A partnership begins its first year of operations with the following capital balances: According to the articles of partnership, all profits will be assigned as follows: ∙ Winston will be awarded an annual salary of $20,000 with $10,000 assigned to Salem. ∙ The partners will be attributed interest equal to 10 percent of the capital balance as of the first day of the year. ∙ The remainder will be assigned on a 5:2:3 basis, respectively. ∙ Each partner is allowed to withdraw up to $10,000 per year. The net loss for the first year of operations is $20,000 and net income for the subsequent year is $40,000. Each partner withdraws the maximum amount from the business each period. What is the balance in Winston’s capital account at the end of the second year? a. $102,600 b. $104,400 c. $108,600 d. $109,200
> In computing the noncontrolling interest’s share of consolidated net income, how should the subsidiary’s net income be adjusted for intra-entity transfers? a. The subsidiary’s reported net income is adjusted for the impact of upstream transfers prior to
> Compute the balances in problem (28) again, assuming that all intra-entity transfers were made from ClipRite to ProForm. From problem 28: ProForm acquired 70 percent of ClipRite on June 30, 2017, for $910,000 in cash. Based on ClipRite’
> ProForm acquired 70 percent of ClipRite on June 30, 2017, for $910,000 in cash. Based on ClipRite’s acquisition-date fair value, an unrecorded intangible of $400,000 was recognized and is being amortized at the rate of $10,000 per year.
> Pitino acquired 90 percent of Brey’s outstanding shares on January 1, 2016, in exchange for $342,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000 and the noncontrolling int
> On January 1, 2018, Sledge had common stock of $120,000 and retained earnings of $260,000. During that year, Sledge reported sales of $130,000, cost of goods sold of $70,000, and operating expenses of $40,000. On January 1, 2016, Percy, Inc., acquired 8
> Allison Corporation acquired 90 percent of Bretton on January 1, 2016. Of Bretton’s total acquisition-date fair value, $60,000 was allocated to undervalued equipment (with a 10-year remaining life) and $80,000 was attributed to franchis
> On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $200,000 in cash. The equipment had originally cost $180,000 but had a book value of only $110,000 when transferred. On that date, the equipment had a five-year rema
> Padre holds 100 percent of the outstanding shares of Sonora. On January 1, 2016, Padre transferred equipment to Sonora for $95,000. The equipment had cost $130,000 originally but had a $50,000 book value and five-year remaining life at the date of transf
> Many companies make annual reports available on their corporate web page, often under an Investors tab. Annual reports also can be accessed through the SEC’s EDGAR system at www.sec.gov (under Filings, click Company Filings Search, type in Company Name,
> A client of the CPA firm of Harston and Mendez is a medical practice of seven local doctors. One doctor has been sued for several million dollars as the result of a recent operation. Because of what appears to be this doctor’s very poor judgment, a patie
> Download Pfizer’s 2015 annual report (search Pfizer Investor Relations). Locate the firm’s consolidated statement of cash flows and answer the following: ∙ Does the firm employ the direct or indirect method of accounting for operating cash flows? ∙ Why
> Many companies make annual reports available on their corporate website, often under an Investors tab. Annual reports also can be accessed through the SEC’s EDGAR system at www.sec.gov (under Filings, click Company Filings Search, type in Company Name, a
> On January 1, 2017, QuickPort Company acquired 90 percent of the outstanding voting stock of NetSpeed, Inc., for $810,000 in cash and stock options. At the acquisition date, NetSpeed had common stock of $800,000 and Retained Earnings of $40,000. The acqu
> Many companies make annual reports available on their corporate website, often under an Investors tab. Annual reports also can be accessed through the SEC’s EDGAR system at www.sec.gov (under Filings, click Company Filings Search, type in Company Name, a
> Go to the Buckeye Partners, L.P. website where forms filed with the SEC are available through the Investor Center. Find Buckeye’s recent annual financial statements in their 10–K report for the partnership. Required Review Buckeye’s financial statemen
> The Pier Ten Company, a U.S. company, made credit sales to four customers in Asia on September 15, 2015, and received payment on October 15, 2015. Information related to these sales is as follows The Pier Ten Company’s fiscal year ends
> The FASB ASC Subtopic “Variable Interest Entities” affects thousands of business enterprises that now, as primary beneficiaries, consolidate entities that qualify as controlled VIEs. Retrieve the annual reports of one or more of the following companies (
> Palmetto Bug Extermination Corporation (PBEC), a U.S. company, regularly purchases chemicals from a supplier in Switzerland with the invoice price denominated in Swiss francs. PBEC has experienced several foreign exchange losses in the past year due to i
> Use the information in Communication Case 1. Required Write a report for these two individuals outlining the types of situations in which the partnership form of legal structure would be the best choice. From communication case 1 : Kelly Fernandez and
