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modern advanced accounting

Advanced Accounting 13th Global Edition Joseph H. Anthony, Bruce Bettinghaus, Floyd A. Beams, Kenneth Smith - Solutions

4. A company has a $1,000,000 bond issue outstanding with unamortized premium of $10,000 and unamortized issuance cost of $5,300. What is the book value of its liability? If an affiliate purchases half the bonds in the market at 98, what is the gain or loss? Is the gain or loss actual or
3. What conditions result in an actual retirement of bonds?
2. Do direct lending and borrowing transactions between affiliates give rise to unrealized gains or losses and unrecognized gains or losses?
1. What reciprocal accounts arise when one company borrows from an affiliate?
PR 6-2 What information should be disclosed about property, plant, and equipment in the consolidated financial statements?
PR 6-1 How should a company treat intercompany sales of assets in the consolidated financial statements?
10. Provide computations to explain the $305,800 Investment in Son account balance on December 31, 2017.
9. What was the amount of patents at December 31, 2016? Show computations.
8. Beginning with the noncontrolling interest at January 1, 2017, provide calculations of the $37,200 noncontrolling interest at December 31, 2017.
7. Are there intercompany receivables and payables? If so, identify them and state the amounts.
6. Explain the difference between combined separate and the consolidated “equipment—net” line item by reconstructing the workpaper entry(s) that was (were) apparently made.
5. Provide computations to explain the difference between the combined separate cost of sales and consolidated cost of sales.
4. Are there unrealized inventory profits on December 31, 2017? If so, show computations.
3. Were there intercompany sales between Pop and Son in 2017? If so, show computations.
P6-9 Analyze provided separate company and consolidated statements Separate company and consolidated financial statements for Pop Corporation and its only subsidiary, Son Corporation, for 2017 are summarized here. Pop acquired its interest in Son on January 1, 2016, at a price in excess of book
P6-8 Consolidation workpaper (upstream sales)Financial statements for Pam and Sun Corporations for 2016 are as follows (in thousands):Pam Sun Combined Income and Retained Earnings Statement for the Year Ended December 31, 2016 Sales $210 $130 Income from Sun 34.4 —Gain on sale of land — 10
4. Pam uses the equity method to account for its investment in Sun.REQuIRED: Prepare a consolidation workpaper for Pam Corporation and Subsidiary for 2019.
3. On January 1, 2018, Sun sold plant assets to Pam for $60,000. These assets had a book value of $40,000 on that date and are being depreciated by Pam over five years.
P6-7 Workpaper (upstream sales current and previous years)Pam Corporation acquired an 80 percent interest in Sun Corporation on January 1, 2016, for $108,000 cash, when Sun’s capital stock was $100,000 and retained earnings were $10,000. The difference between investment fair value and book value
P6-6 Workpaper (downstream and upstream sales)Pam Corporation acquired all the outstanding stock of Sun Corporation on April 1, 2016, for $15,000,000, when Sun’s stockholders’ equity consisted of $5,000,000 capital stock and $2,000,000 retained earnings.The price reflected a $500,000
4. Pop uses the equity method to accounting for its investment in Son.REQuIRED: Prepare a consolidation workpaper for Pop Corporation and Subsidiary for the year ended December 31, 2016.
3. During 2016, Son sold land to Pop at a profit of $20,000 (included in plant assets in the financial statements).
2. Son sold equipment to Pop for $50,000 on January 1, 2015, at which time the equipment had a book value of $20,000 and a five-year remaining useful life (included in plant assets in the financial statements).
