Managerial Accounting Persuasive Essay

TEST BANK CHAPTER 1 Intercorporate Investments: An Overview MULTIPLE CHOICE Use the afterward advice on a company’s investments in disinterestedness antithesis to acknowledgment questions 1- 4 below. The company’s accounting year ends December 31. |Date of acquisition|Cost |Fair bulk |Date awash |Selling bulk | |Investment | | |12/31/10 | | | |Ajax Aggregation banal |6/20/10 |$40,000 |$36,000 |2/10/11 |$34,000 | |Bril Association banal |5/1/10 | 20,000 |N/A |11/15/10 | 23,000 | |Coy Aggregation banal |8/2/10 | 16,000 | 19,500 |1/17/11 | 21,000 | 1. Topic: Accounting for trading antithesis LO 2 If the aloft investments are categorized as trading securities, what bulk is arise for accretion or accident on securities, on the 2010 assets statement? a. 3,000 accretion b. $2,500 accretion c. $4,000 accident d. No accretion or accident ANS:b 2. Topic: Accounting for trading antithesis LO 2 If the aloft investments are categorized as trading securities, what bulk is arise for accretion or accident on securities, on the 2011 assets statement? a. $1,000 accident b. $2,000 accretion c. $3,000 accretion d. $500 accident ANS:d 3. Topic: Accounting for AFS antithesis LO 2 If the aloft investments are categorized as available-for-sale securities, what bulk is arise for accretion or accident on securities, on the 2010 assets statement? a. $3,000 accretion b. $2,500 accretion c. $4,000 accident d. No accretion or accident ANS:a 4. Topic: Accounting for AFS antithesis LO 2 If the aloft investments are categorized as available-for-sale securities, what bulk is arise as accretion or accident on securities, on the 2011 assets statement? a. $1,000 accident b. $2,000 accretion c. $3,000 accretion d. $500 accident ANS:a Use the afterward advice to acknowledgment questions 5-7 below: A aggregation holds a $100,000 face bulk accumulated bond, bought January 1, 2011, advantageous 4% annually on December 31, and crumbling December 31, 2014. The aggregation paid $93,070 for the bond, to crop 6%. The aggregation categorizes the band as a held-to-maturity investment, and its accounting year ends December 31. 5. Topic: Accounting for HTM antithesis LO 2 What bulk will the aggregation address as absorption acquirement on the band for 2012? a. $4,000 b. $5,584 c. $5,679 d. $6,000 ANS:c 6. Topic: Accounting for HTM antithesis LO 2 What is the access to almanac cancellation of absorption and arch on December 31, 2014, bold no crime on the band throughout its life? a. Cash104,000 Absorption acquirement 5,887 Advance in bond98,113 b. Cash104,000 Absorption acquirement 4,000 Advance in bond100,000 c. Cash106,000 Absorption acquirement 6,000 Advance in bond100,000 d. Cash104,000 Absorption acquirement 5,584 Advance in band 98,416 ANS:a 7. Topic: Accounting for HTM antithesis LO 2 Accept the bazaar bulk of the band on December 31, 2011 is $80,000, and no antecedent crime has been reported. The abatement in bulk is advised to be addition than temporary. What crime accident is arise on the company’s 2011 assets statement? a. $20,000 b. $13,070 c. $14,654 d. $24,000 ANS:c Use the afterward advice to acknowledgment questions 8-11 below: Eagle Aggregation acquires 25% of the voting banal of Frank Association for $4,000,000 on January 1, 2010. At the time, the book bulk of the aggregation was $16,000,000. During 2010 Frank arise net assets of $1,500,000 and paid assets of $200,000. Both companies accept December 31 year-ends. 8. Topic: Disinterestedness acclimation investments LO 3 What is the advance antithesis on Eagle’s antithesis area on December 31, 2010? a. $4,000,000 b. $4,375,000 c. $4,325,000 d. $4,300,000 ANS:c 9. Topic: Disinterestedness acclimation investments LO 3 Now accept Frank’s book bulk at the date of accretion was $10,000,000, and the antithesis paid over book bulk is attributed to ahead accepted affluence with an estimated actual action of 10 years. Straight-line acquittal is appropriate. What bulk will Eagle address as disinterestedness in net assets of Frank for 2010? a. $225,000 b. $375,000 c. $175,000 d. $325,000 ANS:a 10. Topic: Disinterestedness acclimation investments LO 3 Accept the aforementioned advice as in catechism 9. What is the advance antithesis on December 31, 2010, arise on Eagle’s antithesis sheet? a. $4,375,000 b. $4,225,000 c. $4,175,000 d. $4,000,000 ANS:c 11. Topic: Disinterestedness acclimation investments LO 3 Now accept Eagle’s 2010 catastrophe annual contains $90,000 in commodity purchased from Frank, at a markup of 20% on cost. What is the appulse on 2010 disinterestedness in net income? a. None b. $15,000 lower c. 3,750 lower d. $18,000 lower ANS:c Use the afterward advice to acknowledgment questions 12 and 13 below: Eagle Aggregation acquires all of the voting banal of Frank Association for $20,000,000 on January 1, 2010, in a approved merger. Frank’s January 1, 2010 antithesis area is as follows: Accepted assets$15,000,000 Bulb & accessories 60,000,000 Accepted liabilities 12,000,000 Abiding debt 47,000,000 12. Topic: Approved alliance LO 4 How abundant amicableness does Eagle report? a. $4,000,000 b. $0 c. $16,000,000 d. $20,000,000 ANS:a 13. Topic: Approved alliance LO 4 Now accept Frank’s bulb and accessories is overvalued by $5,000,000. How abundant amicableness does Eagle report? . $(5,000,000) b. $0 c. $4,000,000 d. $9,000,000 ANS:d Use the afterward advice to acknowledgment questions 14 and 15 below: At the alpha of the accepted year, Jalu S. A. enters a collective adventure with addition aggregation to advance new technology. Anniversary aggregation invests €1,000,000 for a 50% absorption in the collective venture. During the year, the collective adventure letters assets of €200,000 and pays assets of €60,000. At the end of the year the collective venture’s antithesis area letters €5,000,000 in assets and €2,860,000 in liabilities. Jalu letters €22,000,000 in assets and €10,000,000 in liabilities from its own operations. 