Questions and Answers of Modern Advanced Accounting

Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2016, for $450,000. At that time, Score Company had stockholders? equity consisting of common stock,
On January 1, 2016, Plank Company purchased 80% of the outstanding capital stock of Scoba Company for $53,000. At that time, Scoba?s stockholders? equity consisted of capital stock, $55,000; other
On January 1, 2017, Perez Company purchased 90% of the capital stock of Sanchez Company for $85,000. Sanchez Company had capital stock of $70,000 and retained earnings of $12,000 at that time. On
Place Company purchased 92% of the common stock of Shaw, Inc. on January 1, 2017, for $400,000. Trial balances at the end of 2017 for the companies were: Inventory balances on December 31, 2017,
Perkins Company acquired 100% of Schultz Company on January 1, 2017, for $161,500. On December 31, 2017, the companies prepared the following trial balances: Required: A. What method is being used
Parry Corporation acquired a 100% interest in Sent Company on January 1, 2016, paying $140,000. Financial statement data for the two companies for the year ended December 31, 2016
On January 1, 2016, Perelli Company purchased 90,000 of the 100,000 outstanding shares of common stock of Singer Company as a long-term investment. The purchase price of $4,972,000 was paid in cash.
Badco Inc. purchased a 90% interest in Lazytoo Company for $600,000 cash on January 1, 2021. Any excess of implied over book value was attributed to depreciable assets with a 15-year remaining life
The following accounts appeared in the separate financial statements at the end of 2019 for Pressing Inc. and its wholly-owned subsidiary, Stressing Inc. Stressing was acquired in
On January 1, 2022, Plutonium Corporation acquired 80% of the outstanding stock of Sulfurst Inc. for $268,000 cash. The following balance sheet shows Sulfurst Inc.?s book values immediately prior to
A consolidated income statement and selected comparative consolidated balance sheet data for Palano Company and subsidiary follow: Required: Prepare the cash flow from operating activities section
On October 1, 2020, Para Company purchased 90% of the outstanding common stock of Star Company for $210,000. Additional data concerning Star Company for 2020 follows:Common
On May 1, 2020, Peters Company purchased 80% of the common stock of Smith Company for $50,000. Additional data concerning these two companies for the years 2020 and 2021 are: Any difference between
Continue the situation in Exercise 4-6 and assume that during 2020 Sales Company earned $190,000 and declared and paid a $50,000 dividend.Required:A. Prepare the investment-related entries on Pert
On January 1, 2019, Pert Company purchased 85% of the outstanding common stock of Sales Company for $350,000. On that date, Sales Company’s stockholders’ equity consisted of common stock,
On January 1, 2019, Plate Company purchased a 90% interest in the common stock of Set Company for $650,000, an amount $20,000 in excess of the book value of equity acquired. The excess relates to
Poco Company purchased 85% of the outstanding common stock of Serena Company on December 31, 2019, for $310,000 cash. On that date, Serena Company’s stockholders’ equity consisted of the
At the beginning of 2014, Presidio Company purchased 95% of the common stock of Succo Company for $494,000. On that date, Succo Company’s stockholders’ equity consisted of the following:Common
Park Company purchased 90% of the stock of Salt Company on January 1, 2019, for $465,000, an amount equal to $15,000 in excess of the book value of equity acquired. This excess payment relates to an
Percy Company purchased 80% of the outstanding voting shares of Song Company at the beginning of 2019 for $387,000. At the time of purchase, Song Company?s total stockholders? equity amounted to
At the date of an 80% acquisition, a subsidiary had common stock of $100,000 and retained earnings of $16,250. Seven years later, at December 31, 2020, the subsidiary’s retained earnings had
On January 1, 2020, Pruitt Company issued 25,500 shares of its common stock in exchange for 85% of the outstanding common stock of Shah Company. Pruitt?s common stock had a fair value of $28 per
On January 1, 2020, Pope Company purchased 90% of Sun Company?s common stock for $5,800,000 cash. Immediately after the acquisition, the two companies? balance sheets were as follows: Sun Company?s
On February 1, 2019, Punto Company purchased 95% of the outstanding common stock of Sara Company and 85% of the outstanding common stock of Rob Company. Immediately before the two acquisitions,
