ACCOUNTING
Assignment Type: Individual Project Deliverable Length: 2-3 paragraphs
Points Possible: 125
Les Fleurs, a boutique in Paris, France, had the following accounts in its accounting records at December 31, 20X2 (amounts in Euros, denoted as "E")
Purchases………………... E250,000
Freight In……………… E8,000
Sales discounts…………. 4,000
Purchase returns…….. 7,000
Inventory Sales…………………. 400,000
December 31, 20X1….. 20,000
Purchase discounts…. 3,000
December 31, 20X2….. 30,000
Sales returns…………. 8,000
Administrative Expenses 20,000
Balance Sheet - December 31, 20X1
Cash 10,000
Inventory 20,000
Owner's Equity 30,000
Compute the following for Les Fleurs during 20X2: (Do not convert the figures to US dollars.)
1. Net sales revenue
2. Cost of goods sold
3. Gross profit
4. Net income
5. Balance sheet, December 31, 20X2
6. Statement of Owner's Equity, December 31, 20X2
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Tuesday, July 20, 2010
Doug Maltbee formed a lawn service business as a summer job
ACCOUNTING
Assignment Type: Group Project Deliverable Length: Income Statement, Balance Sheet, and paragraph
Points Possible: 150
Group Project
Doug Maltbee formed a lawn service business as a summer job. To start the business on May 1, he deposited $1,000 in a new bank account in the name of the proprietorship. The $1,000 consisted of a $600 loan from his father and $400 of his own money. Doug rented lawn equipment, purchased supplies, and hired fellow students to mow and trim his customer's lawns.
At the end of each month, Doug mailed bills to his customers. On August 31, he was ready to dissolve the business and return to Louisiana State University for the fall semester. Because he was so busy, he kept few records other than his checkbook and a list of amounts owed to him by customers.
At August 31, Doug's checkbook shows a balance of $690, and his customers still owe him $500. During the summer, he collected $4,250 from customers. His checkbook lists payments for supplies totaling $400, and he still has gasoline, weedeater cord, and other supplies that cost a total of $50. He paid his employees $1,900, and he still owes them $200 for the final week of the summer.
Doug rented some equipment from Scholes Machine Shop. On May 1, he signed a six-month lease on mowers and paid $600 for the full lease period. Scholes will refund the unused potion of the prepayment if the equipment is in good shape. To get the refund, Doug has kept the mower in excellent condition. In fact, he had to pay $300 to repair a mower.
To transport employees and equipment to jobs, Doug used a trailer that he bought for $300. He figures that the summer's work used up one-third of the trailer's service potential. The business checkbook lists a payment of $460 for cash withdrawals by Doug during the summer. Doug paid his father back during August.
As a team, prepare the income statement of Maltbee Lawn Service for the four months May through August. Prepare the classified balance sheet of Maltbee Lawn Service at August 31.
Next, as a small group discuss the following. Was Maltbee's summer work successful? Give the reason for your answer. What are the steps in the accounting cycle?
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Assignment Type: Group Project Deliverable Length: Income Statement, Balance Sheet, and paragraph
Points Possible: 150
Group Project
Doug Maltbee formed a lawn service business as a summer job. To start the business on May 1, he deposited $1,000 in a new bank account in the name of the proprietorship. The $1,000 consisted of a $600 loan from his father and $400 of his own money. Doug rented lawn equipment, purchased supplies, and hired fellow students to mow and trim his customer's lawns.
At the end of each month, Doug mailed bills to his customers. On August 31, he was ready to dissolve the business and return to Louisiana State University for the fall semester. Because he was so busy, he kept few records other than his checkbook and a list of amounts owed to him by customers.
At August 31, Doug's checkbook shows a balance of $690, and his customers still owe him $500. During the summer, he collected $4,250 from customers. His checkbook lists payments for supplies totaling $400, and he still has gasoline, weedeater cord, and other supplies that cost a total of $50. He paid his employees $1,900, and he still owes them $200 for the final week of the summer.
Doug rented some equipment from Scholes Machine Shop. On May 1, he signed a six-month lease on mowers and paid $600 for the full lease period. Scholes will refund the unused potion of the prepayment if the equipment is in good shape. To get the refund, Doug has kept the mower in excellent condition. In fact, he had to pay $300 to repair a mower.