14. Topic: Collective ventures LO 3, 5 If Jalu uses the disinterestedness acclimation to address its advance in the collective venture, what are its absolute liabilities at the end of the year? a. €10,000,000 b. €12,860,000 c. €11,430,000 d. € 2,860,000 ANS:a 15. Topic: Collective ventures LO 5 If Jalu uses commensurable alliance to address its advance in the collective venture, what are its absolute liabilities at the end of the year? a. €10,000,000 b. €12,860,000 c. €11,430,000 d. € 2,860,000 ANS:c 16. Topic: Disinterestedness acclimation advance LO 3 Monroe Aggregation owns 40% of the voting banal of Nartal Industries, acquired at book value. Nartal letters assets of $600,000 for 2010. Nartal consistently sells commodity to Monroe at a markup of 30% on cost. Monroe’s 2010 alpha annual includes $156,000 purchased from Nartal. Its 2010 catastrophe annual includes $260,000 purchased from Nartal. Monroe uses the disinterestedness acclimation to address its advance in Nartal. Disinterestedness in net assets of Nartal for 2010 is: a. $249,600 b. $230,400 c. $216,000 d. $264,000 ANS:b Use the afterward advice to acknowledgment questions 17 – 20 below: On January 1, 2011, Ola Aggregation paid $388,900 for a $400,000 face bulk 3% accumulated band acquiescent 4%, absorption paid annually on December 31, and classifies it as held-to-maturity. Ola’s advertisement year ends December 31. 17. Topic: HTM advance LO 2 On its 2011 assets statement, Ola letters absorption acquirement on the accumulated band of: a. $12,000 b. $11,667 c. $15,556 d. $16,000 ANS:c 18. Topic: HTM advance LO 2 On its 2011 antithesis sheet, Ola letters the advance at: a. $389,678 b. $392,965 c. $400,000 d. $392,456 ANS:d 19. Topic: HTM advance LO 2 On its 2012 antithesis sheet, Ola letters the advance at: a. $395,981 b. $397,296 c. $396,154 d. $398,231 ANS:c 20. Topic: HTM advance LO 2 What is the action of this bond? a. 2 years b. 5 years c. 6 years d. 4 years ANS:d 21. Topic: Trading advance LO 2 On December 20, 2011, a aggregation pays $40,000 for a stock, classified as a trading security. On December 31, 2011, the company’s year-end, the banal has a bazaar bulk of $43,000. The aggregation sells the banal in 2012 for $41,000. On its assets statement, the aggregation reports: a. a accretion of $3,000 in 2011, and a accident of $2,000 in 2012. b. no accretion or accident in 2011, and a accretion of $1,000 in 2012. c. a accretion of $3,000 in 2011, and no accretion or accident in 2012. d. no accretion or accident in 2011, and a accretion of $3,000 in 2012. ANS:a 22. Topic: AFS advance LO 2 On December 20, 2011, a aggregation pays $40,000 for a stock, classified as an available-for-sale security. On December 31, 2011, the company’s year-end, the banal has a bazaar bulk of $43,000. The aggregation sells the banal in 2012 for $41,000. On its assets statement, the aggregation reports: a. a accretion of $3,000 in 2011, and a accident of $2,000 in 2012. b. o accretion or accident in 2011, and a accretion of $1,000 in 2012. c. a accretion of $3,000 in 2011, and no accretion or accident in 2012. d. no accretion or accident in 2011, and a accretion of $3,000 in 2012. ANS:b 23. Topic: Approved alliance LO 4 Porter Association acquires all of Quinn Company’s assets and liabilities on January 1, 2012, for $10,000,000 in cash. At the date of acquisition, Quinn’s antithesis area arise assets of $50,000,000 and liabilities of $46,000,000. Investigation reveals that Quinn’s arise bulb assets are undervalued by $2,500,000. Porter letters how abundant amicableness on this acquisition? a. $6,000,000 b. $2,500,000 c. $3,500,000 d. $2,000,000 ANS:c 24. Topic: Approved alliance LO 4 Rand Association acquires all of Southern Company’s assets and liabilities on January 1, 2012, for $15,000,000 in cash. At the date of acquisition, Southern’s antithesis area arise assets of $75,000,000 and liabilities of $65,000,000. Investigation reveals that Southern’s arise bulb assets are overvalued by $1,400,000. Rand letters how abundant amicableness on this acquisition? a. $5,000,000 b. $6,400,000 c. $3,600,000 d. $2,000,000 ANS:b 25. Topic: Collective ventures LO 3, 5 At the alpha of the accepted year, Trux, Inc. enters a collective adventure with addition company. Anniversary aggregation invests €25,000,000 for a 50% absorption in the collective venture. During the year, the collective adventure letters assets of €1,500,000 and pays no dividends. At the end of the year the collective venture’s antithesis area letters €65,000,000 in assets and €13,500,000 in liabilities. If Trux uses commensurable alliance to address its advance in the collective venture, its liabilities will be: a. the aforementioned as if it acclimated the disinterestedness acclimation to address the investment. b. €13,500,000 college than if it acclimated the disinterestedness acclimation to address the investment. c. €25,000,000 lower than if it acclimated the disinterestedness acclimation to address the investment. d. €6,750,000 college than if it acclimated the disinterestedness acclimation to address the investment. ANS:d 26. Topic: Authoritative advance LO 4 A aggregation acquires all of the assets and liabilities of addition aggregation in a approved merger. Which annual is false? a. The accepting aggregation letters the acquired assets and liabilities at fair bulk at the date of acquisition. b. The accepting aggregation does not address acquired abstract assets unless they are already arise on the acquired company’s books. c. The acquired aggregation no best exists as a abstracted entity. d. the accepting aggregation does not cheapen its assets and liabilities to fair bulk at the date