Advanced Accounting 8th Edition Dennis M. Bline, Mary L. Fischer, Ted D. Skekel - Solutions

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Problem 13A-2 (LO 5) Reconciliation of GAAP-to-tax-basis income, tax basis calculation. Fandek and Franklin formed a partnership on January 1, 20X7, and contributed assets and liabilities to the partnership as follows:Fandek Franklin Fair Value Tax Basis Fair Value Tax Basis Net assets
Problem 13A-1 (LO 4, 5) Profit allocation; book and tax basis calculation. Nichols, James, and Wilson are environmental consultants who agree to consolidate their individual practices into a partnership as of January 1, 20X4. Each partner is contributing the following assets and related
Problem 13-6 (LO 3, 4) Partnership agreement, minimum capital balance. Jacobsen, Matthews, and Glorioso are partners in a law firm which specializes in personal injury and medical malpractice litigation. Their fees from clients are contingent upon whether their client receives an award or
Problem 13-5 (LO 3, 4) Investment decision, capital retention decision. Rodriquez is one of your tax clients and has come to you seeking your input about a potential investment opportunity. Your client has the opportunity to acquire a 30% interest in the capital of a partnership. However, this
Problem 13-4 (LO 4) Expert witness, economic loss measurement. A law firm that specializes in personal injury work has engaged you to assist in some litigation. The firm represents a Mr. Lawson, who was injured in an automobile accident and is alleging that he was totally disabled as a result of
Problem 13-3 (LO 4) Decision to admit a new partner, profit allocation. Thomas and Purnell are general partners in a partnership along with four limited partners. Ten percent of partnership profit is allocated to each of the limited partners, and the balance of the profits is allocated to Thomas
Problem 13-1 (LO 1) Characteristics of a partnership and proper organization form. A client is seeking your advice on how to organize a new business. The client is proposing to acquire several single-story residences and convert them into group homes for the elderly.Each home would house eight
Exercise A-2 (LO 5) Calculation of book and tax basis; change in interest over time. Berkshire Investments is a partnership consisting of three partners: Pearson, Ellis, and Parker.Pearson and Ellis each have a 40% interest in capital prior to withdrawals and the allocation of profits. Ellis and
Exercise A-1 (LO 5) Calculation of book and tax basis. Thomas is considering joining Baker and Nap in a partnership. Baker and Nap will each contribute cash of $39,000 to the new partnership. The partners will share profits and losses equally, and all partners have individual tax rates of 30%.
Exercise 9 (LO 4) Evaluation of profit and loss allocation alternatives. Powers, Scott, and Riley intend to start a business together that will be organized as a partnership. The partners are considering adopting one of the following two alternative profit-sharing agreements:Agreement #1 Agreement
Exercise 8 (LO 3, 4) Interest calculation; determination of capital account balances. Xavier, Yates, and Zale are partners in a dry-cleaning business. Their partnership agreement provides that the partners shall receive interest on their respective average yearly capital balances at the rate of 8%.
Exercise 7 (LO 3, 4) Profit allocation based on several factors; weighted-average interest. Gabriel and Hall are partners in a manufacturing business located in Portland, Oregon. Their profit and loss agreement contains the following provisions:1. Salaries of $35,000 and $40,000 for Gabriel and
Exercise 6 (LO 4) Evaluation of alternative for earning potential. A client of yours has been offered an attractive position with another company in the specialized tooling and machining industry. As an employee, this position would consist of a salary of $65,000 and a bonus which is estimated to
Exercise 5 (LO 4) Approaches to the allocation of profits and losses. Collins, Baker, and Lebo are partners in a business that distributes various electronic components used to control machinery in the printing industry. The partners have a lucrative business and have allocated profits according to
Exercise 3 (LO 4) Possible bases for allocation of profits and losses. You are asked to provide guidance as to how to allocate profits and losses for the following two partnerships:1. Riley, Scott, and Thompson are partners in a law firm that practices in several different areas of law including
Exercise 1 (LO 1) Partnership versus corporate balance sheets and income statements. In 20X1, a new partnership purchased land on the edge of the town of Otisville. The partners erected a building and opened a furniture and appliance store under the name of Otisville Furniture Fair. The partnership
4. Assume there are two identical business entities; one is organized as a partnership and the other is organized as a corporation. How would the financial statements of the two entities differ with respect to income taxes and how would such differences affect the owners of the entity?
3. When an individual partner contributes assets to a partnership, the partnership’s tax basis of the assets is generally not the fair value at the date of transfer. What is the logic underlying this treatment?
2. Under what circumstances might a salary or bonus be more appropriate than interest on capital balances as a means of allocating profits?