To transport employees and equipment to jobs, Doug used a trailer that he bought for $300. He figures that the summer's work used up one-third of the trailer's service potential. The business checkbook lists a payment of $460 for cash withdrawals by Doug during the summer. Doug paid his father back during August.
As a team, prepare the income statement of Maltbee Lawn Service for the four months May through August. Prepare the classified balance sheet of Maltbee Lawn Service at August 31.
Next, as a small group discuss the following. Was Maltbee's summer work successful? Give the reason for your answer. What are the steps in the accounting cycle?
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Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago
ACCOUNTING
Assignment Type: Individual Project Deliverable Length: 2-3 paragraphs
Points Possible: 125
Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago. From all appearances, the business has prospered. In the past few years, you have become friends with O'Henry and his wife. Recently, O'Henry mentioned that he has lost his zest for the business and would consider selling it for the right price. You are interested in buying this business, and you obtain its most recent monthly unadjusted trial balance which follows:
O'Henry's Data Services Unadjusted Trial Balance November 30, 20XX
Cash……………………………… $9,700
Accounts receivable……………………… 7,900
Prepaid expenses………… 2,600
Furniture, fixtures, & equipment 151,300
Accumulated depreciation $15,600
Accounts payable………… 3,800
Salary payable………………
Unearned service revenue 6,700
Benjamin O'Henry, capital 137,400
Benjamin O'Henry, withdrawals 2,000
Service revenue………… 14,300
Rent expense……………
Salary expense………… 3,400
Utilities expense……… 900
Depreciation expense
Supplies expense……
Total…………………………………………. $177,800 $177,800
Revenues and expenses vary little from month to month, and November is a typical month. Your investigation reveals that the unadjusted trial balance does not include the effects of monthly revenues of $2,100 and monthly expenses totaling $2,750. If you were to buy O'Henry's Data Services, you would hire a manager who would require a monthly salary of $3,000.
The most you would pay for the business is 20 times the monthly net income you could expect to earn from it. Compute this possible price. The least O'Henry will take for the business is his ending capital. Compute this amount. Under these conditions, how much should you offer O'Henry? Give your reason.
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Assignment Type: Individual Project Deliverable Length: 2-3 paragraphs
Points Possible: 125
Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago. From all appearances, the business has prospered. In the past few years, you have become friends with O'Henry and his wife. Recently, O'Henry mentioned that he has lost his zest for the business and would consider selling it for the right price. You are interested in buying this business, and you obtain its most recent monthly unadjusted trial balance which follows:
O'Henry's Data Services Unadjusted Trial Balance November 30, 20XX
Cash……………………………… $9,700
Accounts receivable……………………… 7,900
Prepaid expenses………… 2,600
Furniture, fixtures, & equipment 151,300
Accumulated depreciation $15,600
Accounts payable………… 3,800
Salary payable………………
Unearned service revenue 6,700
Benjamin O'Henry, capital 137,400
Benjamin O'Henry, withdrawals 2,000
Service revenue………… 14,300
Rent expense……………
Salary expense………… 3,400
Utilities expense……… 900
Depreciation expense
Supplies expense……
Total…………………………………………. $177,800 $177,800
Revenues and expenses vary little from month to month, and November is a typical month. Your investigation reveals that the unadjusted trial balance does not include the effects of monthly revenues of $2,100 and monthly expenses totaling $2,750. If you were to buy O'Henry's Data Services, you would hire a manager who would require a monthly salary of $3,000.
The most you would pay for the business is 20 times the monthly net income you could expect to earn from it. Compute this possible price. The least O'Henry will take for the business is his ending capital. Compute this amount. Under these conditions, how much should you offer O'Henry? Give your reason.
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The proprietors of two businesses, L.L. Sams Company and Melinda Garcia Career Services, have sought business loans from you
ACCOUNTING
Assignment Type: Individual Project Deliverable Length: 2-3 paragraphs
Points Possible: 125
The proprietors of two businesses, L.L. Sams Company and Melinda Garcia Career Services, have sought business loans from you. To decide whether to make the loans, you have requested their balance sheets. Click Unit 1 Balance sheets to view.
