know the effect of the weakening dollar on its
AUS. parent acquired its Singapore subsidiary at the beginning of 2017, for a price that is S\($10,000,000\) in excess of the subsidiary’s book value. The excess paid was attributable to goodwill,
IFRS conversion of an international subsidiary's accounts to the parent's presentation currency is the same as U.S. GAAP for non-hyperinflationary functional currencies,a. with the exception that
Saucony Company, a wholly-owned subsidlary of Puma Company, purchased a tract of land from Puma in 2016 for \($4,000,000.\) Puma originally acquired the land for \($1,500,000\) and accounts for its
Source Sandals is a subsidiary of Pony Industries. In 2016, Pony purchased land from Source for \($8,000,000.\) Source had carried the land at \($3,400,000\) on its books, prior to the sale. Pony
Sketchy Shoes is a subsidiary of Pacific Brands. Pacific routinely sells merchandise to Sketchy at a 25% markup on cost. Information on intercompany merchandise transactions is below (in
Jimmitz Inc. is a subsidiary of Krocker Gear. Jimmitz sells shoe accessories to Krocker at a 20% markup on cost. Information on these intercompany merchandise transactions is below (in
On July 1, 2015, Pearl Industries sold administrative equipment with a book value of $600,000 to its subsidiary, Shiek Shoes, for $700,000. At the date of sale, the equipment had a remaining life of
Shiek Shoes sold an administrative building to its parent, Pearl Industries, on January 1, 2015, for \($8,000,000.\) At the time of sale, the building was carried on Shiek's books at original cost of
Sessions Athletic Gear borrowed \($5,000,000\) from its parent, PF Consolidated Inc., at an interest rate of 5%. The loan was made on September 30, 2016, with interest due semiannually on March 31
PF Consolidated Inc. provided consulting services to its subsidiary, Sessions Athletic Gear, during 2017. PF Consolidated charged \($6,000,000\) of travel, salary, overhead and supplies costs to its
In consolidation of Perpetual Industries and Sand Hill Company at December 31, 2017, you assemble the following data related to unconfirmed intercompany profits:The equipment is carried on the
Putnam Company owns 80 percent of Swaraj Company. The excess of acquisition cost over book value was attributed entirely to previously unrecorded identifiable intangibles. For 2017, Swaraj Company
The following information relates to Brown Shoe Company and its 51 percent-owned subsidiary, B&H Footwear, for fiscal 2016 (in thousands).Requireda. Brown Shoe uses the complete equity method to
Prance Athleticwear Company owns all of the voting stock of Stallion Shoes. Acquisition cost was \($7\) million in excess of Stallion’s book value of \($3\) million, and the excess was attributed
Paymore Shoes acquired 80 percent of the voting stock of Spire Footwear on February 1, 2014, for \($21\) million. The fair value of the noncontrolling interest at the acquisition date was \($3\)
Pacific Athletic Corporation owns all of the voting stock of Solovair Apparel. Acquisition cost was \($10\) million in excess of Solovair’s book value of \($2\) million, and the excess was
Peninsula Industries and Seaport Company, a 90 percent owned subsidiary, engage in extensive intercompany transactions involving raw materials, component parts, and completed products. Peninsula
Kellogg Company (Kellogg's) acquired 75 percent of the outstanding stock of Wholesome & Hearty Foods ("Wholesome") at the end of 2007, for cash and stock totaling \($120\) million. Wholesome's
Placer Industries acquired 80 percent of SAS Shoes several years ago. Placer and SAS have made several intercompany transfers of depreciable assets over the years. Details are below. On June 30,
Several years ago Puma Athletics acquired all of the outstanding stock of Serengeti Footwear. The acquisition cost was \($40\) million in excess of Serengeti's book value of \($10\) million,
On January 2, 2015, Pohang Company acquired 80 percent of Suro Corporation’s voting common stock for \($1.25\) billion. The fair value of the noncontrolling interest at the date of acquisition was
Pierre Corporation acquired 75 percent of Selene Corporation's common stock for \($20,100,000\) on January 2, 2014. The estimated fair value of the noncontrolling interest was \($5,900,000.\)
Pentland Shoe Company acquired 75 percent of Sketchers Inc.'s common stock on January 2, 2014 for \($180\) million. The fair value of the 25 percent noncontrolling interest was \($50\) million at the
McDeer Equipment Company manufactures farm equipment. It has fifty co-owned dealership subsidiaries. McDeer owns 75 percent of each, and the local operator has a 25 percent equity interest. McDeer
The annual report of Starbucks Corporation for the year ended September 29, 2013, included information on seven investments in which Starbucks generally held a 50 percent ownership interest. Thus
Peco Athletics and its subsidiary, Stetson Footwear, engage in intercompany transactions, as follows: Peco sells merchandise to Stetson at a markup of 35% on cost. In 2015, Peco sold merchandise to
Poplar Outdoor Corporation owns 60 percent of the voting stock of Sugg Australia. Date-of-acquisition information is as follows: Acquisition cost: \($39.5\) million Fair value of the noncontrolling
Pablo S.A. is a manufacturer of children's shoes, located in Spain. It owns 51 percent of the voting stock of Stabifoot, a specialty shoe manufacturer located in Belgium. Pablo acquired its interest
Adaris Group, headquartered in the UK, owns a 70 percent interest in Adaris Malaysia. The acquisition cost was ₤200 million. At the date of acquisition, 1 January 2012, Adaris Malaysia's book value
On July 1, 2016, The Hershey Company acquired 75 percent of the common stock of Bagota Organic Chocolates. The \($1.2\) billion purchase price was paid in cash and newly-issued debt securities. The
Placer Company acquired a 75 percent interest in Summer Company for \($8,000,000\) in cash. The condensed balance sheets immediately prior to the acquisition are below:Additional information:1. In
On January 1, 2016, Paxon Corporation acquired 90 percent of the outstanding common stock of Saxon Company for \($1,620\) million cash. The fair value of the 10 percent noncontrolling interest in
On January 1, 2007, Harrah's Entertainment, Inc. acquired a 70 percent interest in the company that owned Emerald Safari Resort for \($592\) million in cash and stock. Harrah's is now part of
Puffin Industries acquired 90 percent of Sunset Coast Digital’s stock on January 1, 2014, for \($3,150,000.\) At that time, Sunset Coast’s stockholders’ equity totaled \($1,400,000,\) and the
Bottling Company acquired a 75 percent interest in Regional Bottling Partnership on January |, 2008. Assume the following information related to this acquisition:The excess of fair value over book
Comparative consolidated balance sheets and the intervening income statement for Prime Casinos and its subsidiary Saratoga International Hotels are shown below:Additional information (in millions):1.
