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modern advanced accounting
Advanced Accounting 13th Global Edition Joseph H. Anthony, Bruce Bettinghaus, Floyd A. Beams, Kenneth Smith - Solutions
3. Calculate the total amount of noncontrolling interest share.E 10-3 Preferred stock held by parent with dividend arrearage On January 1, 2014, Pop AG purchased 750 shares of outstanding preferred stock from Ron AG, its 90 percent-owned affiliate, at $100 per share. The stockholders’ equity of
2. Calculate the total amount of stockholders’ equity at the time of the purchase.
Permata Tbk and its affiliate Berlian Tbk recorded goodwill of $75,000 at its consolidated financial statement year ended December 31, 2013. Permata Tbk acquired an 80 percent interest in Berlian Tbk on January 1, 2013, when its common stock was at $250,000 and retained earnings at $130,000. The
4. [Tax] Pop Corporation and Son Corporation filed consolidated tax returns. In January 2016, Pop sold land, with a basis of $120,000 and a fair value of $150,000, to Son for $200,000. Son sold the land in December 2017 for$250,000. In its 2017 and 2016 tax returns, what amount of gain should be
3. [Tax] In 2016, Pop Corporation received $600,000 in dividends from Son Corporation, its 80 percent–owned subsidiary.What net amount of dividend income should Pop include in its 2016 consolidated tax return?a $600,000 b $480,000 c $420,000 d $0
2. [Tax] Pop Corporation uses the equity method to account for its 25% investment in Son Corporation. During 2016, Pop received dividends of $60,000 from Son and recorded $360,000 as its equity in the earnings of Son. Additional information follows:■ The dividends received from Son are eligible
1. [Preferred stock] During 2017, Pop Corporation owns 20 percent of Son Corporation’s preferred stock and 80 percent of its common stock. Son’s stock outstanding on December 31, 2017, is as follows:10% cumulative preferred stock $ 400,000 Common stock 2,800,000 Son reported net income of
17. When do unrealized and constructive gains and losses create temporary differences for a consolidated entity?E x E R c I S E S E 10-1[Based on AICPA] Preferred stock and income tax
16. Does a parent/investor provide for income taxes on the undistributed earnings of a subsidiary by adjusting investment and investment income accounts? Explain.
15. Describe the nature of the tax effect of temporary differences that arise from use of the equity method of accounting.368 CHAPTER 10
14. Some or all of the dividends received by a corporation from domestic affiliates may be excluded from federal income taxation. When are all of the dividends excluded?
13. What are the primary advantages of filing a consolidated tax return?
12. Can a consolidated entity that is classified as an “affiliated group” under the IRS code elect to file separate tax returns for each affiliate?
11. Are consolidated income tax returns required for all consolidated entities? Discuss.
10. In computing diluted earnings for a parent, it may be necessary to replace the parent’s equity in subsidiary’s realized income with the parent’s equity in the subsidiary’s diluted earnings. Does this replacement calculation involve unrealized profits that are included in the parent’s
9. Potentially dilutive securities of a subsidiary may be converted into parent common stock or subsidiary common stock. Describe how these situations affect the parent’s EPS procedures.
8. It may be necessary to compute the earnings per share for subsidiaries and equity investees before parent(and consolidated) earnings per share can be determined. When are the subsidiary EPS computations used in calculating parent earnings per share?
7. Under what conditions will the procedures used in computing a parent’s EPS be the same as those for a company without equity investments?
6. Do investments in nonconsolidated subsidiaries and 20 to 50 percent–owned investees affect the nature of the investor’s EPS calculations?
5. How does controlling share of consolidated earnings per share differ from parent earnings per share?
4. Describe the computation of noncontrolling interest share for an 80 percent–owned subsidiary with both preferred and common stock outstanding.
3. When a parent acquires only the common stock of a subsidiary that held outstanding preferred stock, how would the common and preferred components of the noncontrolling interest be separated?
2. How is the effect of outstanding preferred stock in the consolidation process generally treated?
1. What are the complications for the consolidation process associated with outstanding preferred stock that is held by a subsidiary?
PR 15-2 When preparing interim reports, does an entity need to use the same method to value inventory that they use at the annual report date? What options are accepted?
PR 15-1 Does an entity need to disclose segment level information about depreciation and amortization (D&A) if the chief decision maker does not consider D&A in their assessment of the segments?