1. A major issue faced by people who are starting their own business is the form of organization they should select. What are some major characteristics of a partnership that might influence their decision?
1. Determine which of the segments are considered to be reportable and whether the guidelines regarding the number of reportable segments have been satisfied.
Problem 12-8 (LO 6, 7, 8) Determination of reportable segments, disclosures, ratio analysis. A U.S. multinational corporation has divided its operations into several operating segments and has provided the following data for each segment:
Problem 12-9 (LO 7, 8) Schedule of reportable segments and reconciliation to the consolidated company. Tress Corporation is a rapidly growing company that has diversified into a number of different segments. The following partial trial balance, which includes the effect of intercompany
Problem 12-5 (LO 3, 4) Tax expense/benefit, ordinary and nonordinary income.The following information relates to three independent cases:Case A Case B Case C Pretax net income (loss) from continuing operations:Year-to-date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(80,000) $ 30,000
Problem 12-3 (LO 3, 4) Tax expense/benefit, nonordinary items of gain/loss. During 20X8, Midway Corporation reported first six months’ pretax income of $120,000 from continuing operations and a year-to-date tax expense of $37,668. The tax expense reflects projected pretax income for the balance
Problem 12-2 (LO 3, 4) Determination of various values for pretax income and the related tax effect. The following schedule relates to interim reporting for the Hughes Corporation:Chapter 12 INTERIM REPORTING AND DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE 12-39 Current YTD YTD Tax Type of Income
Problem 12-1 (LO 2) Interim income statement, accounting for various items.Mikelson Company, a California corporation listed on the Pacific Coast Stock Exchange, budgeted activities for 20X5 as follows:Mikelson has operated profitably for many years and has experienced a season pattern of sales
Exercise 11 (LO 6) Determination of reportable segments, reconciliation to consolidated totals. A large diversified company divides its operations into several operating segments.Determine which of the following segments are reportable, and reconcile the reportable segments to the consolidated
Exercise 8 (LO 4) Tax expense/benefit traceable to nonordinary items of income.In 20X1, Riley Corporation had year-to-date income of $70,000 and projected income of $50,000 from continuing operations. Statutory tax rates were as follows: 15% on the first $50,000 of taxable income, 25% on the next
Exercise 6 (LO 3, 4) Estimated effective annual tax rate, prior period restatement, discontinued operation. The Merlot Corporation reported a net operating loss before taxes for the first quarter of 20X3 in the amount of $80,000 (which included $4,000 of tax-exempt income) and a projected loss for
Exercise 4 (LO 3, 4) Tax expense/benefit traceable to nonordinary items of income. Your client has no permanent or temporary differences between accounting and tax measures of income. However, the client has a tax credit carryforward from last year in the amount of $6,000. The benefit of this
Exercise 2 (LO 1, 2) Accounting for R&D, tax rate differences. Your client is seeking advice on each of the following interim reporting issues related to the current year:1. In the first quarter of the current year, the client incurred $130,000 of research and development (R&D) costs which will
Exercise 1 (LO 1, 2) Cost of goods sold, interim income statement. Wert Company has sought assistance in preparing its second-quarter income statement for 20X2. Figures for sales revenue, selling expenses, and general and administrative expenses are $860,000, $68,000, and$117,000, respectively.For
4. Why isn’t the total operating profit of all reportable segments normally equal to the consolidated operating profit?
3. Why must the tax expense or benefit traceable to nonordinary items of income be computed on an incremental basis, and why does it involve a process of ratable allocation?
Problem 11-10 (LO 6) Remeasurement of a trial balance and translation into dollars. Hanna Company, which began operations on January 1, 20X4, is a wholly owned subsidiary of a U.S. based manufacturer. The majority of Hanna’s cash flows are in foreign currency B (FCB), which has been determined to
Problem 11-9 (LO 5, 6) Same facts as 11-8 except involve remeasurement. Useful comparison with 11-8. Assume the same facts as Problem 11-8 with the following exceptions:a. Tobac’s functional currency is the U.S. dollar.b. Balfour’s investment in Tobac consists of the following:Initial
Problem 11-8 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet. Useful comparison with 11-9. Balfour Corporation acquired 100% of Tobac, Inc., a foreign corporation, for 33,000,000 foreign currency units (FC). The acquisition, which was accounted for as a purchase, occurred
Problem 11-5 (LO 5) Translate a foreign branch and prepare a worksheet for combined home/branch financials. Reslin Corporation is a New York-based manufacturer of photographic supplies. On August 1, 20X3, Reslin expanded its network of operations by opening a branch office in Great Britain. The
Problem 11-4 (LO 2, 5) Adjust to U.S. GAAP and translate trial balance. Potter Corporation purchased a 100% interest in Stone Corporation, a foreign subsidiary, on January 1, 20X5, for 9,000,000 foreign currency (FC). On this date, Stone had common stock of 5,000,000 FC, paid-in capital in excess
Problem 11-3 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet with excess of cost over book value traceable to equipment. Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 20X6.