Balance sheets for Prego Company and Sprague Company as of December 31, 2018, follow: The fair values of Sprague Company?s assets and liabilities are equal to their book values. Required: Prepare
On July 31, 2019, Ping Company purchased 90% of Santos Company?s common stock for $2,010,000 cash. Immediately after the acquisition, the two companies? balance sheets were as follows: Santos
On January 1, 2019, Pat Company purchased 90% of the outstanding common stock of Solo Company for $236,000 cash. The balance sheet for Pat Company just before the acquisition of Solo Company stock,
On January 2, 2019, Phillips Company purchased 80% of Sanchez Company and 90% of Thomas Company for $225,000 and $168,000, respectively. Immediately before the acquisitions, the balance sheets of the
Balance sheets for P Company and S Company on August 1, 2019, are as follows: Required: Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on August 1, 2019,
On January 1, 2019, Perry Company purchased 8,000 shares of Soho Company?s common stock for $120,000. Immediately after the stock acquisition, the statements of financial position of Perry and Soho
The two following separate cases show the financial position of a parent company and its subsidiary company on November 30, 2019, just after the parent had purchased 90% of the subsidiary?s
Polychromasia, Inc. had a number of receivables from subsidiaries at the balance sheet date, as well as several payables to subsidiaries. Of its five subsidiaries, four are consolidated in the
Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2019, for cash. At that time the balance sheet of Spruce Company was as follows:Current
On December 31, 2018, Price Company purchased a controlling interest in Shipley Company. The balance sheet of Price Company and the consolidated balance sheet on December 3, 2018, were as
On January 1, 2018, Peach Company issued 1,500 of its $20 par value common shares with a fair value of $60 per share in exchange for the 2,000 outstanding common shares of Swartz Company in a
On January 2, 2019, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $192,000 cash. Just before the acquisition, the balance sheets of the two companies were as
On January 1, 2019, Polo Company purchased 100% of the common stock of Save Company by issuing 40,000 shares of its (Polo?s) $10 par value common stock with a market price of $17.50 per share. Polo
Spalding Company has offered to sell to Ping Company its assets at their book values plus $1,800,000 representing payment for goodwill. Operating data for 2018 for the two companies are as
Balance sheets for Salt Company and Pepper Company on December 31, 2018, follow: Pepper Company tentatively plans to issue 30,000 shares of its $20 par value stock, which has a current market value
Pham Company acquired the assets (except for cash) and assumed the liabilities of Senn Company on January 1, 2019, paying $720,000 cash. Senn Company?s December 31, 2018, balance sheet, reflecting
On January 1, 2019, Perez Company acquired all the assets and assumed all the liabilities of Stalton Company and merged Stalton into Perez. In exchange for the net assets of Stalton, Perez gave its
Stockholders of Acme Company, Baltic Company, and Colt Company are considering alternative arrangements for a business combination. Balance sheets and the fair values of each company?s assets on
Condensed balance sheets for Phillips Company and Solina Company on January 1, 2018, are as follows: On January 1, 2018, the stockholders of Phillips and Solina agreed to a consolidation. Because
The following balance sheets were reported on January 1, 2019, for Peach Company and Stream Company: Required: Appraisals reveal that the inventory has a fair value of $120,000, and the equipment
On January 1, 2018, Porsche Company acquired the net assets of Saab Company for $450,000 cash. The fair value of Saab?s identifiable net assets was $375,000 on this date. Porsche Company decided to
Effective December 31, 2018, Zintel Corporation proposes to issue additional shares of its common stock in exchange for all the assets and liabilities of Smith Corporation and Platz Corporation,
Assume the same information as in Exercise 2-5 except that instead of paying a cash earnout, Pritano Company agreed to issue 10,000 additional shares of its $10 par value common stock to the
Pritano Company acquired all the net assets of Succo Company on December 31, 2018, for $2,160,000 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: As part of
P Company acquired the assets and assumed the liabilities of S Company on January 1, 2018, for $510,000 when S Company’s balance sheet was as follows:S COMPANYBalance SheetJanuary 1,
Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. As compensation, Pretzel Company gave 30,000 shares of its common stock, 15,000
The balance sheets of Petrello Company and Sanchez Company as of January 1, 2019, are presented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To
Plantation Homes Company is considering the acquisition of Condominiums, Inc. early in 2020. To assess the amount it might be willing to pay, Plantation Homes makes the following computations and
Tesla announced on August 1, 2016, its intent to buy SolarCity in a deal expected to exceed $2.5 billion dollars. Tesla touted the acquisition because of $150 million in expected cost synergies in
All facts about this NFPO are identical to those described in Problem 11, except that the deferral method of recording contributions is used for accounting and for external financial reporting. Fund
All facts about this NFPO are identical to those described in Problem 9, except that the Centre wants to use the restricted fund method of accounting for contributions. The Centre will use two
Fairchild Centre is an NFPO funded by govenunent grants and private donations. It was established on January 1, Year 5, to provide counselling services and a drop-in centre for single parents.On
All facts about this NFPO are identical to those described in Problem 5, except for the following:1. The Society will use the restricted fund method of accounting for contributions.2. The Society
Protect Purple Plants (PPP) uses the deferral method of accounting for contributions and has no separate fund for restricted contributions. On January 1, Year 6, PPP received its first restricted
All facts about this NFPO are identical to those described in Problem 2, except that the association wants to use the deferral method of accounting for contributions. The centre will continue to use
The Perch Falls Minor Hockey Association was established in Perch Falls in January Year 5. Its mandate is to promote recreational hockey in the small community of Perch Falls. With the support of the
The OPI Care Centre is an NFPO funded by government grants and private donations. It prepares its annual financial statements using the deferral method of accounting for contributions, and it uses
Today is September 16, Year 2. You, CPA, work for Garcia & Garcia LLP, a medium-sized firm located in Montreal. Jules Garcia calls you into his office. "CPA, I have a very special engagement for
Explain the meaning of the account "net assets invested in capital assets" and describe how it is used under the two methods of accounting for contributions.
Is it possible that an organization would be required to use certain aspects of the deferral method even though it reports using the restricted fund method? Explain.
What guidelines does the Handbook provide for pledges received by an NFPO?
White Company was incorporated on January 2, Year 1, and commenced active operations immediately.Common shares were issued on the date of incorporation and no new common shares have been issued since
Athena Ltd. is a subsidiary located in Greece. It uses the euro for internal reporting purposes. At December 31, Year 11, the company's inventory on hand had a cost of €20,000 and a net realizable
On January 1, Year 4, P Company (a Canadian company) purchased 90% of S Company (located in a foreign country) at a cost of 15,580 foreign currency units (FC).The carrying amounts of S Company's net
EVA Company was incorporated on January 2, Year 5, and commenced active operations immediately. Ordinary shares were issued on the date of incorporation and no new ordinary shares have been issued
Refer to Problem 11-3. All of the facts and data given in the problem are the same. Your answer to Problem 11-3 will be incorporated in the answer to this problem. Kelly Corporation's
On January 1, Year 5, Wellington Inc. owned 90% of the outstanding common shares of Sussex Corp. Wellington accounts for its investment using the equity method. The balance in the investment account
Parento Inc. owns 80% of Santana Corp. The consolidated financial statements of Parento follow:Parento Inc. purchased its 80% interest in Santana Corp. on January 1, Year 2, for $114,000 when
A Company owns 75% of B Company and 40% of C Company. B Company owns 40% of C Company. The following information was assembled at December 31, Year 7.Additional Information:• A Company purchased
At December 31, Year 4, Hein Company owned 90,000 ordinary shares of Jensen Company when the shareholders' equity of Jensen was as follows:The unamortized acquisition differential at December 31,
