Questions and Answers of Modern Advanced Accounting

The following are selected account balances from Penske Company and Stanza Corporation as of December 31, 2021:On January 1, 2021, Penske acquired all of Stanza’s outstanding stock for $680,000
Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $510,000 cash. Immediately after the acquisition, the two companies have the following account balances. Clay’s equipment
Assume that Chapman Company acquired Abernethy’s common stock by paying $520,000 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book
Assume that Chapman Company acquired Abernethy’s common stock for $500,000 in cash. Assume that the equipment and long-term liabilities had fair values of $220,000 and $120,000, respectively, on
Assume that Chapman Company acquired Abernethy’s common stock for $490,000 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $90,000, its buildings were valued at $160,000, and
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3.
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $198,000 in cash and issued 100,000 shares of its own $1 par value common
Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2020, by issuing 9,000 shares of $10 par value common stock. Haynes’s shares had a $15 per share fair value. On
Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the
SK Corporation acquired Neptune, Inc., on January 1, 2020, by issuing 125,000 shares of common stock with a $5 per share par value and a $30 market value. This transaction resulted in recognizing
On its December 31, 2021, consolidated balance sheet, what amount should Phoenix report for Sedona’s customer list?a. $10,000b. $20,000c. $25,000d. $50,000On January 1, 2019, Phoenix Co. acquired
What is Phoenix’s consolidated retained earnings balance at December 31, 2021?a. $250,000b. $290,000c. $330,000d. $360,000On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding
What is consolidated net income for Phoenix and Sedona for 2021?a. $148,000b. $203,000c. $228,000d. $238,000On January 1, 2019, Phoenix Co. acquired 100 percent of the outstanding voting shares of
Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of
Goodwill recognized in a business combination must be allocated across a firm’s identified reporting units. For a consolidated entity with multiple reporting units, when is goodwill considered to
Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar’s equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000. Kimmel
When should a consolidated entity recognize a goodwill impairment loss?a. When the fair value of a reporting unit exceeds its respective carrying amountb. Whenever the entity’s fair value declines
On January 1, 2021, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zee’s acquisition-date fair values, Jay concluded that the carrying value of Zee’s
Reimers Company acquires Rollins Corporation on January 1, 2020. As part of the agreement, the parent states that an additional $100,000 cash payment to the former owners of Rollins will be made in
On June 22, 2018, Kroger, Inc., acquired the assets and liabilities of Home Chef, a privately owned company based in Chicago, Illinois, in exchange for $197 million in cash (net of 30 million cash
On May 29, 2018, Microchip Technology Incorporated acquired all of the outstanding stock of Microsemi Corporation in exchange for $8.19 billion in cash to the stockholders of Microsemi. Referring to
On January 31, 2018, The Hershey Company acquired Amplify Snack Brands, Inc., its largest business acquisition to date. Access Hershey’s 2018 financial statements and media reports near the time of
ComWire Company manufactures wireless transponders for satellite applications. ComWire has recently acquired Martin Company, which is primarily known for its software communications development but
AutoNav Company agrees to pay $20 million in cash to the four former owners of Easy-C, Inc., for all of its assets and liabilities. These four owners of Easy-C developed and patented a technology for
What is pushdown accounting?a. A requirement that a subsidiary must use the same accounting principles as a parent company.b. Inventory transfers made from a parent company to a subsidiary.c. A
On January 1, 2021, James Corporation exchanged $3,050,000 cash for 100 percent of the outstanding voting stock of Johnson Corporation. James plans to maintain Johnson as a wholly owned subsidiary
On June 30, 2021, Streeter Company reported the following account balances:On June 30, 2021, Princeton Company paid $310,800 cash for all assets and liabilities of Streeter, which will cease to exist
Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2021, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and
Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and
On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $200,000 in long-term liabilities and 20,000
On January 1, 2021, Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary
On June 30, 2020, Wisconsin, Inc., issued $300,000 in debt and 15,000 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company.
In the December 31, 2020, consolidated balance sheet of Patrick and its subsidiary, what amount of total stockholders’ equity should be reported?a. $1,100,000b. $1,125,000c. $1,150,000d.
In the December 31, 2020, consolidated balance sheet of Patrick and its subsidiary, what amount of total assets should be reported?a. $1,375,000b. $1,395,000c. $1,520,000d. $1,980,000The separate
What is goodwill?a. An intangible asset representing the excess of consideration transferred over the collective fair values of the net identifiable assets acquired in a business combinationb. An
What does the term consolidated financial statements mean?