Solely on the basis of these balance sheets, to which entity would you be more comfortable lending money? Explain fully, citing specific items such as the accounting equation and amounts from the balance sheets. In addition to balance sheet data, what other information would you require? Be specific.
Click here for the SOLUTION
Assignment Type: Individual Project Deliverable Length: 2-3 paragraphs
Points Possible: 125
The proprietors of two businesses, L.L. Sams Company and Melinda Garcia Career Services, have sought business loans from you. To decide whether to make the loans, you have requested their balance sheets. Click Unit 1 Balance sheets to view.
Solely on the basis of these balance sheets, to which entity would you be more comfortable lending money? Explain fully, citing specific items such as the accounting equation and amounts from the balance sheets. In addition to balance sheet data, what other information would you require? Be specific.
Click here for the SOLUTION
Currently,the unit selling price of a product is $280, the unit variable cost is $230, and the total fixed costs are $525,000
ACCOUNTING
Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 21
EX 21-13 Currently,the unit selling price of a product is $280, the unit variable cost is $230, and the total fixed costs are $525,000. A proposal is being evaluated to increase the unit selling price to $300.
a. Compute the current break-even sales (units).
b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
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Warren, Reeve and Duchac
Financial Accounting
Managerial Accounting
Carl Warren, James M. Reeve, Jonathan E. Duchac
Chapter 21
EX 21-13 Currently,the unit selling price of a product is $280, the unit variable cost is $230, and the total fixed costs are $525,000. A proposal is being evaluated to increase the unit selling price to $300.
a. Compute the current break-even sales (units).
b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
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Monday, July 19, 2010
Advanced Accounting: Chapter 4 E4-5 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 4
Exercise 4-5 (E4-5)
General questions on statement of cash flows
1. In preparing a statement of cash flows, the cost of acquiring a subsidiary is reported:
2. In computing cash flows from operating activities under the direct method, the following item is an addition:
3. In computing cash flows from operating activities under the indirect method, the following item is an addition to consolidated net income:
4. In computing cash flows from operating activities under the direct method, the following item is an addition:
5. Dividends paid as presented in a consolidated cash flow statement are:
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 4
Exercise 4-5 (E4-5)
General questions on statement of cash flows
1. In preparing a statement of cash flows, the cost of acquiring a subsidiary is reported:
2. In computing cash flows from operating activities under the direct method, the following item is an addition:
3. In computing cash flows from operating activities under the indirect method, the following item is an addition to consolidated net income:
4. In computing cash flows from operating activities under the direct method, the following item is an addition:
5. Dividends paid as presented in a consolidated cash flow statement are:
Click here for the SOLUTION
Advanced Accounting: Chapter 4 E4-3 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 4
Exercise 4-3 (E4-3)
General Problems
1. Peggy Corporation owns a 70% interest in Sandy Corporation, acquired several years ago at book value. On December 31, 2006, Sandy mailed a check for $10,000 to Peggy in part payment of a $20,000 account with Peggy. Peggy had not received the check when its books were closed on December 31. Peggy Corporation had accounts receivable of $150,000 (including the $20,000 from Sandy), and Sandy had accounts receivable at $220,000 at year-end. In the consolidated balance sheet of Peggy Corporation and Subsidiary at December 31, 2006, accounts receivable will be shown in the amount of:
Use the following information in answering questions 2 and 3.
Primrose Corporation purchased a 70% interest in Starman Corporation on January 1, 2006, for $15,000, when Starman’s stockholders’ equity consisted of $3,000 common stock, $10,000 additional paid-in capital, and $2,000 retained earnings. Income and dividend information for Starman for 2006, 2007, and 2008 is as follows:
2006 2007 2008
Net income (or loss) $1,000 $200 $(500)
Dividends 400 100 —
2. Primrose reported separate income of $12,000 for 2008. Consolidated net income for 2008 is:
3. Primrose’s Investment in Starman balance at December 31, 2008, under the equity method is:
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 4
Exercise 4-3 (E4-3)
General Problems
1. Peggy Corporation owns a 70% interest in Sandy Corporation, acquired several years ago at book value. On December 31, 2006, Sandy mailed a check for $10,000 to Peggy in part payment of a $20,000 account with Peggy. Peggy had not received the check when its books were closed on December 31. Peggy Corporation had accounts receivable of $150,000 (including the $20,000 from Sandy), and Sandy had accounts receivable at $220,000 at year-end. In the consolidated balance sheet of Peggy Corporation and Subsidiary at December 31, 2006, accounts receivable will be shown in the amount of:
Use the following information in answering questions 2 and 3.