Rendezvous Resorts is a Swiss company with an 80 percent interest in Monaco Hotels, located in France. Rendezvous acquired its interest in Monaco on January 1, 2015, for 4 billion. Monaco's book
Lily Bakeries, located in Belgium, specializes in biscuit and cake products. Lily owns 75 percent of Hearty Foods, a French company acquired on January 1, 2013, for cash and stock totaling €150
Mirror Resorts, Inc., a U.S. company, acquires an 80 percent interest in Silver Nugget Company on January 1, 2016, for \($80\) million cash. The estimated fair value of the 20 percent noncontrolling
On January 1, 2016, Pine Mountain Resorts acquires a 60 percent interest in Shawnee Peak Enterprises for \($25.4\) million in cash. The date-of-acquisition fair value of the noncontrolling interest
In 2013, Verizon Communications Inc. owned 55 percent of Verizon Wireless, and the noncontrolling interest reported in Verizon’s financial statements is Vodafone Group Plc’s 45 percent interest
Suzlon, a subsidiary of Patni, provides services to Patni. During 2016, Suzlon charged \($3,000,000\) for services provided to Patni. Cost of the services provided was \($2,100,000.\) How should the
A parent makes an interest-bearing loan to its 90%-owned subsidiary in 2016, which is still outstanding in 2017. The eliminating entries (I) on the consolidation working paper for 2017, related to
Petronet sells merchandise to its 80-percnet subsidiary Sonata at a markup of 20 percent on cost. During 2017, Petronet charges Sonata \($4,000,000\) for merchandise sales. Sonata’s 2017 beginning
Pentamedia owns 90 percent of Sesa. At the start of 2016, Sesa sold buildings carried at \($4,000,000\), net, to Pentamedia for \($6,000,000\). The buildings had a remaining life of 10 years and
A parent sells land costing \($35,000\) to a subsidiary in 2016 for \($55,000\). The subsidiary sells the land in 2018 to a third party for \($85,000\). On the consolidated income statement for 2018,
A subsidiary sells land costing \($1,000,000\) to its parent in 2014 for \($1,400,000\). The parent owns 80 percent of the subsidiary’s stock. In 2017, the parent sells the land to an outside party
A subsidiary sells merchandise to its parent at a markup of 25% on cost. In 2017, the parent paid \($500,000\) for merchandise received from the subsidiary. By year-end 2017, the parent has sold
A parent sells \($30,000,000\) retail value of merchandise to its subsidiary during 2016. The subsidiary’s beginning inventory for 2016 contains \($1,000,000\) in merchandise purchased from the
At the beginning of 2015, a parent company sold a patent, carried on its books at \($4,000,000\), to its subsidiary for \($3,000,000\). The patent had a remaining life of five years and straight-line
Atthe beginning of 2013, a subsidiary sold cquiptneneeiel on its books at \($3,000,000\), net, to its parent for \($5,000,000\). The equipment had a remaining life of 20 years and straight-line
Pennant Corporation acquired 80 percent of Saylor Company's common stock for \($12,000,000\) in cash. At the date of acquisition, Saylor's \($3,000,000\) of reported net assets were fairly stated,
Palm Resorts acquired its 70 percent interest in Sun City on January 1, 2014, for \($35,200,000.\) The fair value of the 30 percent non-controlling interest at the date of acquisition was
Peregrine Company acquired 80 percent of Sparrow Company's common stock for \($22,000,000\) in cash; fees paid to an outside firm to estimate the earning power of Sparrow and the fair values of its
Paramount Corporation acquired its 75 percent investment in Sun Corporation in January 2012, for \($2,910,000,\) and accounts for its investment internally using the complete equity method. At the
On January 1, 2013, Palomar Resorts acquired 65 percent of the stock of Sahara Hotel & Casino for \($41.45\) million in cash and stock. The date-of-acquisition fair value of the noncontrolling
Below are the pre-combination condensed balance sheets of Princecraft and Sylvan Companies just prior to Princecraft’s acquisition of 90 percent of the voting shares of Sylvan for \($43\) million
Plummer Corporation acquired 90 percent of Softek Technologies’ voting stock by issuing 2,000,000 shares of \($2\) par common stock with a fair value of \($25,000,000.\) In addition, Plummer paid
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