Describe the concept of a synergy. What are some examples of possible synergies in business combinations?
On January 1, 2021, Acme Co. is considering purchasing a 40 percent ownership interest in PHC Co., a privately held enterprise, for $700,000. PHC predicts its profit will be $185,000 in 2021,
On January 1, 2020, Stream Company acquired 30 percent of the outstanding voting shares of Q-Video, Inc., for $770,000. Q-Video manufactures specialty cables for computer monitors. On that date,
On January 1, 2020, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc., for $982,000 in cash and began to use the equity method for the investment. The price
On July 1, 2019, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to
On January 1, 2021, Pine Company owns 40 percent (40,000 shares) of Seacrest, Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been
Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $210,000 in cash. The book value of Kinman’s net assets on that date was $400,000,
Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $312,000, which gives Belden the ability to significantly influence Sheffield. Sheffield
On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Company’s common shares on the open market in exchange for $16,000. On December 31, 2020, Akron, Inc., acquires an additional 25
Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the
Parrot Corporation holds a 42 percent ownership of Sunrise, Inc., and applies the equity method to account for its investment. Parrot assigned the entire original excess purchase price over book
Echo, Inc., purchased 10 percent of ProForm Corporation on January 1, 2020, for $345,000 and accounted for the investment using the fair-value method. Echo acquires an additional 15 percent of
On January 1, 2019, Halstead, Inc., purchased 75,000 shares of Sedgwick Company common stock for $1,480,000, giving Halstead 25 percent ownership and the ability to apply significant influence over
BuyCo, Inc., holds 25 percent of the outstanding shares of Marqueen Company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with
Camille, Inc., sold $120,000 in inventory to Eckerle Company during 2020 for $200,000. Eckerle resold $85,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming
Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani
On January 1, 2021, Alamar Corporation acquired a 40 percent interest in Burks, Inc., for $210,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of
On January 1, 2020, Alison, Inc., paid $60,000 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $200,000 and liabilities of $75,000. A
On January 1, 2020, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both companies provide commercial Internet support services but serve
On January 1, 2021, Fisher Corporation paid $2,290,000 for 35 percent of the outstanding voting stock of Steel, Inc., and appropriately applied the equity method for its investment. Any excess of
On January 3, 2021, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole Company for $1,160,000. This acquisition gave Matteson the ability to exercise significant
Alex, Inc., buys 40 percent of Steinbart Company on January 1, 2020, for $530,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $1.2 million. Any excess
Jubilee, Inc., owns 35 percent of JPW Company and applies the equity method. During the current year, Jubilee buys inventory costing $60,000 and then sells it to JPW for $75,000. At the end of the
Perez, Inc., applies the equity method for its 25 percent investment in Senior, Inc. During 2021, Perez sold goods with a 40 percent gross profit to Senior, which sold all of these goods in 2021. How
Evan Company reports net income of $140,000 each year and declares an annual cash dividend of $50,000. The company holds net assets of $1,200,000 on January 1, 2020. On that date, Shalina purchases
In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $700,000. This investment gave Domingo the ability to exercise significant influence over
On January 1, Belleville Company paid $2,295,000 to acquire 90,000 shares of O’Fallon’s voting common stock, which represents a 30 percent investment. No allocations to goodwill or other specific
The equity method tends to be most appropriate ifa. An investment represents 50 percent or more of the voting stock of an investee.b. An investment enables the investor to influence the operating and
What is the difference between downstream and upstream sales? How does this difference affect application of the equity method?
Princeton Company holds a 40 percent interest in shares of Yale Company common stock. On June 19 of the current year, Princeton sells part of this investment. What accounting should Princeton make on
Riggins Company accounts for its investment in Bostic Company using the equity method. During the past fiscal year, Bostic reported other comprehensive income from translation adjustments related to
What advantages does a company achieve when it possesses significant influence over another company through voting stock ownership?