P 15-8 Interim reporting—tax Tor Corporation is subject to income tax rates of 20 percent on its first $50,000 pretax income and 34 percent on amounts in excess of $50,000. Quarterly pretax accounting income for the calendar year is estimated by Tor to be as follows:Quarter Estimated Pretax
2. Prepare a schedule to show how Cob’s segment information would be disclosed under the provisions of FASB ASC Topic 280.
P 15-7 Apply threshold tests—Disclosure The information that follows is for Cob Company at and for the year ended December 31, 2016. Cob’s operating segments are cost centers currently used for internal planning and control purposes. Amounts shown in the Total Consolidated column are amounts
P 15-6 Apply threshold tests—Disclosure The consolidated income statement of Tut Company for 2016 is as follows (in thousands):TUT CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2016 Sales $360 Interest income 10 Income from equity investee 30 Total revenue 400 Cost of sales $180
P 15-5 Apply threshold tests—Disclosure Selected information, which is reported to the chief operating officer, for the five segments of Rad Company for the year ended December 31, 2016, is as follows:Food Tobacco Lumber Textiles Furniture General Corporate Consolidated Revenue Data Sales to
P 15-4 Apply threshold tests—Segment and enterprise-wide disclosure Mer Corporation has five major operating segments and operates in both domestic and foreign markets.Mer is organized internally on an industry basis. Information about its revenue from operating segments and foreign operations
P 15-3 Apply threshold test Ferd CA is a company that has 5 operating segments. Information regarding the operating segments is as follows:A B C D E Sales to unaffiliated customer $500,000 $100,000 $720,000 $40,000 $20,000 Total sales 600,000 110,000 730,000 740,000 30,000 Expenses 650,000 80,000
2. Do additional reportable segments have to be identified?
P 15-2 Apply threshold tests The following information is available for 2016 for Ichi Company, a worldwide conglomerate (in millions):Unaffiliated Sales Intersegment Sales Operating Profit(Loss)Assets Japan ¥800 — ¥300 ¥1,000 China 600 — 200 800 United States 550 ¥100 (50) 650 Europe 400 50
3. Prepare a schedule to disclose segmented revenue and its reconciliation for 2016.
2. Are additional reportable segments required?
P 15-1 Apply threshold tests Rise Corporation is based in the United States and its business is divided into segments based on geographical location. The following information has been accumulated for use in preparing segment disclosures in 2016:Unaffiliated Sales Intersegment Sales Total United
5. In January 2016, Pin Company paid property taxes of $80,000 covering the calendar year 2016. Also in January 2016, Pin estimated that its year-end bonuses to executives would amount to $320,000 for 2016. What is the total amount of expense relating to these two items that should be reflected in
4. On July 1, 2016, Dol Corporation incurred an discontinued operations loss of $300,000, net of income tax saving. Dol’s operating income for the full year ending December 31, 2016, is expected to be $500,000. In Dol’s income statement for the quarter ended September 30, 2016, how much of this
3. An inventory loss from a permanent market decline of $360,000 occurred in May 2016. Cox Company appropriately recorded this loss in May 2016, after its March 31, 2016, quarterly report was issued. What amount of inventory loss should be reported in Cox’s quarterly income statement for the
2. Far Corporation had the following transactions during the quarter ended March 31, 2016:Loss on early extinguishment of debt $70,000 Payment of fire insurance premium for calendar year 2016 100,000 What amount should be included in Far’s income statement for the quarter ended March 31,
E 15-9 Interim accounting for various situations—tax 1. An inventory loss from a market price decline occurred in the first quarter, and the decline was not expected to reverse during the fiscal year. However, in the third quarter, the inventory’s market price recovery exceeded the market
E 15-8 Effective tax rate Assume that the applicable tax rate and the estimated pretax income for four quarters of Nour SA are as follows:Quarter Estimated Pretax Income First $40,000 Second 30,000 Third 90,000 Fourth 120,000 Total $280,000 REQuIRED: Calculate the annual effective tax rate for Nour
4. Assume corporate tax rates of 15 percent on the first $50,000 of taxable income, 25 percent on taxable income between $50,000 and $75,000, 34 percent on taxable income between $75,000 and $100,000, and 39 percent on taxable income between $100,000 and $335,000. If a corporation estimates its