Problem 11-2 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet with amortization of patents. Keltner Enterprises has acquired an 80% interest in Jacklandia (a foreign company). The acquisition was accounted for as a purchase and occurred on January 1, 20X6, as
Problem 11-1 (LO 2, 3) Adjust to U.S. GAAP and translate trial balance. On January 1, 20X8, Richter Corporation acquired an 80% interest in Morgan Company, a foreign company, for 9,000,000 FC. On the date of acquisition, Morgan’s equity consisted of common stock of 3,000,000 FC and retained
Exercise 6 (LO 6) Remeasuring selected balances with various functional currencies. For each of the following independent cases, determine the translated value of the relevant accounts.Case A: A foreign subsidiary has inventory accounted for by the lower-of-cost-or-market rule.The 20X7 ending
Exercise 4 (LO 5) Measurement of net investment under the sophisticated equity method. On June 1, 20X8, the Auburn Company (a U.S. company) acquired a 30% interest in a foreign company which was formed on November 1, 20X7. Auburn accounted for the investment using the sophisticated equity method.
Exercise 3 (LO 5) Entries to record investment under the sophisticated equity method. On January 1, 20X8, Conroy Company, a U.S. company, acquired a 35% interest in Sholt Company, which is a French company. Sholt’s functional currency is the French franc (FF). Conroy acquired its interest at a
Exercise 2 (LO 2, 3) Translate a trial balance, and explain how objectives of translation are achieved. Hughes Consulting formed a French company to market its climate control devices in Western Europe. During the first three months after the French company was formed, the following transactions
3. Explain how a German subsidiary’s year-end balance in retained earnings is expressed in dollars assuming that the German mark is the functional currency.
Problem 10-7 (LO 5) Hedge a commitment to sell. On February 1, Pettit Corporation committed to sell inventory with a cost of $75,000 to a foreign company for 100,000 FC. Payment for this transaction is to be settled on May 1. In anticipation of this sale, Pettit entered into a 90-day forward
Problem 10-6 (LO 5) Comparison of strategies: no hedge, hedge commitment, hedge transaction. Boyd Enterprises has begun to purchase certain component parts from a foreign vendor. These purchases will be denominated in foreign currency units (FC), and the company is trying to evaluate various
Problem 10-5 (LO 3, 5) FC bank loan, hedge of forecasted inventory purchase, impact on earnings. Wagner Corporation transacts business in a number of foreign currencies and had the following activities during the current year. On July 1, the company signed a 60-day, 400,000 foreign currency A (FCA)
Problem 10-4 (LO 2) Forward contract premium, hedging strategies. Jenner Corporation has recently begun to expand its international markets and has engaged in several foreign currency transactions. In one particular series of transactions, the company purchased components from a French manufacturer
Problem 10-3 (LO 5) Hedge a commitment. Vasser Corporation has an extremely strong foreign operations division, having both foreign vendors and foreign customers. Vasser bought inventory with a cost of 250,000 foreign currency A (FCA) on June 1 when the spot rate is 1 FCA $1.58. Payment was made
Problem 10-2 (LO 5) Hedge forecasted transactions, forward contracts. Riker International is building a water purification system in Mexico which will sell for $1,200,000. Although most of the costs incurred will be paid for in U.S. dollars, the company is forecasting that several necessary
Problem 10-1 (LO 5) FC transactions, commitments, forcasted transactions—earnings impact. Jarvis Corporation transacts business with a number of foreign vendors and customers. These transactions are denominated in FC, and the company uses a number of hedging strategies to reduce the exposure to
Exercise 8 (LO 4) Strategy to reduce FC exchange rate risk. Stratco Manufacturing engages in a number of foreign currency transactions which have resulted in the following current balances:Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 Canadian dollars Cash . . . . . . . . .