of acquisition. ANS:b 27. Topic: Collective ventures LO 3 U. S. GAAP accepted requires collective ventures to be arise as: a. disinterestedness acclimation investments. b. trading securities. c. circumscribed controlled investments. d. available-for-sale securities. ANS:a 28. Topic: HTM antithesis LO 2 Held-to-maturity investments are arise at: a. fair value, with abeyant assets and losses arise on the assets statement. b. fair value, with abeyant assets and losses arise in addition absolute income. c. amortized cost. d. cost, with abeyant assets and losses arise on the assets statement. ANS:c 29. Topic: Commensurable alliance LO 5 Commensurable alliance is: a. acclimated to address investments in bankable securities, captivated for abiding investment. b. not accustomed in the U. S. c. a way to address all the assets and liabilities of addition aggregation on the investor’s books. d. an addition way to address authoritative investments beneath IFRS. ANS:b 0. Topic: Crime testing of investments LO 2, 3 Crime testing requires a allegory of an asset’s book bulk with its fair value, with crime losses arise on the assets statement. Which of the afterward investments are NOT activated for impairment? a. trading antithesis b. Held-to-maturity investments c. Disinterestedness acclimation investments d. Collective ventures ANS:a 31. Topic: Advance appraisal LO 2, 3, 4 If a aggregation elects the fair bulk advantage beneath SFAS 159 for all of its acceptable investments, which of its investments are not arise at fair value, with abeyant assets and losses arise in income? a. cogent access investments . available-for-sale investments c. held-to-maturity investments d. controlled investments ANS:d 32. Topic: Authoritative advance LO 4 Back a aggregation owns a authoritative absorption in the banal of addition accurately abstracted company, the acquired aggregation is alleged a: a. capricious absorption entity. b. subsidiary. c. disinterestedness acclimation investment. d. held-to-maturity investment. ANS:b 33. Topic: Collective ventures LO 3 If a U. S. aggregation invests in a collective venture, it may address the advance as: a. a trading investment. b. a held-to-maturity investment. c. an disinterestedness acclimation investment. d. a approved merger. ANS:c 34. Topic: Investments with no access LO 2 SFAS 115 divides investments with readily determinable fair ethics into what categories? a. trading and held-to-maturity investments b. trading, held-to-maturity, and disinterestedness methodinvestments c. available-for-sale and held-to-maturity investments d. trading, available-for-sale, and held-to-maturity investments ANS:d 35. Topic: HTM investments LO 2 Crime losses on held-to-maturity investments are: a. not reported. b. arise in addition absolute income. c. arise as a absolute acclimation to alpha retained earnings. d. arise on the assets statement. ANS:d 36. Topic: Trading investments LO 2 Crime losses on trading investments are: a. not reported. b. eported in addition absolute income. c. arise as a absolute acclimation to alpha retained earnings. d. arise on the assets statement. ANS:a 37. Topic: Disinterestedness acclimation investments LO 3 Crime losses on disinterestedness acclimation investments are: a. not reported. b. arise in addition absolute income. c. arise as a absolute acclimation to alpha retained earnings. d. arise on the assets statement. ANS:d 38. Topic: Disinterestedness acclimation investments LO 3 Crime losses are arise on a disinterestedness acclimation advance when: a. its fair bulk is beneath than its book value. b. its fair bulk is beneath than its book value, and the abatement is advised to be addition than temporary. . its fair bulk is zero. d. its fair bulk is beneath than its book value, and there is an alive bazaar for the investment. ANS:b 39. Topic: Disinterestedness acclimation investments LO 3 Disinterestedness in net assets is afflicted by all but which one of these items accompanying to the investee? a. impairments of broad action affluence of the investee b. markup on annual awash by the investee to the broker c. markup on annual awash by the broker to the investee d. acquittal of ahead unreported affluence of the investee ANS:a 40. Topic: Authoritative advance LO 4 A aggregation acquires all of the assets and liabilities of addition company. Which one of the afterward increases the bulk of amicableness the accepting aggregation reports? a. The acquired company’s accessories is undervalued. b. The acquired aggregation has ahead unreported intangibles. c. The acquired company’s debt is undervalued. d. The acquired company’s annual is undervalued. ANS:c 41. Topic: Banal accretion LO 4 A aggregation acquires all of the voting banal in Prolin Company, and annal the transaction by debiting “Investment in Prolin Company. ” The aggregation is accounting for its advance as a: a. approved consolidation. b. capricious absorption entity. c. collective venture. d. banal acquisition. ANS:d 42. Topic: IFRS for intercorporate investments LO 5 Following IFRS, crime accident for intercorporate investments with cogent access occurs when: a. book bulk is college than bazaar value. b. book bulk is college than the college of bazaar bulk or value-in-use. c. the abatement in bulk is addition than temporary. d. the present bulk of the investment’s approaching banknote flows is greater than its accustomed value. ANS:b 43. Topic: IFRS for intercorporate investments LO 5 What is “value-in-use,” as acclimated in advertisement intercorporate investments, per IFRS? a. Present bulk of the investment’s approaching accepted banknote flows. b. Bazaar bulk of the advance in an alive market. c. Present bulk of the investment’s approaching allotment payments. d. Bazaar bulk of the advance back acquired. ANS:a 44. Topic: IFRS for intercorporate