> Read the following as well as any other published articles on the bankruptcy of the partnership of Laventhol & Horwath: “Laventhol Says It Plans to File for Chapter 11,” The Wall Street Journal, November 20, 1990, p. A3. “Laventhol Partners Face Long P
> On February 1, 2017, Linber Company forecasted the purchase of component parts on May 1, 2017, at a price of 100,000 euros. On that date, Linber entered into a forward contract to purchase 100,000 euros on May 1, 2017. It designated the forward contract
> Go to the website www.napico.com and click on “Partnership Financial Information—Click Here.” Then click on “2015 Annual Reports” to access the Form 10-K annual report for Real Estate Associates Limited II (Real II). Read the financial statements contain
> Hamilton Hawks Players’ Association and Mr. Sideline, the CEO and majority owner of Hamilton Hawks Soccer, Inc, ask your help in resolving a salary dispute. Mr. Sideline presents the following income statement to the playersâ€
> Akron, Inc., owns all outstanding stock of Toledo Corporation. Amortization expense of $15,000 per year for patented technology resulted from the original acquisition. For 2018, the companies had the following account balances: Intra-entity sales of $32
> Hughes Inc. has a wholly owned subsidiary in Canada that previously had been determined as having the Canadian dollar as its functional currency. Due to a recent restructuring, Hughes Inc.’s CFO believes that the functional currency of the Canadian compa
> Lynch Corporation has a wholly owned subsidiary in Mexico (Lynmex) with two distinct and unrelated lines of business. Lynmex’s Small Appliance Division manufactures small household appliances such as toasters and coffeemakers at a factory in Monterrey, N
> What valuation should be recorded for noncash assets transferred to a partnership by one of the partners?
> When a company acquires an affiliated company’s debt instruments from a third party, how is the gain or loss on extinguishment of the debt calculated? When should this balance be recognized?
> Barker Company owns 80 percent of the outstanding voting stock of Walden Company. During the current year, intra-entity sales amount to $100,000. These transactions were made with a gross profit rate of 40 percent of the transfer price. In consolidating
> Assume the same information as in question (16) except that Metcalf issues a 10 percent stock dividend instead of selling new shares of stock. How does this transaction affect the business combination? From 16: Washburn Company owns 75 percent of Metcal
> In many cases, EPS is computed based on the parent’s portion of consolidated net income and parent company shares and convertibles. However, a different process must be used for some business combinations. When is this alternative approach required?
> The income statement and the balance sheet are produced using a worksheet, but a consolidated statement of cash flows is not. What process is followed in preparing a consolidated statement of cash flows?
> Perkins Company acquires 90 percent of the outstanding common stock of the Butterfly Corporation as well as 55 percent of its preferred stock. How should these preferred shares be accounted for within the consolidation process?
> A partnership is currently holding $400,000 in assets and $234,000 in liabilities. The partnership is to be liquidated, and $20,000 is the best estimation of the expenses that will be incurred during this process. The four partners share profits and loss
> Protrade Corporation acquired 80 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $612,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft’s identifiable assets and
> James Corporation owns 80 percent of Carl Corporation’s common stock. During October, Carl sold merchandise to James for $250,000. At December 31, 40 percent of this merchandise remains in James’s inventory. Gross profit percentages were 20 percent for J
> A partnership has the following capital balances: X (50 percent of profits and losses) = $150,000; Y (30 percent of profits and losses) = $120,000; Z (20 percent of profits and losses) = $80,000. If the partnership is to be liquidated and $30,000 becomes
> Carney, Pierce, Menton, and Hoehn are partners who share profits and losses on a 4:3:2:1 basis, respectively. They are beginning to liquidate the business. At the start of this process, capital balances are Carney, capital ............................ $6
> Bishop has a capital balance of $120,000 in a local partnership, and Cotton has a $90,000 balance. These two partners share profits and losses by a ratio of 60 percent to Bishop and 40 percent to Cotton. Lovett invests $60,000 in cash in the partnership
> A partnership has the following capital balances: Comprix (35% of gains and losses) .......... $150,000 Heflin (40%) ................................................ 300,000 Kaplan (25%) ................................................ 320,000 Mahar is
> Pat, Jean Lou, and Diane are partners with capital balances of $50,000, $30,000, and $20,000, respectively. These three partners share profits and losses equally. For an investment of $50,000 cash (paid to the business), MaryAnn will be admitted as a par
> Which of the following best describes the articles of partnership agreement? a. The purpose of the partnership and partners’ rights and responsibilities are required elements of the articles of partnership. b. The articles of partnership are a legal co
> How does partnership accounting differ from corporate accounting? a. The matching principle is not considered appropriate for partnership accounting. b. Revenues are recognized at a different time by a partnership than is appropriate for a corporation.
