Midway Construction was a partnership owned by Davis, Murray, and Clay with year-end 2013 capital balances of $50,000, 80,000, and $70,000, respectively. Davis and Murray each received an annual salary of $100,000. Clay was primarily involved in sales and received a salary of $70,000 and a bonus of 20% of net income after salaries. All remaining profits were allocated equally among the partners. In the event of insufficient income or operating losses, each provision of the agreement would be satisfied to whatever extent possible given the order of salaries, interest, bonus, and percentages. Salaries are distributed at the end of each calendar quarter, and Clay’s bonus is distributed at the end of the first month subsequent to year-end. Eighty percent of all other allocated income (income other than salary and bonus) is distributed to the partners at the end of the first quarter subsequent to year-end. During 2013, the partnership had net income of $450,000 and proceeded to construct a number of spec homes during 2014. Unfortunately, during 2014, interest rates increased, and the economy experienced a significant slowdown, resulting in partnership income of only $300,000. In order to improve cash flows, on January 1, 2015, Rayburn made a capital contribution to the partnership of $59,000 cash and received a 50% interest in capital. Rayburn would receive a profit allocation equal to interest of $5,900 in 2015 and a 10% profit percentage. In 2016, Rayburn would receive interest of 10% on average capital, before allocation of 2016 profits, and a 10% profit allocation. The previous partners’ profit and loss agreement was modified to provide for salaries at one-half of previous levels, none of which were to be distributed, and profit percentages of 30% each. All other aspects of the previous profit-sharing agreement remained in effect. During the year 2015, conditions worsened, and the partnership reported income of $142,000. At year-end 2015, Davis sold its capital interest to the partnership in exchange for $49,400 and received no further distributions. At the beginning of 2016, Murray loaned the partnership $50,000 with the necessary loan documents providing for interest at the rate of 6%. The profit-sharing agreement for 2013 was completely changed to simply provide for interest on capital to Rayburn as previously set forth and all remaining profits to be allocated 40%, 40%, and 20% for Murray Clay, and Rayburn, respectively. The only withdrawal to take place during 2016 was the distribution of Clay’s 2015 bonus. The partnership could no longer sustain the economic downturn, and the decision was made to liquidate the partnership after having reported net income of $110,000 during the first six months of 2016. At the beginning of the liquidation process, the partnership had $15,000 in cash and liabilities, excluding loans from partners, of $84,000. Noncash assets of the partnership were liquidated as follows: 1. On August 1, 2016, assets with a book value of $220,000 were sold for $180,000. 2. On September 1, 2016, assets with a book value of $70,000 were sold for $82,000. Required Prior to any further liquidation of assets, all available cash other than $10,000 held for future expenses were to be distributed to the partners on September 15, 2016. 1. Prepare a schedule analyzing the partners’ capital prior to liquidation of the partnership. Assume use of the bonus method to record all changes in the ownership structure of the partnership. 2. Prepare a schedule of cash payments on September 15, 2016, of the liquidation, showing how the available cash was distributed. Supporting calculations should be in good form.
> Lakey International is a foreign corporation that maintains its books of record in foreign currency (FC), although its functional currency is the U.S. dollar. Lakey originally began operations on July 1, 2012, by issuing no par common stock in the amount
> Assume that a U.S. company has made three purchases of inventory from three different foreign vendors. One of the purchases is denominated in U.S. dollars, and the other two purchases are denominated in foreign currency, FC-A and FC-B, respectively. Furt
> From the following information, prepare a statement of net position for the city of Lucas as of June 30, 2019. Cash and cash equivalents, governmental activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 280,000 Cash and cash equivalen
> Using the information from Problem 17-6, illustrate and explain the adjustments necessary to convert to a government-wide statement of activities, assuming all expenditures are for capital assets and other finance sources are the result of issuance of ge
> The pre closing, year-end trial balance for a capital projects fund of the city of Rochester as of December 31, 2019, follows: Required 1. Prepare closing entries as of December 31, 2019. 2. Prepare the year-end statement of revenues, expenditures, and
> Define a financial reporting entity. Give an example of a primary government. Define and give an example of a component unit. Explain the two methods of reporting the primary government and component units in the financial reporting entity and when each
> Based on the following very limited information, indicate whether and how the city should report its related entity. 1. Its school district, although not a legally separate government, is managed by a school board elected by city residents. The system is
> The Urban Development Authority (UDA) was created as a separate legal entity by an act of the state legislature and ‘‘activated’’ by action of the city council to plan and develop the downtown area of the city and to attract new businesses and residents.