investments LO 5 Afterward IFRS, back are held-to-maturity investments advised to be impaired? a. Book bulk is greater than bazaar value, and there is cold affirmation of accident events. b. Book bulk is greater than bazaar value, and there is an alive bazaar for the investment. c. Book bulk is greater than value-in-use, and the abatement is advised to be addition than temporary. d. Book bulk is greater than value-in-use, and the advance no best pays assets or interest. ANS:a 45. Topic: IFRS for intercorporate investments LO 5 Which annual beneath is apocryphal apropos IFRS for bankable debt and disinterestedness investments? a. Trading investments are arise at fair value, with abeyant assets and losses arise in income. b. Available-for-sale investments are arise at fair value, with abeyant assets and losses arise in equity. c. Crime losses are arise in equity, and cannot be reversed. d. Held-to-maturity investments are arise at amortized cost. ANS:c 46. Topic:IFRS for intercorporate investments LO 5 Which annual is accurate apropos commensurable consolidation? Commensurable consolidation: a. is accustomed for investments with cogent access and authoritative intercorporate investments. b. letters the intercorporate advance at net book bulk as an asset on the investor’s antithesis sheet. . increases the investor’s advantage (total liabilities/total assets) if the investee has college advantage than the investor. d. increases the investor’s absolute disinterestedness if the investee has absolute retained earnings. ANS:c 47. Topic: Motivations for intercorporate investments LO 1 Which annual beneath is atomic acceptable to be a acumen a aggregation invests in the antithesis of addition company? a. Earn a acknowledgment on briefly abandoned cash. b. Speculate based on clandestine advice that the banal bulk will increase. c. Antithesis a risk-adjusted portfolio with the apprehension of assets and basic gains. d. Facilitate action forth the accumulation chain. ANS:b 48. Topic: Motivations for intercorporate investments LO 1 Sharil Aggregation owns 40% of Tonlen Company. What is the best acceptable acumen Sharil fabricated this investment? a. Earn a acknowledgment on briefly abandoned cash. b. Speculate based on clandestine advice that the banal bulk will increase. c. Antithesis a risk-adjusted portfolio with the apprehension of assets and basic gains. d. Facilitate action forth the accumulation chain. ANS:d 49. Topic: U. S. GAAP for disinterestedness acclimation investments LO 3 Afterward U. S. GAAP, back should a aggregation use the disinterestedness acclimation to address an intercorporate investment? a. The aggregation decidedly influences the decisions of the investee. b. The investee is the company’s aloft supplier. c. The aggregation owns 20 – 50% of the investee’s voting stock. d. The aggregation is captivation the advance in its abiding portfolio. ANS:c 50. Topic: IFRS for disinterestedness acclimation investments LO 5 Afterward IFRS, back should a aggregation use the disinterestedness acclimation to address an intercorporate investment? a. The aggregation decidedly influences the decisions of the investee. b. The investee is the company’s aloft supplier. c. The aggregation owns 20 – 50% of the investee’s voting stock. d. The aggregation is captivation the advance in its abiding portfolio. ANS:a PROBLEMS Use the afterward advice to complete problems 1 and 2 below: |Date of accretion |Cost |Fair bulk |Date awash |Selling bulk | |Investment | | |12/31/11 | | | |Heman Aggregation banal |4/20/11 |$42,000 |$33,000 |2/10/12 |$36,000 | |Itol Association banal | 8/1/11 | 23,000 |N/A |9/15/11 | 25,000 | |Jambo Aggregation banal | 9/2/11 | 18,000 | 14,000 |1/14/12 | 12,000 | 1. Topic: Trading investments LO 2 Krotar Association holds these investments and classifies them as trading securities. Its accounting year ends December 31. Required Prepare the annual entries to almanac the contest accompanying to these intercorporate investments. ANS: 4/20/11 Advance in antithesis | |42,000 | | | |Cash | |42,000 | 8/1/11 |Investment in antithesis | |23,000 | | | |Cash | |23,000 | 9/2/11 |Investment in antithesis | |18,000 | | | |Cash | |18,000 | 9/15/11 Banknote | |25,000 | | | |Investment in antithesis | |23,000 | | |Gain on antithesis (income) | |2,000 | 12/31/11 |Loss on antithesis (income) | |13,000 | | | |Investment in antithesis | |13,000 | $(13,000) = ($33,000 - $42,000) + ($14,000 - $18,000) 1/14/12 Banknote | |12,000 | | |Loss on antithesis (income) | |2,000 | | | |Investment in antithesis | |14,000 | 2/10/12 |Cash | |36,000 | | | |Investment in antithesis | |33,000 | | |Gain on antithesis (income) | |3,000 | 2. Topic: AFS investments LO 2 Krotar Association holds these investments and classifies them as available-for-sale securities. Its accounting year ends December 31. Required Prepare the annual entries to almanac the contest accompanying to these intercorporate investments. ANS: 4/20/11 |Investment in antithesis | |42,000 | | | |Cash | |42,000 | 8/1/11 |Investment in antithesis | |23,000 | | | |Cash | |23,000 | 9/2/11 Advance in antithesis | |18,000 | | | |Cash | |18,000 | 9/15/11 |Cash | |25,000 | | | |Investment in antithesis | |23,000 | | |Gain on antithesis (income) | |2,000 | 12/31/11 Accident on antithesis (OCI) | |13,000 | | | |Investment in antithesis | |13,000 | $(13,000) = ($33,000 - $42,000) + ($14,000 - $18,000) 1/14/12 |Cash | |12,000 | | |Loss on antithesis (income) | |6,000 | | | |Investment in antithesis | |14,000 | | |AOCI | |4,000 | 2/10/12 Banknote | |36,000 | | |Loss on antithesis (income) | |6,000 | | | |Investment in antithesis | |33,000 | | |AOCI | |9,000 | 3. Topic: Investments in debt and disinterestedness antithesis LO 2 Here is advice for assorted investments captivated by Best Beverages, and ethics arise on its January 1, 2012 antithesis sheet: ASSETS Trading antithesis Advance in Cougar Aggregation stock…………………………. $ 450,000 Available-for-sale antithesis Advance in Daley Aggregation stock…………………………… 1,000,000 Advance in Egan Association stock…………………………. 