Primrose Corporation purchased a 70% interest in Starman Corporation on January 1, 2006, for $15,000, when Starman’s stockholders’ equity consisted of $3,000 common stock, $10,000 additional paid-in capital, and $2,000 retained earnings. Income and dividend information for Starman for 2006, 2007, and 2008 is as follows:
2006 2007 2008
Net income (or loss) $1,000 $200 $(500)
Dividends 400 100 —
2. Primrose reported separate income of $12,000 for 2008. Consolidated net income for 2008 is:
3. Primrose’s Investment in Starman balance at December 31, 2008, under the equity method is:
Click here for the SOLUTION
Advanced Accounting: Chapter 4 E4-1 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 4
Exercise 4-1 (E4-1)
General questions
1. Working paper entries normally:
2. Working paper techniques assume nominal accounts are:
3. Most errors made in consolidating financial statements will appear when:
4. Net income on consolidation working papers is:
5. On consolidation working papers, individual stockholders’ equity accounts of a subsidiary are:
6. On consolidation working papers, investment income from a subsidiary is:
7. On consolidation working papers, the investment in consolidated subsidiary account balances are:
8. On consolidation working papers, consolidated net income is determined by:
9. On consolidation working papers, consolidated end-of-the-period retained earnings is determined by:
10. Under the trial balance approach to consolidation working papers, which of the following is used?
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 4
Exercise 4-1 (E4-1)
General questions
1. Working paper entries normally:
2. Working paper techniques assume nominal accounts are:
3. Most errors made in consolidating financial statements will appear when:
4. Net income on consolidation working papers is:
5. On consolidation working papers, individual stockholders’ equity accounts of a subsidiary are:
6. On consolidation working papers, investment income from a subsidiary is:
7. On consolidation working papers, the investment in consolidated subsidiary account balances are:
8. On consolidation working papers, consolidated net income is determined by:
9. On consolidation working papers, consolidated end-of-the-period retained earnings is determined by:
10. Under the trial balance approach to consolidation working papers, which of the following is used?
Click here for the SOLUTION
Sunday, July 18, 2010
Advanced Accounting: Chapter 3 E3-3 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3
Exercise 3-3 (E3-3)
[AICPA adapted] General problems
Use the following information in answering questions 1 and 2:
Apex Company acquired 70% of the outstanding stock of Nadir Corporation. The separate balance sheet of Apex immediately after the acquisition and the consolidated balance sheet are as follows:
Apex Consolidated
Current assets $106,000 $146,000
Investment in Nadir—cost 100,000 —
Goodwill — 8,100
Fixed assets—net 270,000 370,000
$476,000 $524,100
Current liabilities $ 15,000 $ 28,000
Capital stock 350,000 350,000
Minority interest — 35,100
Retained earnings 111,000 111,000
$476,000 $524,100
Of the excess payment for the investment in Nadir, $10,000 was ascribed to undervaluation of its fixed assets. The balance of the excess payment was ascribed to goodwill. Current assets of Nadir included a $2,000 receivable from Apex, which arose before they became related on an ownership basis. The following two items relate to Nadir’s separate balance sheet prepared at the time Apex acquired its 70% interest in Nadir.
1. What was the total of the current assets on Nadir’s separate balance sheet immediately before Apex acquired its 70% interest?