> William (40% of gains and losses) ........... $ 220,000 Jennings (40%) ............................................. 160,000 Bryan (20%).................................................... 110,000 Darrow invests $250,000 in cash for a 30 percent ownersh
> William (40% of gains and losses) ........... $ 220,000 Jennings (40%) ............................................. 160,000 Bryan (20%).................................................... 110,000 Darrow invests $270,000 in cash for a 30 percent ownersh
> At year-end, the Circle City partnership has the following capital balances: Manning, Capital …………………….$130,000 Gonzalez, Capital .......................... 110,000 Clark, Capital ................................. 80,000 Freeney, Capital ................
> On January 1, 2017, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $200,000 and Rockne’s assets and
> At year-end, the Circle City partnership has the following capital balances: Manning, Capital …………………….$130,000 Gonzalez, Capital .......................... 110,000 Clark, Capital ................................. 80,000 Freeney, Capital ................
> A partnership has the following capital balances: Allen, Capital ............................. $60,000 Burns, Capital.............................. 30,000 Costello, Capital ......................... 90,000 Profits and losses are split as follows: Allen
> Which of the following is not a reason for the popularity of partnerships as a legal form for businesses? a. Partnerships may be formed merely by an oral agreement. b. Partnerships can more easily generate significant amounts of capital. c. Partnershi
> Newberry, Inc., whose reporting currency is the U.S. dollar ($), has a subsidiary in Argentina, whose functional currency also is the $. The subsidiary acquires inventory on credit on November 1, 2017, for 100,000 pesos that is sold on January 17, 2018,
> Newberry, Inc., whose reporting currency is the U.S. dollar ($), has a subsidiary in Argentina, whose functional currency also is the $. The subsidiary acquires inventory on credit on November 1, 2017, for 100,000 pesos that is sold on January 17, 2018,
> Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: This subsidiary’s functional currency is the U.S. dollar. What total should Orchid’s balance sheet
> Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: This subsidiary’s functional currency is a foreign currency. What total should Orchid’s balance she
> At what rates should the following balance sheet accounts in foreign statements be translated (using the current rate method) into U.S. dollars? Accumulated Equipment Depreciation-Equipment a. Current Current b. Current Average for year Historical Cu
> A foreign subsidiary of Thun Corporation has one asset (inventory) and no liabilities. The functional currency for this subsidiary is the yuan. The inventory was acquired for 100,000 yuan when the exchange rate was $0.16 = 1 yuan. Consolidated statements
> Placid Lake Corporation acquired 80 percent of the outstanding voting stock of Scenic, Inc., on January 1, 2017, when Scenic had a net book value of $400,000. Any excess fair value was assigned to intangible assets and amortized at a rate of $5,000 per y
> McCarthy, Inc.’s Brazilian subsidiary borrowed 100,000 euros on January 1, 2017. Exchange rates between the Brazilian real (BRL) and euro (€) and between the U.S. dollar ($) and BRL are as follows: What amo
> McCarthy, Inc.’s Brazilian subsidiary borrowed 100,000 euros on January 1, 2017. Exchange rates between the Brazilian real (BRL) and euro (€) and between the U.S. dollar ($) and BRL are as follows: At what
> The functional currency of Bertrand, Inc.’s Irish subsidiary is the euro. Bertrand borrowed euros as a partial hedge of its investment in the subsidiary. Since then, the euro has decreased in value. Bertrand’s negative translation adjustment on its inves
> A Clarke Corporation subsidiary buys marketable equity securities and inventory on April 1, 2017, for 100,000 won each. It pays for both items on June 1, 2017, and they are still on hand at year-end. Inventory is carried at cost under the lower-of-cost-o
> A Clarke Corporation subsidiary buys marketable equity securities and inventory on April 1, 2017, for 100,000 won each. It pays for both items on June 1, 2017, and they are still on hand at year-end. Inventory is carried at cost under the lower-of-cost-o
> St. Philip Company ordered parts costing €100,000 from a foreign supplier on January 15 when the spot rate was $0.20 per €. A one-month forward contract was signed on that date to purchase €100,000 at a forward rate of $0.23. The forward contract is prop