700,000 Held-to-maturity antithesis -year $1,000,000 face bulk band issued by Franklin Aggregation advantageous 5% absorption annually on December 31, acquiescent 4% annually, due December 31, 2013……………….. 1,018,861 ACCUMULATED OTHER COMPREHENSIVE INCOME Abeyant accident on Daley Aggregation stock………………………. 200,000 Abeyant accretion on Egan Association stock…………………….. 100,000 During 2012 the afterward contest occurred: 1. Awash Cougar Aggregation banal for $510,000. 2. Bought Gordon Association stock, captivated as a trading security, for $350,000. Fair bulk at December 31, 2012: $375,000. 3. Awash Daley Aggregation banal for $950,000. 4. Captivated Egan Association stock; fair bulk at December 31, 2012: $695,000. 5. Received absorption on Franklin Aggregation bond; fair bulk at December 31, 2012: $1,100,000. Required Fill in the amounts arise on Best Beverages’ 2012 banking statements. Show your assignment in the amplitude beneath anniversary answer. 2012 INCOME STATEMENT Absorption acquirement on Franklin bond$______________ Accretion or accident on auction of Cougar stock$______________ accretion accident (circle) Accretion or accident on auction of Daley stock$______________ accretion accident (circle) Addition assets annual assets or losses (specify stock, amount, and whether it is a accretion or loss) DECEMBER 31, 2012 BALANCE SHEET ASSETS Advance in Gordon Association stock$____________ Advance in Egan Association stock$____________ Investment in Franklin Aggregation bond$____________ ACCUMULATED OTHER COMPREHENSIVE INCOME Abeyant assets and losses (specify security, amount, and whether it is a accretion or loss) ANS: 2012 INCOME STATEMENT Absorption acquirement on Franklin bond$40,754 (= 4% x 1,018,861) Accretion or accident on auction of Cougar stock$60,000 accretion (= $510,000 – $450,000) Accretion or accident on auction of Daley stock$250,000 accident (= $950,000–$1,000,000–$200,000) Addition assets annual assets or losses Abeyant accretion on Gordon banal (trading)$25,000 (= $375,000 – $350,000) DECEMBER 31, 2012 BALANCE SHEET ASSETS Advance in Gordon Association stock$ 375,000 Advance in Egan Association stock$ 695,000 Investment in Franklin Aggregation bond$1,009,615 (= $1,018,861 – ($50,000 – $40,754) ACCUMULATED OTHER COMPREHENSIVE INCOME Abeyant assets and losses Abeyant accretion on Egan banal (AFS)$95,000 (= $695,000 –$700,000 +$100,000) 4. Topic:Equity acclimation investments LO 3 On January 2, 2010 Cornwall Association acquired 35% if the voting banal of Kingston Aggregation for $4,000,000 in cash. The book ethics of Kingston’s arise assets and liabilities approximated their fair values, but Kingston had unreported chump lists (3-year life, straight-line) admired at $300,000, and cast names (indefinite life) admired at $1,000,000. During 2010 Kingston arise absolute assets of $600,000 and paid absolute assets of $200,000. Kingston arise $25,000 in abeyant losses on trading antithesis and $10,000 in abeyant losses on AFS securities. Kingston awash $5,000,000 in commodity to Cornwall at a markup of 20% on cost; $312,000 charcoal in Cornwall’s catastrophe inventory. Kingston’s cast names are broken by $150,000 in 2010. Cornwall uses the disinterestedness acclimation to address its advance in Kingston. Required a. Compute Cornwall’s disinterestedness in net assets of Kingston for 2010, arise on Cornwall’s assets statement. b. Accomplish the access or entries all-important to address the aloft contest for 2010 on Cornwall’s books. ANS: a. |Share of arise assets |35% x $600,000 $ 210,000 | |Less revaluation writeoff: chump lists | | | | |$300,000/3 x 35% |(35,000) | |Less bottomless accumulation in catastrophe annual | | | | |($312,000–$312,000/1. 2) x 35% |(18,200) | |Equity in net assets | |$ 156,800 | b. Advance in Kingston | |4,000,000 | | | |Cash | |4,000,000 | |Investment in Kingston | |156,800 | | | |Equity in net assets | |156,800 | |Cash | |70,000 | | | |Investment in Kingston | |70,000 | OCI | |3,500 | | | |Investment in Kingston | |3,500 | 5. Topic: Commensurable alliance LO 5 On January 1, 2007, Coca-Cola and addition aggregation accordingly acquired Jugos del Valle. Anniversary accepting aggregation paid $10 actor to access 50% of Jugos. At the date of acquisition, Jugos’ book bulk was $6 million. It had unreported technology (indefinite life) admired at $5 million, and the butt of Jugos’ assets and liabilities were adequately stated. It is now December 31, 2009. Coca-Cola treats Jugos as an disinterestedness acclimation investment. The antithesis bedding of the two companies are as follows (in thousands): |Coca-Cola |Jugos | |Current assets |$ 3,000 |$ 500 | |Plant & equipment, net |80,000 |30,000 | |Investment in Jugos |10,750 | _____ | | Absolute assets |$ 93,750 |$ 30,500 | | | | | |Liabilities |$ 35,750 |$ 23,000 | |Capital banal |14,000 |2,000 | |Retained antithesis |44,000 |5,500 | | Absolute liabilities & disinterestedness |$ 93,750 |$ 30,500 | Required Present Coca-Cola’s antithesis area at December 31, 2009, bold Coca-Cola uses commensurable alliance to address its advance in Jugos. ANS: (in thousands) Accepted assets |$ 3,250 |Liabilities |$ 47,250 | |P&E, net |95,000 |Capital banal |14,000 | |Technology |2,500 |Retained antithesis |44,000 | |Goodwill | 4,500 | |______ | |Total |$105,250 |Total |$105,250 | 6. Topic: Approved alliance LO 4 Delicious Delicacies acquires the assets and liabilities of Elegant Eateries on January 2, 2013, for $7,000,000 cash. At that date, Elegant Eateries’ antithesis area is as follows: Assets | |Liabilities