> Under the reporting model required by GASB Statement No. 34, fund statements are required for governmental, proprietary, and fiduciary funds. Government-wide statements include the statement of net position and the statement of activities. Required 1. E
> Go to the Web site featuring the financial statements of Minneapolis, Minnesota, at http://www.ci.minneapolis. mn.us/finance/reports/CAFR/index.htm. Required Provide brief answers to the following: 1. The financial section includes the basic financial s
> Select the best answer to the following multiple-choice questions: 1. In the statement of activities, a. all expenses are subtracted from all revenues to get net income. b. the net program expense (revenue) for major functions and programs of the primary
> Palto County elects not to purchase commercial insurance. Instead, it sets aside resources for potential claims in an internal service ‘‘self-insurance’’ fund. During the year, the fund recognized $4 million for claims filed during the year. Of this amou
> Brico Enterprises, a U.S. corporation, acquired an 80% interest in Bandar Distributors in June 2012 when 1 FC equaled $1.62. Bandar is a foreign corporation whose functional currency is the FC. The condensed pre closing comparative trial balance for Band
> The pre closing, year-end trial balance for a capital projects fund of the city of Clark as of December 31, 2019, follows: Required 1. Prepare closing entries as of December 31, 2019, assuming that all inflows and outflows are designated assigned. 2. P
> The following information pertains to Palmer Township’s construction and financing of a new administration center: Estimated total cost of project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $9,000,000 Project financin
> Mountain View’s citizens authorized the construction of a new library. As a result of this project, the city had the following transactions during 2018: a. On January 3, 2018, a $600,000 serial bond issue having a stated interest rate of 8% was authorize
> (Nos. 4, 5, and 8 are AICPA adapted.) 1. The following revenues were among those reported by Tosa Township in 2018: Net rental revenue (after depreciation) from a parking garage owned by Tosa . . . . . . $ 40,000 Interest earned on investments held for
> The following information relates to Dell City, whose first fiscal year ended December 31, 2019. Assume Dell has only the long-term debt as specified below and only the funds necessitated by the following information. 1. General fund: a. There were n
> The following information relates to Redwood City during its fiscal year ended December 31, 2019: a. On October 31, 2019, to finance the construction of a city hall annex, Redwood issued 8%, 10-year general obligation bonds at their face value of $600,00
> The village of Fay was recently incorporated and began financial operations on July 1, 2018, the beginning of its fiscal year. The following transactions occurred during this first fiscal year from July 1, 2018, to June 30, 2019: 1. The village council a
> A selected list of transactions for the city of Hope for the fiscal year ending June 30, 2018, follows: 1. The city government authorized a budget with estimated revenues of $4,500,000 and appropriations of $4,450,000. 2. The city’s share of state gasoli
> In compliance with a newly enacted state law, Tilburg County assumed the responsibility of collecting all property taxes levied within its boundaries as of July 1, 2018. The following composite property tax rate per $100 of net assessed valuation was dev
> The following trial balance of the Employees’ Retirement System Fund for Bedrock City was prepared by a clerk who used only balance sheet accounts in recording the events for the fiscal year ended June 30, 2018: Cash . . . . . . . . . . . . . . . . . .