P6-5 Workpaper (fair value/book value differential, upstream sales)Financial statements for Pop and Son Corporations for 2016 are as follows (in thousands):Pop Son Combined Income and Retained Earnings Statement for the Year Ended December 31, 2016 Sales $ 420 $ 260 Income from Son 63.8 —Gain on
P6-4 Workpaper (downstream sales, two years)Pam Corporation acquired a 90 percent interest in Sun Corporation on January 1, 2016, for $2,700,000, at which time Sun’s capital stock and retained earnings were $1,500,000 and $900,000, respectively. The fair value cost/book value differential is due
P6-3 Workpaper (downstream sale and intercompany receivable/payable)Arnab Corporation acquired an 80 percent interest in Bitt Corporation on January 1, 2016, for $3,000,000 in cash. Bitt’s common stock and retained earnings on this date were at $2,500,000 and $500,000, respectively.The book value
3. On December 31, 2014, Jenna OYJ purchased a building from Mikko OYJ for $2,000,000. At that date, the building had a book value of $1,500,000 and a remaining useful life of 20 years. Jenna OYJ depreciated the building using the straight-line method.REQuIRED: Prepare consolidation workpapers for
2. On January 1, 2014, Jenna OYJ sold equipment with a book value of $1,000,000 to Mikko OYJ for$1,200,000. The equipment had a remaining useful life of 4 years. Mikko OYJ depreciated the equipment using straight-line method.
1. In 2013, Jenna OYJ sold $900,000 of inventories to Mikko OYJ with a $200,000 unrealized profit included in the ending inventories.
P6-2 Upstream and downstream sale of depreciable asset Jenna OYJ was a 90 percent-owned subsidiary of Mikko OYJ and was acquired in 2012. At the acquisition date, any fair value/book value differences were due to goodwill. Separate trial balances for both companies for the year ended in 2014 were
P6-1 Downstream sale of land Rashed QSC is a 90 percent-owned subsidiary of Nase QSC. The separate trial balance for the year ended in 2014 for both companies is as follows:Debits Nase QSC Rashed QSC Cash $ 200 $ 100 Accounts receivable 300 200 Inventory 700 800 Land 1,200 700 Equipment 400 400
E 6-11 Consolidated net income (upstream and downstream sales)Income data from the records of Pam Corporation and Sun Corporation, Pam’s 80 percent–owned subsidiary, for 2016 through 2019 follow (in thousands):2016 2017 2018 2019 Pam’s separate income $200 $150 $40 $120 Sun’s net income 60
2. Pop accounts for its investment in Son as a one-line consolidation. Prepare the consolidation workpaper entries related to this intercompany sale that are necessary to consolidate the financial statements of Pop and Son at December 31, 2016 and 2017.
E 6-10 Inventory items of parent capitalized by subsidiary Pop Industries manufactures heavy equipment used in construction and excavation. On January 3, 2016, Pop sold a piece of equipment from its inventory that cost $360,000 to its 60 percent–owned subsidiary, Son Corporation, at Pop’s
E 6-9 Depreciable asset downstream sale On July 1, 2013, Fatou SA sells equipment to Baba SA, its 75 percent-owned subsidiary, for $6,000,000. The equipment has a book value of $4,500,000 at this date. Baba SA depreciates the equipment by using sum-of-the year method in 5 years. Baba keeps the
E 6-8 Depreciable asset upstream sale On April 1, 2014, Maiba Ltd. purchased a vehicle from its 80 percent-owned subsidiary, Japera Ltd., for $2,800,000. At the time, the vehicle had a book value of $2,300,000 with accumulated depreciation of $200,000. Maiba Ltd. used double declining method