and disinterestedness | | |Current assets |$1,300,000 |Current liabilities |$1,100,000 | |Plant & equipment, net | 8,000,000 |Long-term debt |5,000,000 | | |________ |Capital banal |3,200,000 | |Totals |$9,300,000 |Totals |$9,300,000 | Elegant’s accepted assets are overvalued by $200,000, and its bulb and accessories is overvalued by $1,000,000. Elegant has ahead unreported affluence of $2,000,000. Required Prepare the annual access fabricated by Delicious Delicacies to almanac its accretion of Elegant Eateries. ANS: Accepted assets | |1,100,000 | | |Plant & accessories | |7,000,000 | | |Intangibles | |2,000,000 | | |Goodwill | |3,000,000 | | | |Current liabilities | |1,100,000 | | |Long-term debt | |5,000,000 | | |Cash | |7,000,000 | 7. Topic: Approved alliance LO 4 Akron Industries acquires the assets and liabilities of Dayton Inc. on January 2, 2011 for $60,000,000 cash. Dayton Inc. has the afterward assets and liabilities, at fair value: Cash…………………………………………$ 400,000 Receivables…………………………………. 1,500,000 Inventories………………………………….. 5,400,000 Barrio & equipment…………………….. 72,000,000 Accepted liabilities…………………………… 6,500,000 Addendum payable………………………………. 34,000,000 Required a. Calculate the amicableness Akron annal for this acquisition. b. If Dayton’s addendum payable had a bazaar bulk of $40,000,000, how is amicableness affected? Calculate the bulk and administration of change. ANS: a. Bulk paid | | | |Fair bulk of identifiable net assets acquired: | |$60,000,000 | | Banknote |$ 400,000 | | | Receivables |1,500,000 | | | Inventories |5,400,000 | | | Barrio & accessories |72,000,000 | | | Accepted liabilities | (6,500,000) | | | Addendum payable | (34,000,000) |38,800,000 | |Goodwill | |$21,200,000 | b. If addendum payable accept a bazaar bulk of $40,000,000, an access of $6,000,000, the fair bulk of identifiable net assets acquired declines to $32,800,000 (= $38,800,000 – $6,000,000) and amicableness increases to $27,200,000 (= $21,200,000 + $6,000,000). 8. Topic: Approved mergers, banal acquisitions LO 4 Creative Cutlery Inc. acquires Fairport Aggregation on January 2, 2012 for $100,000,000 cash. Fairport has the afterward assets and liabilities, at fair value: Accepted assets………………………………. $ 2,400,000 Barrio & equipment…………………….. 55,000,000 Patents & trademarks………………………. 10,800,000 Accepted liabilities…………………………… 7,000,000 Abiding debt. ……………………………. 35,000,000 Fairport additionally has developed technology, appropriately recorded as an asset on accretion and admired at $30,000,000 that does not arise on its antithesis sheet. Required a. Prepare the annual access Creative Cutlery makes to almanac the accretion of Fairport, bold this is a approved merger. b. Repeat claim a, bold this is a banal acquisition. ANS: a. Accepted assets | |2,400,000 | | |Plant & accessories | |55,000,000 | | |Patents & trademarks | |10,800,000 | | |Developed technology | |30,000,000 | | |Goodwill | |43,800,000 | | | |Current liabilities | |7,000,000 | | |Long-term debt | |35,000,000 | | |Cash | |100,000,000 | b. Advance in Fairport | |100,000,000 | | | |Cash | |100,000,000 | 9. Topic: Disinterestedness acclimation investments LO 3 Larkland Aggregation acquires 30% of the voting banal of Martin Association on January 2, 2011. At the date of acquisition, Martin’s recorded net assets of $6,000,000 approximated fair value, but it had bound action intangibles, not currently arise on its antithesis sheet, admired at $4,000,000, with a actual action of 5 years, and absolute action intangibles, not currently arise on its antithesis sheet, admired at $3,000,000. During 2012, Martin Association letters net assets of $5,000,000 and pays assets of $2,000,000. Impairment testing reveals that the absolute action affluence are broken by $600,000 during 2012. Required Calculate disinterestedness in net assets of Martin Corporation, to be arise on Larkland’s assets statement. ANS: |30% net assets |30% x $5,000,000 |$1,500,000 | |Amortization |30% x ($4,000,000/5) | (240,000) | |Equity in net assets | |$1,260,000 | Note: Disinterestedness in net assets is not adapted for crime of broad action intangibles. 10. Topic: Disinterestedness acclimation investments LO 3 Delano Association acquires 25% of the voting banal of Harley Aggregation on January 3, 2011, for $23,000,000. At that date, the book ethics of Harley’s assets and liabilities approximated fair value. During 2011, Harley arise net assets of $7,000,000 and paid assets of $2,000,000. Harley’s catastrophe annual contains $1,200,000 purchased from Delano. Delano awash the annual to Harley at a markup of 20% on cost. Delano’s catastrophe annual contains $1,560,000 purchased from Harley. Harley awash the annual to Delano at a markup of 30% on cost. Required a. Calculate disinterestedness in net assets of Harley, arise on Delano’s 2011 assets statement. b. Calculate Advance in Harley, arise on Delano’s December 31, 2011 antithesis sheet. ANS: a. 25% net assets |25% x $7,000,000 |$1,750,000 | |Unconfirmed accumulation on upstream catastrophe annual |25% x ($1,560,000 - $1,560,000/1. 3) | | | | |(90,000) | |Unconfirmed accumulation on after catastrophe annual |25% x ($1,200,000 - $1,200,000/1. 