> In the past, Baxter Manufacturing has engaged in a number of foreign currency transactions but has never before attempted to hedge these transactions. Baxter has given you three past events and asked you to illustrate how hedging could have been employed
> In 2018, a city opens a municipal landfill, which it will account for in an enterprise fund. It estimates capacity to be 6 million cubic feet and usable life to be 20 years. To close the landfill, the municipality expects to incur labor, material, and eq
> The city of Cloverville operates a central computer center through an internal service fund. The Computer Internal Service Fund was established by a contribution of $1,000,000 from the general fund on July 1, 2017, at which time a building was acquired a
> Prepare a statement of cash flows for the internal service fund of the city of Boniville from the following information: Cash on hand at the beginning of the year . . . . . . . . . . . . . $ 122 Interest from investments . . . . . . . . . . . . . .
> In response to a petition signed by the property owners of Riverdale Subdivision, the city of Pewaukee will oversee the installation of sidewalks, curbs, and gutters in the subdivision, to be accounted for in the city’s capital projects
> Select the best response for each of the following multiple-choice questions. (Nos. 1–8 are AICPA adapted.) 1. In 2019, a state government collected income taxes of $8,000,000 for the benefit of one of its cities that imposes an income tax on its residen
> Prepare journal entries to record the following events using the general fund and the general fixed assets account group: a. The general fund vouchered the purchase of trucks for $80,000. The purchase had been encumbered earlier in the year at $75,000. b
> Manchester City maintains a defined benefit pension plan for its employees. In a recent year, the city contributed $15 million to its pension fund. However, its annual pension expense and increase in net pension liability as calculated by its actuary was
> A summary of the general fund transactions for the city of Toma for the year ended December 31, 2019, is as follows: a. A budget was approved, showing estimated revenues of $900,000, appropriations of $875,000, transfers-in of $27,000 from other funds, a
> The general fund trial balance of the city of Oakpark at December 31, 2018, was as follows: The following data pertain to 2019 general fund operations: a. Budget adopted: Revenues and other financing sources: Taxes ....................................
> On July 1, 2018, the beginning of its fiscal year, the trial balance of the general fund of the city of Wentworth was as follows: The following events occurred: a. The budget shows estimated general fund revenues of $400,000 and estimated expenditures
> Regber International is building an addition to one of its overseas manufacturing facilities with all construction costs being paid in foreign currency (FC) as follows: 200,000 FC, 300,000 FC, 400,000 FC, and 100,000 FC on March 1, June 30, August 31, an
> Land City leases a fleet of garbage trucks. The term of the lease is 10 years, approximately the useful life of the equipment. Based on a sales price of $800,000 and an interest rate of 6%, the city agrees to make annual payments of $108,694. Upon the ex
> Select the best answer for each of the following multiple-choice questions. (Nos. 1, 5, and 7–10 are AICPA adapted.) 1. The encumbrances control account of a governmental unit is increased when a voucher payable is a. not recorded and t
> The January 2, 2018, trial balance of Oneida Township follows: The following events occurred during the first six months of 2018: a. The adopted budget showed the following: Estimated expenditures .................... $620,000 Transfers to other funds
> The following selected information was taken from SunValley City’s general fund statement of revenues, expenditures, and changes in fund balance for the year ended December 31, 2019: Revenues: Property taxes—2019 ........................................
> The city of Clinton was incorporated on January 1, 2014. On December 31, 2019, a careful study of the city’s records revealed the following information regarding long-term debt: a. General obligation bonds in the amount of $1,500,000 were authorized and
> The following schedule of capital assets was obtained from the records of the city of Elmcreek: City of Elmcreek Schedule of General Fixed Assets December 31, 2018 Governmental activities: Land ...........................................................