3. How much was income from Vasquez in 2014?
2. How much was income from Vasquez in 2013?
E 6-7 Non-depreciable asset downstream sale Vasquez SA is a 90 percent-owned subsidiary of Fernando SA. The book value of Vasquez SA was equal to fair value when Fernando SA acquired Vasquez SA. In 2013, Fernando SA sold land with a book value of $500,000 to Vasquez SA for $600,000. Vasquez SA’s
6. Shin Corporation sold equipment with a four-year remaining useful life and a book value of $36,000 to its parent company, Fajar Corporation, which owned 90 percent in Shin Corporation, for $40,000 on January 1, 2014. If Shin reports net income of $500,000 in 2016, what is the amount of
5. Sasa Corporation sold equipment with a five-year remaining useful life and a book value of $25,000 to its parent company, Pingkan Corporation, which owns 80 percent in Sasa, for $30,000 on January 1, 2014. How can Pingkan and Subsidiary eliminate the unrealized gains from the transaction at
4. Palapa Corporation purchased a truck for $30,000 from its 90 percent-owned subsidiary, Gon Corporation, on January 1, 2015, when the truck had a five-year remaining useful life and cost $20,000. What is the amount by which the Investment to Gon account will be affected by the unrealized gains
3. Ping Corporation sold equipment with a five-year remaining useful life to its 80 percent-owned subsidiary, Song Corporation, on January 1, 2014. The equipment’s cost was $300,000, and it was sold for $325,000. What is the amount by which this transaction will affect the consolidated equipment
2. Penang Corporation acquired a 90 percent interest in Doki Corporation on January 1, 2012, when the book value of Doki’s net assets was equal to their fair value. During 2014, Doki sold land that cost $50,000 to Penang for $75,000.Penang held the land for two years before selling it for
1. In 2014, Pop Corporation sold land that cost $20,000 to Minang Corporation, its 80 percent-owned subsidiary, for$30,000. Minang still owns the land at December 31, 2017. How will this transaction affect the consolidated account at December 31, 2017?a Credit to gain on sale of land for $10,000 b
4. Pam Company owns 100 percent of Sun Company. On January 1, 2016, Pam sold Sun delivery equipment at a gain. Pam had owned the equipment for two years and used a five-year straight-line depreciation rate with no residual value. Sun is using a three-year straight-line depreciation rate with no
3. Pam Corporation owns 100 percent of Sun Corporation’s common stock. On January 2, 2016, Pam sold to Sun for$40,000 machinery with a carrying amount of $30,000. Sun is depreciating the acquired machinery over a five-year life by the straight-line method. The net adjustments to compute 2016 and
2. In the preparation of consolidated financial statements, intercompany items for which eliminations will not be made are:a Purchases and sales where the parent employs the equity method b Receivables and payables where the parent employs the cost method c Dividends received and paid where the
E 6-5 General questions [Based on AICPA]1. On January 1, 2016, Pam Company sold equipment to its wholly owned subsidiary, Sun Company, for $1,800.The equipment cost Pam $2,000. Accumulated depreciation at the time of sale was $500. Pam was depreciating the equipment on the straight-line method over
2. Prepare a consolidated income statement for Pam Corporation and Subsidiary for 2016.
E 6-3 Computation of net income for upstream and downstream sales of land Patay Corporation acquired a 90 percent interest in Satay Corporation, when the book value of Satay’s net assets was equal to their fair value in 2014. On January 1, 2015, Patay sold land with a book value of $50,000 to
4. If Khun sold the building back to Khap at the same price and date, how and in what amount will the sale of the building affect Khap’s income from Khun and net income for 2016 and the balance of Khap’s Investment in Khun account at December 31, 2016?
3. How and in what amount will the sale of the building affect Khap’s income from Khun and net income for 2017 and the balance of Khap’s Investment in Khun account at December 31, 2017 if Khun still owns the building in 2017?
2. How will the consolidated financial statement of Khap Corporation and Subsidiary for 2016 be affected by the intercompany sale of the building?
E 6-2 Discuss effect of intercompany sale of building Khap Corporation acquired an 80 percent interest in Khun Corporation in 2014. On January 1, 2016, Khap sold a building with a five-year remaining useful life to Khun for $150,000 cash. The building’s book value was $100,000. Khun still owns
4. How will the consolidated assets and consolidated net income for 2016 be affected by the intercompany sale?a Consolidated net assets will decrease, and consolidated net income will increase.b Neither consolidated net assets nor consolidated net income will be affected.c Consolidated net assets
3. How will the intercompany sale affect Pon’s income from Son and Pon’s net income for 2016?a Pon’s income from Son will decrease, and its net income will not be affected.b Neither Pon’s income from Son nor its net income will be affected.c Pon’s income from Son will increase, and its
2. Which of the following statements is true?a Under the equity method, Faizal Company’s Investment in Azmi account will be $2,000 less than its underlying equity in Azmi throughout 2017.b No workpaper adjustments for the land are required in 2017 if Faizal Company has applied the equity method
1. In 2016 the unrealized gain:a To be eliminated is affected by the noncontrolling interest percentage b Is initially included in the subsidiary’s accounts and must be eliminated from Faizal Company’s income from Azmi Company under the equity method c Is eliminated from consolidated net income
10. How are unrealized gains or losses identified when an inventory from intercompany transactions is used as an operating asset?