Exercise 7 (LO 5) Hedging existing FC transaction; forecasted transaction. The Berger Corporation received delivery of equipment purchased from a foreign manufacturer on June 1. The cost of the equipment was 1,200,000 FC with payment due on July 31. On June 1, the company also forecasted the need
Exercise 6 (LO 4, 5) Hedging a commitment; forecasted transaction—forward contract vs. option. Jackson, a U.S. company, acquires a variety of raw materials from foreign vendors with amounts payable in foreign currency (FC). The company needs to acquire 20,000 units of raw material, and the goods
Exercise 5 (LO 4, 5) Hedge with forward contract or loan with FC payoff. Cortez Electronics buys subassemblies from a foreign vendor. On June 1, 20X9, the company committed to acquire subassemblies costing 400,000 foreign currency units (FC). The parts will be shipped, f.o.b. shipping point, on
Exercise 4 (LO 3, 5) Hedge with forward contract. Stark Inc. placed an order for inventory costing 500,000 FC with a foreign vendor on April 15 when the spot rate was 1 FC $0.683.Stark received the goods on May 1 when the spot rate was 1 FC $0.687. Also on May 1, Stark entered into a 90-day
Exercise 3 (LO 3, 5) Measuring changes in value of FC transaction and a forward contract. Dettner Corporation purchased inventory from a foreign vendor in the amount of 75,000 FC on December 1 of the current year. On this same date, Dettner entered into a 90-day forward contract to buy FC. Dettner
Exercise 2 (LO 3) Equipment purchase financed with loan denominated in FC.Keller, Inc. purchased equipment, costing 5,100,000 French francs (FF) from a French vendor.The equipment was delivered on December 1 when 1 FF $0.185. Payment is due to the vendor on March 1 when 1 FF $0.181. In order to
Exercise 1 (LO 3) Sale denominated in FC. Jenkins, Inc. manufactures memory chips used in personal computers. On June 15, when 1 FC $1.10, Jenkins sold chips to a foreign customer for 550,000 FC. The cost of these chips was $475,000. The resulting account receivable is collected on July 12 when 1
4. If a forecasted purchase of equipment were to be denominated in foreign currency (FC), how would the change in value of a cash flow hedge of the forecasted transaction be accounted for?
3. Explain how a U.S. company’s commitment to purchase inventory with settlement in foreign currency (FC) might become less attractive over time and how adverse effects on earnings could be reduced.
Exercise 6 (LO 10) Value-added tax. Assuming that a 10% value-added tax is in effect, prepare a schedule to indicate how it would be calculated, assuming also that a manufacturer produces a product which is sold to a wholesaler who, in turn, sells the product to a retailer who then sells the
Exercise 5 (LO 7, 9) The IAS. Cadbury Schweppes plc is a British company that manufactures and distributes beverages, confectioneries, and related products to customers in over 200 countries throughout the world. Their financial statements are prepared on the basis of U.K. GAAP, and selected
Exercise 4 (LO 7) Differences between U.S. and non-U.S. GAAP. The SEC allows foreign registrants to file financial statements prepared on the basis of either U.S. GAAP, International Accounting Standards (IASs), or their own national GAAP. However, if U.S. GAAP is not employed, companies must
Exercise 3 (LO 2, 6) Harmonization effect. Harmonization of accounting standards through a private standard-setting process will have both advantages and disadvantages to American investors and businesses.1. Discuss the advantages of harmonization to American investors.2. Discuss why differences in
Exercise 1 (LO 2, 6, 8) Harmonization. The single market created by the European Union(EU) will eliminate trade barriers among its member nations. Most U.S. businesses see the EU as an opportunity for growth.1. Discuss some of the apparent opportunities presented by the EU.2. Discuss why
4. Using accounting for inventory as an example, explain how principles differ among countries and how harmonization may benefit an international investor.
3. What are the major objectives of the International Accounting Standards Committee (IASC)?
2. What is the goal of harmonization of accounting standards, and what approaches have been used to accomplish this goal?
10. Describe transfer-pricing issues and differences in tax systems.
9. Discuss the role of the International Accounting Standards Committee(IASC) and the International Federation of Accountants (IFAC).
8. Explain several approaches that characterize attempts to harmonize accounting principles.
7. Demonstrate how foreign companies listed on U.S. stock exchanges reconcile their respective accounting principles to U.S. GAAP.