> Prepare the necessary journal entries to record the following transaction for the city of Small ville during 2017 in the general fund and account groups, and specify the account group used. Entries in the debt service fund and capital projects fund shoul
> Select the best answer for each of the following multiple-choice questions. (Nos. 3 and 7 are AICPA adapted.) 1. What is the underlying reason a governmental unit uses separate funds to account for its transactions? a. Governmental units are so large tha
> Prior to liquidation, the following information relates to the partnership: Partnership trial balance: On June 30, other assets with a book value of $160,000 were sold for $120,000, and all available cash with the exception of $20,000 was used to reduc
> A partnership has decided to liquidate its operations. Prior to beginning the liquidation process, the partnership had cash balances of $12,000 and noncash assets of $210,000. At that time liabilities were $125,000 of which $25,000 represented a note pay
> Jackson, a U.S. company, acquires a variety of raw materials from foreign vendors with amounts payable in foreign currency (FC). The company needs to acquire 20,000 units of raw materials, and the goods are expected to have a price of 100,000 FC. Assume
> At the end of 2015, Klaproth finds himself in a difficult situation. He is a partner in a residential construction company, and the housing market has been adversely impacted by interest rates, mortgage defaults, and a surplus of existing homes for sale.
> Murphy and Reinartz have been partners for several years and critical values related to their partnership are as follows: In 2016, the partnership reported net income of $230,000, and each partner received a $100,000 distribution at year-end. After muc
> Jacobs, a client of yours, is a partner in a retail establishment that has been experiencing difficult times. Shortly after deciding to liquidate the partnership, partner Williams offers to buy out the interests of the other partners. Jacobs is trying to
> After being a partner for over 10 years, Ziegler has decided to sell her interest in a partnership with Grossman and Casper. Prior to the date of the sale and subsequent to the allocation of profits and drawing balances, information concerning the partne
> A partnership has assets of $210,000 and liabilities of $95,000. The capital information for the current partners is as follows: Given the above information, respond to each of the following independent fact situations: 1. Assuming new Partner D acquir
> Carlton, Weber, and Stansbury share profits equally and have capital balances of $120,000, $70,000, and $80,000, respectively, as of December 31, 2014. Effective January 1, 2015, Stansbury has transferred his interest in the partnership to Laidlaw for to
> Rexcam is a partnership owned by Wilson, Watts, and Franklin that manufactures special machine tools used primarily in injection molding applications. The partnership had operated very profitably for the first five years of existence. However, in the las
> Rivera, Sampson, and Elliott are partners in a commercial plumbing business. Rivera and Sampson have also started another contracting company and have cash flow needs, which require periodic distributions from the partnership. In order to deal fairly wit
> At the beginning of the current year, Meyers, Lincoln, and Kopinski formed a partnership to carry on their consulting practice. At that time, net assets of $59,000, $30,000, and $25,000 were contributed to the partnership by Meyers, Lincoln, and Kopinski
> Stark, Inc., placed an order for inventory costing 500,000 FC with a foreign vendor on April 15 when the spot rate was 1 FC = $0.683. Stark received the goods on May 1 when the spot rate was 1 FC = $0.687. Also on May 1, Stark entered into a 90-day forwa
> Jacobs and Levine are partners in a plumbing contracting business. Jacobs was divorced and the divorce stipulation states that his ex-spouse is to receive the following as maintenance for any given year: 1. Monthly maintenance payments of $2,500 througho
> Raymond is a senior partner in a manufacturing firm and is approaching retirement age. In discussing succession planning with the company partners, two alternatives have been presented to Raymond. The first alternative would call for Raymond to receive a
> Sandburg and Williams are the owners of a partnership that manufactures commercial lighting fixtures. Profits are allocated among the partners as follows: Sandburg was divorced as of the beginning of 2015 and as part of the divorce stipulation agreed t
> Rockford, Skeeba, and Tapinski are partners in a business which manufactures specialty railings. Their profit and loss agreement provides for the allocation of profits and losses as follows: 1. Salaries of $50,000, $40,000, and $55,000 for Rockford, Skee
> Raymack Manufacturing, headquartered in Michigan, is a manufacturer of equipment component parts used in a number of industries. The company’s financial statements and related footnotes contain the required segment reporting. The financial statements are
> Tress Corporation is a rapidly growing company that has diversified into a number of different segments. The following partial trial balance, which includes the effect of intercompany transactions, is for the current year ended December 31: Net Sales .