9. Why would intercompany sale of plant assets incurring a loss require special evaluation?
8. How does a parent eliminate the effects of unrealized gains on intercompany sales of plant assets under the equity method?
7. Describe the computation of noncontrolling interest share in the year of an upstream sale of depreciable plant assets.
6. How are unrealized gains and losses from intercompany transactions involving depreciable assets eventually realized?
5. Consolidation workpaper entries are made to eliminate 100 percent of the unrealized profit from the land account in downstream sales of land. Is 100 percent also eliminated for upstream sales of land?
4. How is the computation of noncontrolling interest share affected by downstream sales of land? By upstream sales of land?
3. When are unrealized gains and losses from intercompany sales of land realized from the viewpoint of the selling affiliate?
2. In the years subsequent to the sale of plant assets, why would the investment and/or noncontrolling interest accounts be used to adjust the unrealized gains or losses from the sale of plant assets?
1. What is the objective of eliminating the effects of intercompany sales of plant assets in preparing consolidated financial statements?
PR 5-2 Does noncontrolling interest represent a liability or an equity in the consolidated balance sheet?
PR 5-1 Should the consolidated financial statements include the subsidiary’s retained earnings at the acquisition date?
P 5-9 Consolidated workpaper (noncontrolling interest, upstream sales, intercompany receivables/payables)Pop Corporation purchased a 90 percent interest in Son Corporation on December 31, 2016, for$5,400,000 cash, when Son had capital stock of $4,000,000 and retained earnings of $1,000,000. All
P 5-8 Consolidated workpapers (downstream sales)Pop Corporation acquired 100 percent of Son Corporation’s outstanding voting common stock on January 1, 2016, for $660,000 cash. Son’s stockholders’ equity on this date consisted of $300,000 capital stock and $300,000 retained earnings. The
P 5-7 Consolidation workpapers (upstream sales, noncontrolling interest)Pam Corporation purchased a 90 percent interest in Sun Corporation on December 31, 2015, for$2,700,000 cash, when Sun had capital stock of $2,000,000 and retained earnings of $500,000. All Sun’s assets and liabilities were
P 5-6 Upstream and downstream sales, 90 percent owned Justin Bhd is a 90 percent-owned company of Epik Bhd and was acquired in 2011, when the book value of Justin Bhd’s net identifiable assets were equal to fair value. Information regarding inventory transactions between Justin Bhd and Epik Bhd
P 5-5 Upstream inventory sale, 100 percent owned On February 20, 2012, Angel AG acquired all common stock of Mark AG. The book value of Mark AG’s net assets was equal to fair value at the acquisition date. Mark AG regularly sold inventories to Angel AG with a 10 percent mark-up. In 2014, $200,000
5. Pop uses the equity method of accounting for its investment in Son.REQuIRED 1. Prepare a schedule showing Pop’s income from Son for the years 2016, 2017, and 2018.2. Compute Pop’s net income for the years 2016, 2017, and 2018.3. Prepare a schedule of consolidated net income for Pop
4. There were no unrealized profits in the December 31, 2018, inventories of either company.
3. Pop’s inventory at December 31, 2017, included items acquired from Son on which Son made a profit of $1,200,000. Total sales by Son to Pop during 2017 were $4,800,000.
2. Pop sold inventory items to Son during 2016 at a gross profit to Pop of $2,400,000. Half the merchandise remained in Son’s inventory at December 31, 2016. Total sales by Pop to Son in 2016 were$6,000,000. The remaining merchandise was sold by Son in 2017.