6. Explain the goal of harmonization.
5. Identify the major cultural classifications that can be used to categorize accounting systems.
4. List several factors that influence the development of accounting among nations.
3. Describe major areas of interest involved in international accounting.
2. Explain why comparable accounting standards are needed.
1. Describe the international business environment.
Problem 8-11 (LO 5) Worksheet, purchase in blocks, subsidiary stock dividend, subsidiary purchase of parent shares, machinery sale, merchandise. On January 1, 20X3, Heckert Company purchased a controlling interest in Allen Company. The following information is available:a. Heckert Company purchased
Problem 8-10 (LO5) Worksheet, subsidiary owns parent shares through stock swap. Assume the same facts as Problem 8-9 except that instead of acquiring parent shares for cash, the subsidiary issued 1,000 of its shares for 500 shares of the parent, Pepe Company. The parent shares had a market value of
Problem 8-8 (LO 4) Worksheet, direct and indirect holdings, preferred stock, intercompany merchandise. The following diagram depicts the relationships among Ackley Company, Biernat Company, and Cromwell Company on December 31, 20X5:Prepare the worksheet necessary to produce the consolidated
Problem 8-7 (LO 4) Worksheet, three-level holding, intercompany merchandise, plant assets. Shelby Corporation purchased 90% of the outstanding stock of Boehm Company on January 1, 20X1, for $600,000 cash. At that time, Boehm Company had the following stockholders’ equity balances: Common Stock:
Problem 8-5 (LO 2) Worksheet, two subsidiaries, subsidiary stock sales, intercompany merchandise, fixed assets, bonds. The audit of Barns Company and its subsidiaries for the year ended December 31, 20X2, was completed. The working papers contain the following information:a. Barns Company acquired
Problem 8-4 (LO 2) Worksheet, subsidiary stock sale with parent purchase, intercompany merchandise. On January 1, 20X2, Mitta Corporation purchased a 60% interest (12,000 shares) in Trainer Company for $158,000. Trainer stockholders’ equity on the purchase date was as follows:Common stock ($5
Problem 8-3 (LO 2) Worksheet, subsidiary stock sale, intercompany merchandise.On January 1, 20X2, Pepka Company purchased 80% of the outstanding common stock of Smart Company for $700,000.On January 1, 20X4, Smart Company sold 25,000 shares of common stock to the public at $10 per share. Pepka
Problem 8-2 (LO 1) Stock dividend, subsidiary stock sales, cost method. On January 1, 20X1, Bear Corporation acquired a 60% interest in Keller Company and an 80% interest in Samco Company. The purchase prices were $225,000 and $250,000, respectively. The excess of cost over book value for each
Problem 8-1 (LO 1) Stock dividend, subsidiary stock sales, equity method. On January 1, 20X1, Zee Corporation purchased 8,000 shares of Thomas Company stock and 18,000 shares of Sand Company stock for $196,000 and $270,000, respectively. The excess of cost over book value on each investment was
Exercise 11 (LO5) Mutual Holdings—Stock Swap. Myles Corporation and its subsidiary, Dowling Corp Myles Corporation purchased a 60% interest in Dowling Corporation for $350,000 on January 1, 20X1. At that time, Dowling’s retained earnings was $50,000. Any excess of cost was attributed to
Exercise 10 (LO 5) Treasury stock method. Myles Corporation and its subsidiary, Dowling Corporation, had the following trial balances as of December 31, 20X3:Myles Dowling Corporation Corporation Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 182,000
Exercise 9 (LO 4) Direct and indirect holdings. The following diagram depicts the investment affiliations among Companies M, N, and O:Using the facts given, determine the consolidated income of the consolidated company, the noncontrolling interest, and the controlling interest net income. Income
Exercise 8 (LO 4) Purchase of a company with a subsidiary. On January 1, 20X1, Hartland Company purchased an 80% interest in Fort Company for $120,000. The purchase price represented a $20,000 excess over book value, which was attributed to a patent and given a 10-year life. The investment is
Exercise 7 (LO 4) Three-level purchase, inventory and fixed asset sales. Companies A, B, and C produced the following separate internally generated net incomes during 20X5:ABC Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 $400,000 $100,000 Less cost of goods
Exercise 5 (LO 4) Three-level purchase. You have secured the following information for Companies A, B, and C concerning their internally generated net incomes (excluding subsidiary income) and dividends paid:ABC 20X1 Internally generated net income . . . . . . . . . . . . . . . $30,000 $20,000
Exercise 4 (LO 3) Subsidiary treasury stock. The following comparative statements of stockholders’ equity were prepared for Nolte Corporation:Jan. 1, 20X1 Jan. 1, 20X3 Jan. 1, 20X5 Common stock ($10 par) . . . . . . . . . . . . . . . . $300,000 $300,000 $300,000 Paid-in capital in excess of par .
Exercise 3 (LO 2) Subsidiary sale of shares, alternative amounts purchased by parent. On January 1, 20X1, Tom Company purchased an 80% interest in Car Company for$400,000. On the purchase date, Car Company had the following stockholders’ equity:Common stock ($10 par) . . . . . . . . . . . . . . .

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Advanced Accounting 8th Edition Dennis M. Bline, Mary L. Fischer, Ted D. Skekel - Solutions

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