2) | | | | |(50,000) | |Equity in net assets | |$1,610,000 | b. Advance in Harley, 1/3/11 |$23,000,000 | |Equity in net income, 2011 |1,610,000 | |Dividends, 2011 (=$2,000,000 x 25%) | (500,000) | |Investment in Harley, 12/31/11 |$24,110,000 | 11. Topic: Disinterestedness acclimation investments LO 3 Grant Aggregation acquires 40% of the voting banal of Jake Association on January 1, 2010, for $50,000,000. At that date, Jake arise bulb and accessories at $4,000,000 added than its fair value. The bulb and accessories had a actual action of 20 years, straight-line. Jake additionally had bound action abstract assets, not arise on its antithesis sheet, with a fair bazaar bulk of $10,000,000, 4 year actual life, straight-line. During the 5-year aeon from January 1, 2010 through December 31, 2014 Jake arise absolute net assets of $23,000,000 and paid $8,000,000 in dividends. During 2015, Jake arise net assets of $3,000,000 and paid $800,000 in dividends. Required a. Calculate disinterestedness in net assets of Jake, arise on Grant’s 2015 assets statement. b. Calculate Advance in Jake, arise on Grant’s December 31, 2015 antithesis sheet. ANS: a. 40% net assets |40% x $3,000,000 |$1,200,000 | |Depreciation acclimation |40% x ($4,000,000/20) | 80,000 | |Equity in net assets | |$1,280,000 | Note: intangibles’ action is over in 2015, so no acquittal is taken. b. |Investment, 1/1/10 | |$50,000,000 | |Share of net income, 2010-2014 |40% x $23,000,000 |9,200,000 | |Depr. adjustment, 2010-2014 |$80,000 x 5 |400,000 | |Amort. djustment, 2010-2014 | | (10,000,000) | |Dividends, 2010-2014 |40% x $8,000,000 | (3,200,000) | |Equity in net income, 2015 | |1,280,000 | |Dividends, 2015 |40% x $800,000 | (320,000)| |Investment, 12/31/15 | |$47,360,000 | 12. Topic: Disinterestedness acclimation investments LO 3 Santor Aggregation acquires 35% of the voting banal of Tinto Association on January 1, 2010, for $12,000,000, which was 35% of Tinto’s book value. It is now December 31, 2012. Santor sells commodity to Tinto at a markup of 15% on cost. Tinto sells commodity to Santor at a markup of 25% on cost. Beneath are the annual balances captivated by Santor, purchased from Tinto, and captivated by Tinto, purchased from Santor, at assorted dates. |Inventory captivated by Santor, purchased from |Inventory captivated by Tinto, purchased from | | |Tinto |Santor | |December 31, 2010 |$1,500,000 |$575,000 | |December 31, 2011 |2,000,000 |747,500 | |December 31, 2012 |2,250,000 |828,000 | Tinto letters absolute net assets of $2,500,000 for 2010 and 2011, and $750,000 for 2012. Tinto pays no assets during this period. Required a. Calculate disinterestedness in net assets of Tinto, arise on Santor’s 2012 assets statement. b. Calculate the Advance in Tinto balance, arise on Santor’s December 31, 2012 antithesis sheet. ANS: a. |35% net assets |35% x $750,000 |$262,500 | |Unconfirmed accumulation on upstream catastrophe annual |35% x ($2,250,000 - $2,250,000/1. 25) | | | |(157,500) | |Unconfirmed accumulation on after catastrophe annual |35% x ($828,000 - $828,000/1. 15) | | | | |(37,800) | |Confirmed accumulation on upstream alpha annual |35% x ($2,000,000 - $2,000,000/1. 25) | | | | |140,000 | |Confirmed accumulation on after alpha annual |35% x ($747,500 - $747,500/1. 5) | | | | |34,125 | |Equity in net assets | |$241,325 | b. |Investment, 1/1/10 | |$12,000,000 | |Share of net income, 2010-2011 |35% x $2,500,000 |875,000 | |Unconfirmed accumulation on upstream catastrophe annual |35% x ($2,000,000 - $2,000,000/1. 25) | | | | |(140,000) | |Unconfirmed accumulation on after alpha annual |35% x ($747,500 - $747,500/1. 5) | | | | |(34,125) | |Equity in net income, 2012 | |241,325 | |Investment, 12/31/12 | |$12,942,200 | Note: Confirmed and bottomless profits on December 31, 2010 and 2011 inventories abolish out over time. Only the December 31, 2012 annual profits affect the advance balance. 13. Topic: Commensurable alliance and disinterestedness acclimation for collective ventures LO 5 On January 1, 2011, Transcom Association and addition aggregation created a collective venture. Anniversary aggregation contributed $25 actor and has a 50% absorption in the collective venture. At December 31, 2011, the end of Transcom’s accounting year, Transcom and the collective adventure address the afterward antithesis sheets: (in thousands) |Transcom |Joint Adventure | |Current assets |$ 15,000 |$ 10,000 | |Land, barrio and equipment, net |200,000 |45,000 | |Intangible assets |-- |25,000 | |Investment in collective adventure | 25,000 | -- | | Absolute assets |$240,000 |$ 80,000 | | | | | |Liabilities |$120,000 |$ 25,000 | |Capital banal |100,000 |50,000 | |Retained antithesis | 20,000 | 5,000 | | Absolute liabilities & disinterestedness |$240,000 |$ 80,000 | Transcom’s Advance antithesis has not yet been adapted to its actual anniversary value. The collective adventure paid no assets during 2011. Required a. What acclimation does Transcom use to address its advance in the collective venture, per U. S. GAAP? b. Prepare Transcom’s adjusting access bare at anniversary to accompany the Advance annual to its actual December 31, 2011 value. c. Present Transcom’s December 31, 2011 antithesis sheet, afterward U. S. GAAP. d. Now accept Transcom follows IFRS and uses commensurable alliance to annual for its advance in the collective venture. Present Transcom’s December 31, 2011 antithesis sheet. ANS: a. Disinterestedness acclimation b. Advance in collective adventure | |2,500,000 | | | |Equity in assets of collective adventure | | | | | | |2,500,000 | c. (in thousands) |Current assets |$ 15,000 |Liabilities |$ 120,000 | |Land, buildings, & equipment, net |200,000 |Capital banal |100,000 | |Investment in collective adventure | 27,500 |Retained antithesis | 22,500 | |Total |$242,500 |Total |$242,500 | d. (in thousands) Accepted assets |$ 20,000 |Liabilities |$132,500 | |Land, buildings, & equipment, net |222,500 |Capital banal |100,000 | |Intangible assets | 12,500 |Retained antithesis | 22,500 | |Total |$255,000 |Total |$255,000 | 14. Topic: HTM investments LO2 A aggregation invests in a 5-year, $2,500,000 face value, 5% accumulated band on July 1, 2013, and classifies it as a held-to-maturity investment. The band is priced to crop 8%. The company’s accounting year ends June 30 of anniversary year. Required a. How abundant did the aggregation pay for the accumulated bond? b. Assuming the aggregation continues to authority the band through budgetary 2016, and no crime losses accept been arise on the investment, what amounts does it address for absorption acquirement on the budgetary 2016 assets statement, and what is the antithesis for the advance at June 30, 2016? c. Accept the aggregation believes the advance may be broken at June 30, 2016. How would the aggregation actuate whether or not the advance is impaired? d. If no antecedent crime has been reported, and the aggregation estimates that the June 30, 2106 advance fair bulk is $1,500,000 and crime accident acceptance is appropriate, accomplish the access to almanac the crime loss. ANS: a. ($125,000/1. 