> A U.S. multinational corporation has divided its operations into several operating segments and has provided the following data for each segment: It is important to note that all purchases of goods or services from other segments have been sold to ou
> You are presenting segmental information regarding your company to the finance committee of the board of directors and have been asked the following questions. Provide your response to each of the following questions: Required 1. How is it possible that
> A new client of yours has prepared the following condensed income statement for the second quarter of 2015. Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $280,000 Less: Sales returns and allowances . . . .
> The following schedule was developed for Monroe Corporation to support interim reporting for the year 2014. The following additional 2014 information is available: 1. The statutory tax rate is as follows: 15% on the first $50,000 of taxable income 20%
> A company has acquired two derivatives: an option to buy foreign currency (FC) and a forward contract to buy FC. Both derivatives were acquired on the same day, for the same notional amount and expire on May 31. Relevant information involving the derivat
> Radix, Inc., operates primarily as a distributor of components for gasoline compressors. In the first quarter of 2015, the company reported a gross profit of $248,000 on net sales of $1,360,000. After considering selling, general, and administrative expe
> McClure Manufacturing reported a pretax loss from operations of $45,000 for the first quarter of 2017. The estimated effective annual tax rate at that time was based on the following information: 1. A statutory tax rate of 32% and annual estimated tax cr
> Roberts Corporation began operations in 2013 and finally began to report pretax profits in 2014. However, a major economic downturn in 2015 has negatively impacted the company’s operations. Required For each of the following quarters o
> Assume the same facts as Problem 11-8 with the following exceptions: a. Tobac’s functional currency is the U.S. dollar. b. Balfour’s investment in Tobac consists of the following: Initial investment (33,000,000 FC × $0.55) ..............................
> Balfour Corporation acquired 100% of Tobac, Inc., a foreign corporation, for 33,000,000 FC. The acquisition, which was accounted for as a purchase, occurred on July 1, 2015, when Tobac’s equity, in FC, was as follows: Common stock. .
> Campione Manufacturing acquired an 80% interest in DaLuca Distributors, a foreign corporation established on November 1, 2010, for 650,000 foreign currency units (FC). Campione acquired its 80% interest on June 30, 2012, when DaLuca’s s
> Prospect International, a U.S. company, acquired an 80% controlling interest in the equity of a foreign corporation, Aspic Developments. At the time of the acquisition, January 1, 2014, Prospect paid 880,000 foreign currency (FC) for its interest, which
> Moser International, a U.S. corporation, acquired a 100% interest in Gilmore Enterprises, a foreign corporation, which manufactures avionic components. Although Gilmore accounts for its activity using foreign currency A (FCA), it has been determined that
> On October 1, 2013, Kemper International acquired a 90% interest in the equity of Spruco Manufacturing when the subsidiary’s equity was 8,000,000 foreign currency (FC), including retained earnings with a balance of 3,000,000 FC. Kemper
> Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson’s equity consisted of the following: Common
> On January 1, one U.S. dollar can be exchanged for eight foreign currencies (FC). The dollar can be invested short term at a rate of 4%, and the FC can be invested at a rate of 5%. 1. Calculate the direct and indirect spot exchange rates as of January 1.
> WTC Manufacturing, Inc., has an 80% interest in a foreign subsidiary, Mofoco Manufacturing. Relevant details regarding WTC’s investment in Mofoco are as follows: Date of acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . .
> In order to demonstrate the use of the re measurement process, assume that at the beginning of the year a U.S. parent company invested 100,000 foreign currency B (FCB) to form a 100% owned subsidiary. The subsidiary immediately invested the foreign curre
> In the process of preparing a budget for the second quarter of the current fiscal year, Anderson Welding, Inc., has forecasted foreign sales of 1,200,00 foreign currency (FC). The company is concerned that the dollar will strengthen relative to the FC an
> On March 1, a company committed to acquire 10,000 units of inventory to be delivered on May 31. The purchase price is to be paid in foreign currency (FC) in the amount of 200,000 FC. Assume that the commitment’s negative values are $7,9
> Medical Distributors, Inc., is a U.S. company that buys and sells used medical equipment throughout the United States and Canada. During the month of June, the company had the following transactions with Canadian parties: 1. Purchased used equipment on J
> Kaiser Exporters buys used medical equipment and sells it to various foreign health care institutions. On June 15, the company committed to sell medical equipment to a foreign hospital for 800,000 FC. The equipment, with a cost of $325,000, was shipped t
> Jarvis Corporation transacts business with a number of foreign vendors and customers. These transactions are denominated in FC, and the company uses a number of hedging strategies to reduce the exposure to exchange rate risk. Several such transactions ar
> Hauser Corporation has $20,000,000 of outstanding debt that bears interest at a variable rate and matures on June 30, 2018. At inception of the debt, the company had a lower credit rating, and most available financing carried a variable rate. The company
> During the third quarter of the current year, Beamer Manufacturing Company invested in derivative instruments for a variety of reasons. The various investments and hedging relationships are as follows: a. Call Option A—This option was p
> Industrial Plating Corporation coats manufactured parts with a variety of coatings such as Teflon, gold, and silver. The company intends to purchase 100,000 troy ounces of silver in September. The purchase is highly probable, and the company has become c
> Williams Corporation imports, from a number of German manufacturers, large machining equipment used in the tooling industry. On June 1, the company received delivery of a piece of machinery with a cost of 450,000 euros when the spot rate was 1 euro equal
> Pasu International purchased a plant in Louisiana on December 31, 2015, and financed $20,000,000 of the purchase price with a 5-year note. The note bears interest at the fixed rate of 5%, and payments on the note are made quarterly in the amount of $1,13
> Clayton Industries sells medical equipment worldwide. On March 1 of the current year, the company sold equipment, with a cost of $160,000, to a foreign customer for 200,000 euros payable in 60 days. At the same time, the company purchased a forward contr
> Custom Brand Bakeries, Inc. (CBBI), located in Erie, Pennsylvania, bakes a variety of products for various parties on a contract basis. For example, a food company may contract with CBBI to make energy bars that are then sold under the food companyâ
> On March 17, Kennedy Baking, Inc., committed to buy 1,000 tons of commodity A for delivery in May at a cost of $118 per ton. Concerned that the price of commodity A might decrease, on March 29 the company purchased a May put option for 1,000 tons of comm
> Each of the following is an independent fact situation involving an extinguishment or restructuring of debt. Debt A—On January 1, 2015, the company borrowed $3,000,000 after incurring $100,000 of related debt issuance costs. The note had a term of three
> St. John Corporation is barely solvent and has been seeking an equity investor that would be interested in making a capital contribution so that the company would hopefully return to performance levels it had experienced in the past. At the end of the pr
> Matmart Corporation is contemplating seeking a voluntary liquidation under Chapter 7 of the Bankruptcy Reform Act. There are a large number of partially secured creditors who are opposed to the possibility of a liquidation and favor a restructuring of th
> Marshall Tool and Die Company has been experiencing significant foreign competition and a declining market. Annual net losses from operations have averaged $250,000 over the last three years. The company’s balance sheet as of December 3
> A partially completed statement of realization and liquidation is as follows: The following additional transactions have occurred through August 12 of the current year: a. Receivables collected amounted to $39,000. Receivables with a book value of $15,
> Casper Blueprinting, Inc., has filed under Chapter 7 of the Bankruptcy Code. The estimated net realizable value of its assets is as follows: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. $ 23,
> A major cattle feeding operation has entered into a firm commitment to buy 100,000 bushels of corn to be delivered to its feed lot in Kansas. The corn is expected to be delivered in 90 days. The company is committed to pay $1.50 per bushel. If corn yield