2. What was the total stockholders’ equity on Nadir’s separate balance sheet at the time Apex acquired its 70% interest?
3. Cobb Company’s current receivables from affiliated companies at December 31, 2006, are (1) a $75,000 cash advance to Hill Corporation (Cobb owns 30% of the voting stock of Hill and accounts for the investment by the equity method), (2) a receivable of $260,000 from Vick Corporation for administrative and selling services (Vick is 100% owned by Cobb and is included in Cobb’s consolidated financial statements), and (3) a receivable of $200,000 from Ward Corporation for merchandise sales on credit (Ward is a 90%-owned, unconsolidated subsidiary of Cobb accounted for by the equity method). In the current assets section of its December 31, 2006, consolidated balance sheet, Cobb should report accounts receivable from investees in the amount of:
Use the following information in answering questions 4 and 5:
On January 1, 2006, Owen Corporation purchased all of Sharp Corporation’s common stock for $1,200,000. On that date, the fair values of Sharp’s assets and liabilities equaled their carrying amounts of $1,320,000 and $320,000, respectively. Owen’s policy is to amortize intangibles other than goodwill over 10 years. During 2006, Sharp paid cash dividends of $20,000.
Selected information from the separate balance sheets and income statements of Owen and Sharp as of December 31, 2006, and for the year then ended follows (in thousands):
Owen Sharp Balance Sheet Accounts
Investment in subsidiary $1,320 —
Retained earnings 1,240 $ 560
Total stockholders’ equity 2,620 1,120
Income Statement Accounts
Operating income $ 420 $ 200
Equity in earnings of Sharp 140 —
Net income 400 140
4. In Owen’s 2006 consolidated income statement, what amount should be reported for amortization of goodwill?
5. In Owen’s December 31, 2006, consolidated balance sheet, what amount should be reported as total retained earnings?
6. Wright Corporation has several subsidiaries that are included in its consolidated financial statements. In its December 31, 2006, trial balance, Wright had the following intercompany balances before eliminations:
Debit Credit
Current receivable due from Main Co. $ 32,000
Noncurrent receivable from Main 114,000
Cash advance from Corn Corp. 6,000
Cash advance from King Co. $ 15,000
Intercompany payable to King 101,000
7. In its December 31, 2006, consolidated balance sheet, what amount should Wright report as intercompany receivables?
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3
Exercise 3-3 (E3-3)
[AICPA adapted] General problems
Use the following information in answering questions 1 and 2:
Apex Company acquired 70% of the outstanding stock of Nadir Corporation. The separate balance sheet of Apex immediately after the acquisition and the consolidated balance sheet are as follows:
Apex Consolidated
Current assets $106,000 $146,000
Investment in Nadir—cost 100,000 —
Goodwill — 8,100
Fixed assets—net 270,000 370,000
$476,000 $524,100
Current liabilities $ 15,000 $ 28,000
Capital stock 350,000 350,000
Minority interest — 35,100
Retained earnings 111,000 111,000
$476,000 $524,100
Of the excess payment for the investment in Nadir, $10,000 was ascribed to undervaluation of its fixed assets. The balance of the excess payment was ascribed to goodwill. Current assets of Nadir included a $2,000 receivable from Apex, which arose before they became related on an ownership basis. The following two items relate to Nadir’s separate balance sheet prepared at the time Apex acquired its 70% interest in Nadir.
1. What was the total of the current assets on Nadir’s separate balance sheet immediately before Apex acquired its 70% interest?
2. What was the total stockholders’ equity on Nadir’s separate balance sheet at the time Apex acquired its 70% interest?
3. Cobb Company’s current receivables from affiliated companies at December 31, 2006, are (1) a $75,000 cash advance to Hill Corporation (Cobb owns 30% of the voting stock of Hill and accounts for the investment by the equity method), (2) a receivable of $260,000 from Vick Corporation for administrative and selling services (Vick is 100% owned by Cobb and is included in Cobb’s consolidated financial statements), and (3) a receivable of $200,000 from Ward Corporation for merchandise sales on credit (Ward is a 90%-owned, unconsolidated subsidiary of Cobb accounted for by the equity method). In the current assets section of its December 31, 2006, consolidated balance sheet, Cobb should report accounts receivable from investees in the amount of:
Use the following information in answering questions 4 and 5:
On January 1, 2006, Owen Corporation purchased all of Sharp Corporation’s common stock for $1,200,000. On that date, the fair values of Sharp’s assets and liabilities equaled their carrying amounts of $1,320,000 and $320,000, respectively. Owen’s policy is to amortize intangibles other than goodwill over 10 years. During 2006, Sharp paid cash dividends of $20,000.