08) + ($125,000/(1. 082) + $125,000/(1. 083) + ($125,000/(1. 084) + (2,625,000/(1. 085) = $2,200,547 b. An acquittal table through the end of budgetary 2016 follows: |Interest acquirement |Addition to advance annual | | | |(8% x antecedent year’s investment|(interest acquirement - $125,000) | | | |balance) | |Year-end advance antithesis | |Fiscal year | | | | |Beginning | | |$2,200,547 | |2014 |$176,044 |$51,044 |2,251,591 | |2015 |180,127 |55,127 |2,306,718 | |2016 |184,537 |59,537 |2,366,255 | Absorption acquirement for budgetary 2016 is $184,537. The June 30, 2016 advance antithesis is $2,366,255. c. SFAS 115 requires that an crime accident be arise if the abatement in fair bulk is “other than temporary. Affirmation ability accommodate a cogent abridgement in accepted revenues for the association which issued the bond, or affirmation that it has or affairs to acknowledge bankruptcy. d. The crime accident is ($2,366,255 - $1,500,000) = $866,255. The access is: |Impairment accident on HTM antithesis (income)| | | | | | |866,255 | | | |Investment in HTM antithesis | |866,255 | 15. Topic: Approved alliance LO 4 Fortuna Industries acquires the assets and liabilities of Gantry Inc. n January 2, 2010 for $50,000,000 cash. At that date, Gantry’s antithesis area is as follows: |Assets | |Liabilities and disinterestedness | | |Cash, receivables |$ 400,000 |Accounts payable |$ 3,000,000 | |Merchandise annual |2,000,000 |Bonds payable |220,000,000 | |Land, buildings, and equipment, net | | | | | |245,000,000 |Common banal 150,000 | | | |Additional paid-in basic | | | | | |25,000,000 | | | |Retained antithesis |1,000,000 | | | |Accumulated addition absolute | | | |___________ |income |(1,750,000) | |Total |$247,400,000 | |$247,400,000 | At January 2, 2010, Gantry’s assets and liabilities accept the afterward fair values: |Fair value, 1/2/10 | |Cash, receivables |$ 400,000 | |Merchandise annual |1,300,000 | |Land, buildings, and accessories |190,000,000 | |Accounts payable |3,000,000 | |Bonds payable |214,000,000 | Gantry has no accepted intangibles. Required a. Prepare the annual access fabricated by Fortuna to almanac its accretion of Gantry. b. Gantry’s book bulk is $24,400,000. Explain why Fortuna paid $50,000,000, or $25,600,000 added than book value, for Gantry. ANS: a. Cash, receivables | |400,000 | | |Merchandise annual | |1,300,000 | | |Land, buildings, and accessories | | | | | | |190,000,000 | | |Goodwill | |75,300,000 | | | |Accounts payable | |3,000,000 | | |Bonds payable | |214,000,000 | | |Cash | |50,000,000 | b. Gantry’s book ethics alter from fair bulk as follows: |Fair bulk – book bulk | |Merchandise annual |$ (700,000) | |Land, buildings, and accessories |(55,000,000) | |Bonds payable | 6,000,000 | |Total |$(49,700,000) | This assay indicates that Fortuna should pay $49,700,000 beneath than book bulk for Gantry. Fortuna was accommodating to pay $25,600,000 added than book value, advertence that Gantry has unidentifiable abstract assets, admired at $75,300,000 (= $25,600,000 + $49,700,000), which it annal as goodwill. These assets could accommodate reputation, assignment force, and addition affluence accepted to actualize approaching revenues. On the addition hand, Fortuna could accept paid too abundant for Gantry, conceivably due to burden from aggressive abeyant buyers or from Gantry’s absolute shareholders. Use the afterward advice to complete problems 16 and 17 below: | | |Fair bulk | | | | |Date of accretion | |12/31/12 |Date awash |Selling bulk | |Investment | |Cost | | | | |Actel Aggregation banal |9/3/12 |$25,000 |$20,000 |1/10/13 |$18,000 | |Bella Association banal |10/15/12 | 36,000 | 38,000 |2/17/13 | 35,000 | |Cripton Aggregation banal |12/4/12 | 12,000 | 10,000 |2/20/13 | 16,000 | Accept the accounting year ends December 31. 16. Topic: Trading and AFS investments LO 2 The Actel and Cripton investments are classified as available-for-sale, and the Bella advance is classified as a trading investment. Required Calculate the accretion or accident on these investments, to be arise on the 2012 and 2013 assets statements. ANS: 2012 assets annual Abeyant accretion on Bella stock$ 2,000 2013 assets annual Realized accident on Actel stock$ (7,000) Realized accident on Bella banal (3,000) Realized accretion on Cripton banal 4,000 Net loss$ (6,000) 17. Topic: Trading and AFS investments LO 2 The Actel and Cripton investments are classified as trading, and the Bella advance is classified as available-for-sale. Required Calculate the accretion or accident on these investments, to be arise on the 2012 and 2013 assets statements. ANS: 2012 assets annual Abeyant accident on Actel stock$ (5,000) Abeyant accident on Cripton banal (2,000) Net loss$ (7,000) 2013 assets annual Realized accident on Actel stock$ (2,000) Realized accident on Bella banal (1,000) Realized accretion on Cripton banal 6,000 Net gain$ 3,000 18. Topic: Disinterestedness acclimation advance LO 3 Pronto Aggregation acquires 45% of the voting banal of Rexo Association on January 1, 2008, for $50,000,000, and treats it as an disinterestedness acclimation investment. At the date o

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