> On July 1, 2017, Mifflin Company borrowed 200,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2018. The note is denominated in euros. The U.S. dollar equivalent of the note principal is as follows: In its 2018 income
> On October 1, 2017, Tile Co., a U.S. company, purchased products from Azulejo, a Portuguese company, with payment due on December 1, 2017. If Tile’s 2017 operating income included no foreign exchange gain or loss, the transaction could have a. Been deno
> On December 15, 2017, Lisbeth Inc. (a U.S. company) purchases merchandise inventory from a foreign supplier for 50,000 schillings. Lisbeth agrees to pay in 45 days after it sells the merchandise. Lisbeth makes sales rather quickly and pays the entire obl
> Peerless Corporation (a U.S. company) made a sale to a foreign customer on September 15, for 100,000 crowns. It received payment on October 15. The following exchange rates for 1 crown apply: September 15………..$0.60 September 30………….0.66 October 15……………….
> On January 1, 2017, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $980,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $700,000, retained earnings of $250,0
> On November 1, 2017, Dos Santos Company forecasts the purchase of raw materials from a Brazilian supplier on February 1, 2018, at a price of 200,000 Brazilian reals. On November 1, 2017, Dos Santos pays $1,500 for a three-month call option on 200,000 rea
> On November 1, 2017, Dos Santos Company forecasts the purchase of raw materials from a Brazilian supplier on February 1, 2018, at a price of 200,000 Brazilian reals. On November 1, 2017, Dos Santos pays $1,500 for a three-month call option on 200,000 rea
> On June 1, 2017, Micro Corp. received an order for parts from a Mexican customer at a price of 1,000,000 Mexican pesos with a delivery date of July 31, 2017. On June 1, when the U.S. dollar–Mexican peso spot rate is $0.115, Micro Corp. entered into a two
> On June 1, 2017, Micro Corp. received an order for parts from a Mexican customer at a price of 1,000,000 Mexican pesos with a delivery date of July 31, 2017. On June 1, when the U.S. dollar–Mexican peso spot rate is $0.115, Micro Corp. entered into a two
> On June 1, 2017, Micro Corp. received an order for parts from a Mexican customer at a price of 1,000,000 Mexican pesos with a delivery date of July 31, 2017. On June 1, when the U.S. dollar–Mexican peso spot rate is $0.115, Micro Corp. entered into a two
> On September 1, 2017, Jensen Company received an order to sell a machine to a customer in Canada at a price of 100,000 Canadian dollars. Jensen shipped the machine and received payment on March 1, 2018. On September 1, 2017, Jensen purchased a put option
> On September 1, 2017, Jensen Company received an order to sell a machine to a customer in Canada at a price of 100,000 Canadian dollars. Jensen shipped the machine and received payment on March 1, 2018. On September 1, 2017, Jensen purchased a put option
> On September 1, 2017, Jensen Company received an order to sell a machine to a customer in Canada at a price of 100,000 Canadian dollars. Jensen shipped the machine and received payment on March 1, 2018. On September 1, 2017, Jensen purchased a put option
> Torres Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 100,000 pounds, with delivery and payment to be made on September 20. On July 20, Torres purchased a two-month call option on 100,000 pounds and design
> On March 1, Pimlico Corporation (a U.S.-based company) expects to order merchandise from a supplier in Sweden in three months. On March 1, when the spot rate is $0.10 per Swedish krona, Pimlico enters into a forward contract to purchase 500,000 Swedish k
> Following are several figures reported for Allister and Barone as of December 31, 2018: Allister acquired 90 percent of Barone in January 2017. In allocating the newly acquired subsidiary’s fair value at the acquisition date, Allister
> MNC Corp. (a U.S.-based company) sold parts to a South Korean customer on December 1, 2017, with payment of 10 million South Korean won to be received on March 31, 2018. The following exchange rates apply: MNC’s incremental borrowing r
> MNC Corp. (a U.S.-based company) sold parts to a South Korean customer on December 1, 2017, with payment of 10 million South Korean won to be received on March 31, 2018. The following exchange rates apply: MNC’s incremental borrowing r
> On December 1, 2017, Ringling Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2018. The following U.S. dollar per peso exchange rates apply: Ringling’s incremental borr
> Bensman Corporation is computing EPS. One of its subsidiaries has stock warrants outstanding. How do these convertible items affect Bensman’s EPS computation? a. No effect is created because the stock warrants were for the subsidiary company’s shares.
> Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned subsidiary Oakley Co. follow: Additional Information for Fiscal Year 2018 ∙ Iverson and Oakley’s consolidated
> Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned subsidiary Oakley Co. follow: Additional Information for Fiscal Year 2018 ∙ Iverson and Oakley’s consolidated
> Aceton Corporation owns 80 percent of the outstanding stock of Voctax, Inc. During the current year, Voctax made $140,000 in sales to Aceton. How does this transfer affect the consolidated statement of cash flows? a. The transaction should be included i
> The parent company acquires all of a subsidiary’s common stock but only 70 percent of its preferred shares. This preferred stock pays a 7 percent annual cumulative dividend. No dividends are in arrears at the current time. How is the noncontrolling inter
> Pesto Company possesses 80 percent of Salerno Company’s outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 9 percent bonds payable with a $10 million face value (maturing in 20 yea
> Redfield Company reports current earnings of $420,000 while declaring $52,000 in cash dividends. Snedeker Company earns $147,000 in net income and declares $13,000 in dividends. Redfield has held a 70 percent interest in Snedeker for several years, an in
> Several years ago, Bennett, Inc., bought a portion of the outstanding bonds of Smith Corporation, a subsidiary organization. The acquisition was made from an outside party. In the current year, how should these intra-entity bonds be accounted for within
> Aaron Company’s books show current earnings of $430,000 and $46,000 in cash dividends. Zeese Company earns $164,000 in net income and declares $11,500 in dividends. Aaron has held a 70 percent interest in Zeese for several years, an investment with an ac
> Mattoon, Inc., owns 80 percent of Effingham Company. For the current year, this combined entity reported consolidated net income of $500,000. Of this amount $465,000 was attributable to Mattoon’s controlling interest while the remaining $35,000 was attri
> Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $185,000 and the subsidiary reports $105,000. The parent had a bond payable outstanding on January 1, with a carry
> Arcola, Inc., acquires all 40,000 shares of Tuscola Company for $725,000. A year later, when Arcola’s equity adjusted balance in its investment in Tuscola equals $800,000, Tuscola issues an additional 10,000 shares to outside investors for $25 per share
> Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2017, when Stamford has the following stockholders’ equity accounts: Common stock—40,000 shares outstanding .......... $100,000 Additional paid-in capital...........
> Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2017, when Stamford has the following stockholders’ equity accounts: Common stock—40,000 shares outstanding .......... $100,000 Additional paid-in capital...........
> Neill Company purchases 80 percent of the common stock of Stamford Company on January 1, 2017, when Stamford has the following stockholders’ equity accounts: Common stock—40,000 shares outstanding .......... $100,000 Additional paid-in capital...........
> Aaron owns 100 percent of the 12,000 shares of Veritable, Inc. The Investment in Veritable account has a balance of $588,000, corresponding to the subsidiary’s unamortized acquisition-date fair value of $49 per share. Veritable issues 3,000 new shares to
> Premier Company owns 90 percent of the voting shares of Stanton, Inc. Premier reports sales of $480,000 during the current year and Stanton reports $264,000. Stanton sold inventory costing $28,800 to Premier (upstream) during the year for $57,600. Of thi
> On January 1, Coldwater Company has a net book value of $2,174,000 as follows 2,000 shares of preferred stock; par value $100 per share; cumulative, nonparticipating, nonvoting; call value $108 per share ..................................................