Selected information from the separate balance sheets and income statements of Owen and Sharp as of December 31, 2006, and for the year then ended follows (in thousands):
Owen Sharp Balance Sheet Accounts
Investment in subsidiary $1,320 —
Retained earnings 1,240 $ 560
Total stockholders’ equity 2,620 1,120
Income Statement Accounts
Operating income $ 420 $ 200
Equity in earnings of Sharp 140 —
Net income 400 140
4. In Owen’s 2006 consolidated income statement, what amount should be reported for amortization of goodwill?
5. In Owen’s December 31, 2006, consolidated balance sheet, what amount should be reported as total retained earnings?
6. Wright Corporation has several subsidiaries that are included in its consolidated financial statements. In its December 31, 2006, trial balance, Wright had the following intercompany balances before eliminations:
Debit Credit
Current receivable due from Main Co. $ 32,000
Noncurrent receivable from Main 114,000
Cash advance from Corn Corp. 6,000
Cash advance from King Co. $ 15,000
Intercompany payable to King 101,000
7. In its December 31, 2006, consolidated balance sheet, what amount should Wright report as intercompany receivables?
Click here for the SOLUTION
Advanced Accounting: Chapter 3 E3-2 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3
Exercise 3-2 (E3-2)
General problems
1. Under FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” a parent company should exclude a subsidiary from consolidation if:
2. The FASB’s primary motivation for issuing FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” was to:
3. Parent-company and consolidated financial statement amounts would not be the same for:
4. Noncontrolling interest, as it appears in a consolidated balance sheet, refers to:
5. Pat Corporation acquired an 80% interest in Sal Corporation on January 1, 2007, and issued consolidated financial statements at and for the year ended December 31, 2007. Pat and Sal had issued separate-company financial statements in 2006.
6. The noncontrolling interest expense that appears in the consolidated income statement is computed as follows:
7. The retained earnings that appear on the consolidated balance sheet of a parent company and its 60%-owned subsidiary are:
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3
Exercise 3-2 (E3-2)
General problems
1. Under FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” a parent company should exclude a subsidiary from consolidation if:
2. The FASB’s primary motivation for issuing FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” was to:
3. Parent-company and consolidated financial statement amounts would not be the same for:
4. Noncontrolling interest, as it appears in a consolidated balance sheet, refers to:
5. Pat Corporation acquired an 80% interest in Sal Corporation on January 1, 2007, and issued consolidated financial statements at and for the year ended December 31, 2007. Pat and Sal had issued separate-company financial statements in 2006.
6. The noncontrolling interest expense that appears in the consolidated income statement is computed as follows:
7. The retained earnings that appear on the consolidated balance sheet of a parent company and its 60%-owned subsidiary are:
Click here for the SOLUTION
Advanced Accounting: Chapter 3 E3-1 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3
Exercise 3-1 (E3-1)
General problems
1. A 75%-owned subsidiary should not be consolidated under the provisions of FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” when:
2. Under the provisions of FASB Statement No. 94, an 80% owned subsidiary that cannot be consolidated must be accounted for:
3. Consolidated statements for Porter Corporation and its 60%-owned investee, Spinelli Company, will not be prepared under the provisions of FASB Statement No. 94 if:
4. Armor Industries owns 7,000,000 shares of Babbitt Corporation’s outstanding common stock (a 70% interest). The remaining 3,000,000 outstanding common shares of Babbitt are held by Ottman Insurance Company. On Armor Industries’ consolidated financial statements, Ottman Insurance Company is considered:
5. Pella Corporation owns a 60% interest in Sanico Company and an 80% interest in Talbert Company. Pella consolidates its investment in Sanico, but Talbert, which is currently under protection of the bankruptcy court, is not consolidated, and Pella accounts for this investment by the equity method. Which statement is correct?