Pacheco Industries is comprised of four separate profit centers, which are distributed throughout the United States. Relevant data for each profit center are summarized for 2019: You determine that
Case A: A NFP entity receives a promise from a collection of donors to give $10,000 in three years. The expected future cash flows to be received from the donors is $7,000. The NFP uses a present
Select the best answer for each of the following items:1. An unrestricted pledge from an annual contributor to a NFP hospital made in December 2019 and paid in cash in March 2020 would generally be
Select the best answer for each of the following items:1. Which NNOs must record depreciation on exhaustible assets?(a) Hospitals.(b) VHWOs.(c) ONNOs.(d) All of the above.2. Which statement relating
Select the best answer for each of the following items:1. Cura Foundation, a voluntary health and welfare organization, supported by contributions from the general public, included the following
Select the best answer choice for each of the following items:1. Which of the following receipts is properly recorded as unrestricted current funds on the books of a university?(a) Tuition.(b)
Three funds of the Leukemia Foundation, a nonprofit welfare organization, began an investment pool on January 1, 2021. The costs and fair market values on this date were as follows: During 2021,
Jefferson Hospital received money from a donor to set up an endowment fund. The following information pertains to this contribution:During 20201. $2,000,000 was received to establish the fund. The
The December 31, 2020, statement of financial position for the Blood Donors of America Foundation is presented below. Additional information concerning the statement of financial position is as
A well-known celebrity sponsored a telethon for the Help for the Blind Foundation on November 1, 2020. Pledges in the amount of $1,000,000 were called in. Using similar telethon campaigns as a basis,
Preston Library, a nonprofit organization, presented the following statement of financial position and statement of activities for its fiscal year ended February 28, 2019. Preston LibraryStatement
Hastings College pooled the individual investments of three of its funds on December 31, 2019. The recorded value and the fair market value of the investments on December 31, 2019, are presented
The following transactions of Beltville College transpired during 2020. The funds necessary are the Endowment Fund, the Annuity Fund, the Plant Fund?Unexpended, the Plant Fund?Investment in Plant,
A partial statement of financial position of Century University is shown below. During the fiscal year ended June 30, 2011, the following transactions occurred: 1. A gift of $100,000 was received
The Franklin Public Library received a restricted contribution of $300,000 in 2020. The donor specified that the money must be used to acquire books of poetry written in the sixteenth century. As of
On January 1, 2020, a new Board of Directors was elected for Bradley Hospital. The new board switched to a different accountant. After reviewing the hospital?s books, the accountant decided that the
During 2020, volunteer pinstripers donated their services to General Hospital at no cost. The staff at General Hospital was in control of the pinstripers’ duties. If regular employees had provided
The following events were recorded on the books of Mercy Hospital for the year ended December 31, 2020.1. Revenue from patient services totaled $16,000,000. The allowance for uncollectibles was
Discuss the methods used to record changes in partnership membership. Clarify when the goodwill method may be useful for internal purposes but is not consistent with GAAP, and when the goodwill
On January 2, 2019, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Company. On January 2, 2019, SFr Company reported a retained earnings balance of 480,000
The following information was available about items that differed between the governmental funds and the government-wide statements. Assume that there are no internal service funds. The schedule of
The following information is available about items that differ between the governmental funds and the government-wide statements. Assume that there are no internal service funds. The schedule of
The following schedule of capital assets was prepared for Capital City. All capital acquisitions were made in a capital projects fund (and paid for with cash). An asset was sold by the general fund
On January 1, 2012, the city of Nashvegas issued an 8% annual, 10-year, $10,000 bond for $11,472 (an effective yield of 6%). The bonds become due on December 31, 2021. On June 30, 2020, the city of
On January 1, 2020, Metropolis City issued a 7%, 5-year, $100,000 general obligation bond for $96,007. The bond pays interest annually (on December 31) and was issued to yield 8%. The bond was issued
Circus City issued an 8%, 10-year $2,000,000 bond to build a monorail mass transit system. The city received $1,754,217 cash from the bond issuance on January 1, 2020. The bond yield is 10%. Interest
The town of Aberdeen authorized a fire station to be built at an estimated cost of $150,000. On January 1, 2020, 6% bonds with a par value of $150,000 were authorized and issued. Any difference
The City of Minden entered into the following transactions during the year 2021. 1. A bond issue was authorized by vote to provide funds for the construction of a new municipal building, which
On June 1, 2020, the City of Cape May authorized the construction of a police station at an expected cost of $250,000. Financing will be provided through transfers from a Special Revenue Fund.The
The following transactions represent practical situations frequently encountered in accounting for municipal governments. Each transaction is independent of the others. 1. The City Council of
The Village of Oakridge, which was incorporated recently, began financial operations on July 1, 2020, the beginning of its fiscal year. The following transactions occurred during this first fiscal
You have been engaged to examine the financial statements of the Town of Bridgeport for the year ended June 30, 2020. Your examination disclosed that, because of the inexperience of the town?s

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