3. Bar Company’s effective annual income tax rates for the first two quarters of 2016 are 34 percent and 30 percent for the first and second quarter, respectively. Assume that Bar’s pretax income is $240,000 for the first quarter and$180,000 for the second quarter. Income tax expense for the
2. A liquidation of LIFO inventories for interim reporting purposes may create a problem in measuring cost of sales.Accordingly, cost of sales in interim periods should:a Be determined using the gross profit method b Include the income effect of the LIFO liquidation c Include the expected cost of
E 15-7 Interim accounting for various situations—tax 1. Interim reporting under FASB ASC Topic 270 guidelines refers to financial reporting:a On a monthly basis b On a quarterly basis c On a regular basis d For periods less than a year
3. For which of the following geographic areas will separate disclosures be required if all relevant tests are considered?a United States, Canada, Germany, and Japan b United States, Germany, and Japan c United States, Canada, and Japan d United States and Canada
2. For which of the following geographic areas will separate disclosures be required if only the 10 percent asset test is considered?a United States b United States and Canada c United States, Japan, and Germany d United States, Canada, Germany, and Japan
1. For which of the following geographic areas will separate disclosures be required if only the 10 percent revenue test is considered?a United States, Canada, and Japan b United States and Canada c United States and Japan d United States, Canada, Germany, and Japan
E 15-6 Apply threshold tests A summary of the segment operations of the Nog Corporation for the year ended December 31, 2016, follows:United States Canada Germany Japan Mexico Other Foreign Consolidated Sales to unaffiliated customers $35,000 $6,000 $3,000 $3,500 $1,500 $1,000 $50,000 Interarea
8. In financial reporting of segment data, which of the following items is used in determining a segment’s operating income?a Income tax expense b Sales to other segments c General corporate expense d Gain or loss on discontinued operations
7. Selected data for a segment of a business enterprise are to be separately reported in accordance with GAAP when the revenues of the segment exceed 10 percent of the:a Combined net income of all segments reporting profits b Total revenues obtained in transactions with outsiders c Total revenues
6. In its 2016 financial statements, if Gum is organized on an industry basis, it should disclose foreign operations data on a specific country if revenues from that country’s operations are at least:a $5,000,000 b $4,700,000 c $4,000,000 d $1,500,000
5. In its 2016 financial statements, Gum should disclose major customer data if sales to any single customer amount to at least:a $300,000 b $1,500,000 c $4,000,000 d $5,000,000
4. The following information pertains to revenue earned by Wig Company’s operating segments for the year ended December 31, 2016:Segment Sales to Unaffiliated Customers Intersegment Sales Total Revenues Ames $ 10,000 $6,000 $ 16,000 Beck 16,000 8,000 24,000 Cyns 8,000 — 8,000 DG 86,000 32,000
3. The following information pertains to Ari Corporation and its divisions for the year ended December 31, 2016 (in thousands):Sales to unaffiliated customers $4,000 Intersegment sales of products similar to those sold to unaffiliated customers 1,200 Interest earned on loans to other industry
2. Hen Corporation’s revenues for the year ended December 31, 2016, are as follows (in thousands):Consolidated revenue per income statement $1,200 Intersegment sales 180 Intersegment transfers 60 Combined revenues of all segments $1,440 Hen has a reportable segment if that segment’s revenues
E 15-5 Apply threshold tests 1. Coy Corporation and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years’ data) pertain to the industries in which operations were conducted for the year ended December 31, 2016 (in thousands):Industry Total
E 15-4 Apply threshold tests Shin Company is based in Japan, but operates internationally. Sales data based on geographical area for 2016 are as follows (in millions):Unaffiliated Sales Intersegment Sales Total Japan ¥500 ¥100 ¥600 China 450 75 525 United States 250 25 275 Europe 50 5 55 Korea
4. Determine the reportable segments of Anka AD based on all tests.
3. Determine the reportable segments of Anka AD based on the operating-profit test.
2. Determine the reportable segments of Anka AD based on the asset test.
E 15-3 Apply threshold test Financial information for Anka AD segment operations are as follows:Segments Sales to External Party Intersegment Sales Operating Segment’s Identifiable Assets Operating Segment's Operating Profit A $0 $1,400,000 $2,100,000 $650,000 B 0 140,000 150,000 10,000 C 150,000