6. On January 1, 2006, Paxton Company purchased 75% of the outstanding shares of Salem Company at a cost exceeding the book value and fair value of Salem’s net assets. Using the following notations, describe the amount at which the plant assets will appear in a consolidated balance sheet of Paxton Company and Subsidiary prepared immediately after the acquisition:
Pbv = book value of Paxton’s plant assets
Pfv = fair value of Paxton’s plant assets
Sbv = book value of Salem’s plant assets
Sfv = fair value of Salem’s plant assets
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 3
Exercise 3-1 (E3-1)
General problems
1. A 75%-owned subsidiary should not be consolidated under the provisions of FASB Statement No. 94, “Consolidation of All Majority-Owned Subsidiaries,” when:
2. Under the provisions of FASB Statement No. 94, an 80% owned subsidiary that cannot be consolidated must be accounted for:
3. Consolidated statements for Porter Corporation and its 60%-owned investee, Spinelli Company, will not be prepared under the provisions of FASB Statement No. 94 if:
4. Armor Industries owns 7,000,000 shares of Babbitt Corporation’s outstanding common stock (a 70% interest). The remaining 3,000,000 outstanding common shares of Babbitt are held by Ottman Insurance Company. On Armor Industries’ consolidated financial statements, Ottman Insurance Company is considered:
5. Pella Corporation owns a 60% interest in Sanico Company and an 80% interest in Talbert Company. Pella consolidates its investment in Sanico, but Talbert, which is currently under protection of the bankruptcy court, is not consolidated, and Pella accounts for this investment by the equity method. Which statement is correct?
6. On January 1, 2006, Paxton Company purchased 75% of the outstanding shares of Salem Company at a cost exceeding the book value and fair value of Salem’s net assets. Using the following notations, describe the amount at which the plant assets will appear in a consolidated balance sheet of Paxton Company and Subsidiary prepared immediately after the acquisition:
Pbv = book value of Paxton’s plant assets
Pfv = fair value of Paxton’s plant assets
Sbv = book value of Salem’s plant assets
Sfv = fair value of Salem’s plant assets
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Advanced Accounting: Chapter 2 E2-7 General Questions
BA 459
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 2
Exercise 2-7 (E2-7)
General problems
1. On January 3, 2006, Harrison Company purchases a 15% interest in Bennett Corporation’s common stock for $50,000 cash. Harrison accounts for the investment using the cost method. Bennett’s net income for 2006 is $20,000, but it declares no dividends. In 2007, Bennett’s net income is $80,000, and it declares dividends of $120,000. What is the correct balance of Harrison’s Investment in Bennett account at December 31, 2007?
2. Screwsbury Corporation’s stockholders’ equity at December 31, 2006, follows (in thousands):
Capital stock, $100 par $3,000
Additional paid-in capital 500
Retained earnings 500
Total stockholders’ equity $4,000
On January 3, 2007, Screwsbury sells 10,000 shares of previously unissued $100 par common stock to Pannell Corporation for $1,400,000. On this date the recorded book values of Screwsbury’s assets and liabilities equal their fair values. Goodwill from Pannell’s investment in Screwsbury at the date of purchase is:
3. On January 1, Leighton Company paid $300,000 for a 20% interest in Monroe Corporation’s voting common stock, at which time Monroe’s stockholders’ equity consisted of $600,000 capital stock and $400,000 retained earnings. Leighton was not able to exercise any influence over the operations of Monroe and accounted for its investment in Monroe using the cost method. During the year, Monroe had net income of $200,000 and paid dividends of $150,000. The balance of Leighton’s Investment in Monroe account at December 31 is:
4. Jollytime Corporation owns a 40% interest in Krazy Products acquired several years ago at book value. Krazy Products’ income statement contains the following information (in thousands):
Income before extraordinary item $200
Extraordinary loss 50
Net income $150
Jollytime should report income from Krazy Products in its income from continuing operations at:
Click here for the SOLUTION
Advanced Accounting: Beams, Clement, Anthony, Lowensohn
Floyd A. Beams
Robin P. Clement
Joseph H. Anthony
Suzanne Lowensohn
9th Edition 10th Edition
Chapter 2
Exercise 2-7 (E2-7)
General problems
1. On January 3, 2006, Harrison Company purchases a 15% interest in Bennett Corporation’s common stock for $50,000 cash. Harrison accounts for the investment using the cost method. Bennett’s net income for 2006 is $20,000, but it declares no dividends. In 2007, Bennett’s net income is $80,000, and it declares dividends of $120,000. What is the correct balance of Harrison’s Investment in Bennett account at December 31, 2007?