1. Son was a 75 percent–owned subsidiary of Pop Corporation throughout the 2016–2018 period. Pop’s separate income (excludes income from Son) was $21,600,000, $20,400,000, and $24,000,000 in 2016, 2017, and 2018, respectively. Pop acquired its interest in Son at its underlying book value,
P 5-4 Computations (upstream and downstream sales)Comparative income statements of Son Corporation for the calendar years 2016, 2017, and 2018 are as follows (in thousands):2016 2017 2018 Sales $48,000 $51,000 $57,000 Cost of sales 25,200 26,400 30,000 Gross profit 22,800 24,600 27,000 Operating
P 5-3 Computations (parent buys from one subsidiary and sells to the other)Pam Company owns controlling interests in Sun and Toy Corporations, having acquired an 80 percent interest in Sun in 2016, and a 90 percent interest in Toy on January 1, 2017. Pam’s investments in Sun and Toy were at book
P 5-2 Computations (upstream sales)Pop Corporation acquired a 90 percent interest in Son Corporation at book value on January 1, 2016.Intercompany purchases and sales and inventory data for 2016, 2017, and 2018, are as follows:Sales by Son to Pop Intercompany Profit in Pop’s Inventory at December
P 5-1 Consolidated income and retained earnings (upstream sales, noncontrolling interest)Pam Corporation acquired its 90 percent interest in Sun Corporation at its book value of $3,600,000 on January 1, 2016, when Sun had capital stock of $3,000,000 and retained earnings of $1,000,000.The December
E 5-12 Consolidated income statement (intercompany sales correction)The consolidated income statement of Pop and Son for 2016 was as follows (in thousands):Sales $5,520 Cost of sales (3,680)Operating expenses (640)Income to 20 percent noncontrolling interest in Son (160)Consolidated net income $
3. On the books of Pam Corporation, the investment account is properly reflected on December 31, 2016, at:a $3,240 b $3,264 c $3,276 d Not enough information is given.
2. Noncontrolling interest on December 31, 2016, is:a $2,200 b $2,184 c $2,176 d $2,140
1. Under the equity method, Pam reports investment income from Sun for 2016 of:a $120 b $96 c $80 d $104 loss
E 5-11 Upstream sales On January 1, 2009, Pam Corporation acquired 60 percent of the voting common shares of Sun Corporation at an excess of fair value over book value of $1,000,000. This excess was attributed to plant assets with a remaining useful life of five years. For the year ended December
E 5-10 Consolidated income statement (upstream sales)Pop Corporation purchased an 80 percent interest in Son Corporation for $1,200,000 on January 1, 2017, at which time Son’s stockholders’ equity consisted of $1,000,000 common stock and $400,000 retained earnings. The excess fair value over
E 5-9 Compute noncontrolling interest and consolidated cost of sales (upstream sales)Income statement information for 2016 for Pam Corporation and its 60 percent–owned subsidiary, Sun Corporation, is as follows:Pam Sun Sales $900 $350 Cost of sales 400 250 Gross profit 500 100 Operating expenses
E 5-8 Downstream sale of inventory Wikan Tbk acquired 80 percent ownership of Budi Tbk several years ago at book value. During 2014, Wikan Tbk sold merchandise to Budi Tbk for $1,000,000 at a gross profit of 20 percent. Budi Tbk sold 90 percent of this merchandise to outside parties. At the end of
2. What is the cost of sales that should appear on the consolidated income statement?
1. What is the amount of sales that should appear on the consolidated income statement?
E 5-7 Downstream sale of inventory Xuma SA was a subsidiary of Fabian SA. Fabian SA had a policy to sell its merchandise at a mark-up of 10 percent. The beginning balance of Xuma’s inventory in 2014, which was sold in the current year, was $220,000. Half of this beginning inventory included
3. Sun Corporation, a 75 percent–owned subsidiary of Pam Corporation, sells inventory items to its parent at 125 percent of cost. Inventories of the two affiliates for 2016 are as follows:Pam Sun Beginning inventory $400,000 $250,000 Ending inventory 500,000 200,000 Pam’s beginning and ending
2. Pop acquired a 60 percent interest in Son on January 1, 2016, for $360,000, when Son’s net assets had a book value and fair value of $600,000. During 2016, Pop sold inventory items that cost $600,000 to Son for $800,000, and Son’s inventory at December 31, 2016, included one-fourth of this
E 5-6 Upstream and downstream sales 1. Pam Corporation owns 70 percent of Sun Company’s common stock, acquired January 1, 2017. Patents from the investment are being amortized at a rate of $20,000 per year. Sun regularly sells merchandise to Pam at 150 percent of Sun’s cost. Pam’s December
3. Consolidated cost of goods sold of Pam Corporation and Subsidiary for 2017 was:a $1,024 b $1,045 c $1,052.8 d $1,056

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