3. Prepare a reconciliation of segment revenue with corporate revenue.
2. Prepare a schedule suitable for disclosing the reportable segments for external reporting.
E 15-2 Apply threshold test—disclosure Oppa Corporation operates in various industries within Korea. It segments the business based on industry. Total sales of the segments are as follows:Food and beverages W5,000,000 Toiletries 10,000,000 Medicine 12,000,000 Forestry 2,000,000 Farming 8,000,000
5. Which of the following is not a criterion for aggregating two or more operating segments?a The segments should have similar products or services.b The segments should have similar production processes.c The distribution of products should be similar.d The segments should have similar amounts of
4. An enterprise is required to disclose information about its major customers if 10 percent or more of its revenue is derived from any single customer. This disclosure must include:a The products or services generating the revenue from such sales b The operating segment or segments making such
3. Each reportable segment is required to disclose the following information except for:a Unusual items b Depreciation, depletion, and amortization c Capital expenditures d Gross profit or loss
2. A reconciliation between the numbers disclosed in operating segments and consolidated numbers need not be provided for:a Cost of goods sold b Profit or loss c Net assets d Revenues
E 15-1 Segment disclosures 1. The disclosure requirements for an operating segment do not include:a Unusual items b Income tax expense or benefit c Interest revenue d Cost of goods or services sold
15. What is the major difference between US GAAP and IFRS interim reporting?E x E R c I S E S
14. The operating segments reporting between IFRS and US GAAP have several similarities; however, some disclosure requirements remain different. What are they? (Hint: Read IFRS 8 to answer this question.)
13. Explain how a company estimates its annual effective tax rate for interim reporting purposes.
12. Do the requirements of FASB ASC Topic 280 apply to financial statements for interim periods? If so, how?
11. Must a major customer be identified by name?
10. When is an enterprise required to include information in its financial statements about its foreign and domestic operations?
9. What disclosures are required for the reportable segments and all remaining segments in the aggregate?
8. Assume that an enterprise has 10 operating segments. Of these, five segments qualify as reportable segments by passing one of the 10 percent tests. However, their combined revenues from sales to unaffiliated customers total only 70 percent of the combined unaffiliated revenues from all operating
7. Describe the 10 percent revenue test for determining reportable segments.
6. Describe the 10 percent asset test for determining reportable segments.
5. Describe the 10 percent operating-profit test for determining reportable segments.Segment and Interim Financial Reporting 517
4. Revenue information for Mahoney Corporation is as follows:Consolidated revenue (from the income statement) $400,000 Intersegment sales and transfers 80,000 Combined revenues of all industry segments $480,000 Does the 10 percent revenue test for a reportable segment apply to 10 percent of the
3. What items under the segment data and consolidated information require reconciliation?
2. What is a reportable segment according to FASB ASC Topic 280? What criteria are used in determining what operating segments are also reportable segments?
1. What are the characteristics of an operating segment under US GAAP or IFRS 8?
PR 13-2 What criteria are required for a hedged item to qualify for special accounting as a cash-flow hedge?
PR 13-1 What criteria are required for a hedged item to qualify for special accounting as a fair-value hedge?
3. Prepare journal entries for Mar’s settlement of its accounts payable and the forward contract on January 15, 2017.
2. Prepare year-end journal entries for Mar as needed on December 31, 2016.
P 13-8 Foreign currency hedge, existing payable Mar, a U.S. firm, purchased equipment for 400,000 British pounds from Thc on December 16, 2016. The terms were n/30, payable in British pounds.On December 16, 2016, Mar also entered into a 30-day forward contract to hedge the account payable to Thc.
3. The delivery of the equipment and settlement of all accounts with Ram and the exchange broker on March 1, 2017.
2. Year-end adjustments relating to the forward contract on December 31, 2016.
P 13-7 Foreign currency hedge, anticipated sale Bat, a U.S. corporation, anticipates a contract based on December 2, 2016, discussions to sell heavy equipment to Ram of Scotland for 500,000 British pounds. The equipment is likely to be delivered and the amount collected on March 1, 2017.In order to
P 13-6 Foreign currency hedge, firm purchase commitment On October 2, 2016, Flx, a U.S. company, entered into a forward contract to purchase 50,000 euros for delivery in 180 days at a forward rate of $0.6350. The forward contract is a derivative instrument hedging an identifiable foreign currency
2. Prepare journal entries to record collection of the receivable and settlement of the forward contract on February 28.
P 13-5 Foreign currency hedge, existing receivable On January 1, 2017, Song delivers merchandise to Prabu for 250,000,000 Indonesian rupiah when the spot rate for the rupiah is 0.39 rupiah. The receivable is due on February 28, 2017. In addition, on January 1, Song enters into a 60-day forward
4. Assuming that the LIBOR rate is 6.5 percent on December 31, 2017, prepare all the necessary entries to account for the interest rate swap at December 31, 2017, including the 2017 interest payment.
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