2. Screwsbury Corporation’s stockholders’ equity at December 31, 2006, follows (in thousands):
Capital stock, $100 par $3,000
Additional paid-in capital 500
Retained earnings 500
Total stockholders’ equity $4,000
On January 3, 2007, Screwsbury sells 10,000 shares of previously unissued $100 par common stock to Pannell Corporation for $1,400,000. On this date the recorded book values of Screwsbury’s assets and liabilities equal their fair values. Goodwill from Pannell’s investment in Screwsbury at the date of purchase is:
3. On January 1, Leighton Company paid $300,000 for a 20% interest in Monroe Corporation’s voting common stock, at which time Monroe’s stockholders’ equity consisted of $600,000 capital stock and $400,000 retained earnings. Leighton was not able to exercise any influence over the operations of Monroe and accounted for its investment in Monroe using the cost method. During the year, Monroe had net income of $200,000 and paid dividends of $150,000. The balance of Leighton’s Investment in Monroe account at December 31 is:
4. Jollytime Corporation owns a 40% interest in Krazy Products acquired several years ago at book value. Krazy Products’ income statement contains the following information (in thousands):
Income before extraordinary item $200
Extraordinary loss 50
Net income $150
Jollytime should report income from Krazy Products in its income from continuing operations at:
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Friday, July 16, 2010
Curtis Toy Curtis Toy Curtis Toy Curtis Toy Curtis Toy Curtis Toy
18. Curtis Toy Manufacturing Company is evaluating the extension of credit to a new group of customers. Although these customers will provide $240,000 in additional credit sales, 12% are likely to be uncollectible. The company will also incur $21,000 in additional collection expense. Production and marketing costs represent 72% of sales. The company is in a 30% tax bracket and has a receivables turnover of six times. No other asset buildup will be required to service the new customers. The firm has a 10% desired return on investment. a) Should Curtis extend credit to these customers? b) Should credit be extended if 14% of the new sales prove uncollectible? c) Should credit be extended if the receivables turnover drops to 1.5 and 12% of the accounts are uncollectible (as was the case in par a)?
19. Reconsider problem 18. Assume the average collection period is 120 days. All other factors are the same (including 12% uncollectible). Should credit be extended?
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19. Reconsider problem 18. Assume the average collection period is 120 days. All other factors are the same (including 12% uncollectible). Should credit be extended?
Click here for the SOLUTION
Thursday, July 15, 2010
18 and 19 Curtis Toy Manufacturing Company
FIN 200
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week Solution
Chapter 7
18. Curtis Toy Manufacturing Company is evaluating the extension of credit to a new group of customers. Although these customers will provide $240,000 in additional credit sales, 12% are likely to be uncollectible. The company will also incur $21,000 in additional collection expense. Production and marketing costs represent 72% of sales. The company is in a 30% tax bracket and has a receivables turnover of six times. No other asset buildup will be required to service the new customers. The firm has a 10% desired return on investment. a) Should Curtis extend credit to these customers? b) Should credit be extended if 14% of the new sales prove uncollectible? c) Should credit be extended if the receivables turnover drops to 1.5 and 12% of the accounts are uncollectible (as was the case in par a)?
19. Reconsider problem 18. Assume the average collection period is 120 days. All other factors are the same (including 12% uncollectible). Should credit be extended?
Click here for the SOLUTION
Axia College of University of Phoenix (UoP)
Foundations of Financial Management
Block Hirt Danielsen
Introduction to Finance: Harvesting the Money Tree
Fin 200 Week Solution
Chapter 7
18. Curtis Toy Manufacturing Company is evaluating the extension of credit to a new group of customers. Although these customers will provide $240,000 in additional credit sales, 12% are likely to be uncollectible. The company will also incur $21,000 in additional collection expense. Production and marketing costs represent 72% of sales. The company is in a 30% tax bracket and has a receivables turnover of six times. No other asset buildup will be required to service the new customers. The firm has a 10% desired return on investment. a) Should Curtis extend credit to these customers? b) Should credit be extended if 14% of the new sales prove uncollectible? c) Should credit be extended if the receivables turnover drops to 1.5 and 12% of the accounts are uncollectible (as was the case in par a)?
19. Reconsider problem 18. Assume the average collection period is 120 days. All other factors are the same (including 12% uncollectible). Should credit be extended?
Click here for the SOLUTION
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