The comparative consolidated statement of financial position at December 31, Year 2, and the consolidated income statement for Year 2, of Parent Ltd. and its 7Q%.owned subsidiary are shown
Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below:Note 1: Dividends on preferred shares are two years in arrears.On this date, Par acquired 1,400
The following Year 5 consolidated cash flow statement was prepared for Standard Manufacturing Corp. and its 60%-owned subsidiary, Pritchard Windows Inc.:*consolidated net income was $120,000
On January 1, Year 8, Panet Company acquired 40,000 common shares of Saffer Corporation, a public company, for $500,000. This purchase represented 8% of the outstanding shares of Saffer. It was the
On December 31, Year 1, Kelly Corporation of Toronto paid 13.7 million Libyan dinars (LD) for 100% of the outstanding common shares of Arkenu Company of Libya. On this date, the fair values of
Refer to Problem 11-1. All of the facts and data given in the problem are the same except that PMI only purchased 40% of the outstanding ordinary shares of Sandora for US$6,400,000. Additional
Assume that all of the facts in Problem 3 remain unchanged except that Green paid $211,800 for 60% of the voting shares of Mansford.Required:(a) Prepare a consolidated balance sheet at January 1,
Foreign Infants Adoption Inc. (FIA) is a consulting company wholly owned by Roger Tremblay, a wealthy, recently retired lawyer. FIA helps Canadian families adopt infants from other countries.
Explain how the FCT method produces results that are consistent with the normal measurement and valuation of assets and liabilities for domestic transactions and operations.
"If the translation of a foreign operation produced a gain under the FCT method, the translation of the same company could produce a loss if the operation were translated under the PCT method." Do
Does the FCT method use the same unit of measure as the PCT method? Explain.
Hull Manufacturing Corp. (HMC), a Canadian company, manufactures instruments used to measure the moisture content of barley and wheat. The company sells primarily to the domestic market, but in Year
Hamilton Importing Corp. (HIC) imports goods from countries around the world for sale in Canada. On December 1, Year 3, HIC purchased 11,300 watches from a foreign wholesaler for DM613,000 when the
What translation method should be used for a subsidiary that operates in a highly inflationary environment? Why?
What difference does it make whether the foreign operation's functional currency is the same or different than the parent's presentation currency? What method of translation should be used for each?
What should happen if a foreign subsidiary's financial statements have been prepared using accounting principles different from those used in Canada?
Define a foreign operation as per lAS 21.
How are gains and losses on financial instruments used to hedge the net investment in a foreign operation reported in the consolidated financial statements when the PCT method is used to translate
The FCT and PCT methods each produce different amounts for translation gains and losses due to the items at risk. Explain.
On January 1, Year 4, a Canadian firm, Canuck Enterprises Ltd., borrowed US$208,000 from a bank in Seattle, Washington. Interest of 7.5% per annum is to be paid on December 31 of each year during the
As a result of its export sales to customers in Switzerland, the Lenox Company has had Swiss-franc-denominated revenues over the past number of years. In order to gain protection from future exchange
On June 1, Year 3, Forever Young Corp. (FYC) ordered merchandise from a supplier in Turkey for Turkish lira (TL) 217,000. The goods were delivered on September 30, with terms requiring cash on
On May 1, Year 1, JDH orders equipment from a supplier in Germany for €100,000 with delivery scheduled for October 1, Year 1. Payment is due on December 31, Year 1. On May 2, Year 1 JDH enters into
Gemella Ltd. manufactures construction equipment for sale throughout eastern Canada and northeastern United States. Its year-end is June 30. The following foreign currency transactions occurred
On January 1, Year 5, Ornate Company Ltd. purchased US$2,200,000 of the bonds of the Gem Corporation. The bonds were trading at par on this date, pay interest at 12% each December 31, and mature on
Lamont Company is a Canadian company that produces electronic switches for the telecommunicationsindustry. Lamont regularly imports component parts from Sousa Ltd., a supplierlocated in Mexico, and

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