On January 1, 2017, the dental partnership of Angela, Diaz, and Krause was formed when the partners contributed $30,000, $58,000, and $60,000, respectively. Over the next three years, the business reported net income and (loss) as follows: 2017 ................................... $70,000 2018 .................................... 42,000 2019 ..................................... (25,000) During this period, each partner withdrew cash of $15,000 per year. Krause invested an additional $5,000 in cash on February 9, 2018. At the time that the partnership was created, the three partners agreed to allocate all profits and losses according to a specified plan written as follows: ∙ Each partner is entitled to interest computed at the rate of 10 percent per year based on the individual capital balances at the beginning of that year. ∙ Because of prior work experience, Angela is entitled to an annual salary allowance of $12,000 per year and Diaz is entitled to an annual salary allowance of $9,000 per year. ∙ Any remaining profit will be split as follows: Angela, 20 percent; Diaz, 40 percent; and Krause, 40 percent. If a net loss remains after the initial allocations to the partners, the balance will be allocated: Angela, 30 percent; Diaz, 50 percent; and Krause, 20 percent. Determine the ending capital balance for each partner as of the end of each of these three years.
> Government officials of the City of Jones expect to receive general fund revenues of $400,000 in 2017 but approve spending only $380,000. Later in the year, as they receive more information, they increase the revenue projection to $420,000. Officials als
> Use the transactions in problem (47) but prepare a statement of net position for the government wide financial statements. Assume that the general fund had $180,000 in cash on the first day of the year and no other assets or liabilities. No amount was re
> The following transactions relate to the General Fund of the city of Lost Angels for the year ending December 31, 2017. Prepare a statement of revenues, expenditures, and other changes in fund balance for the general fund for the period to be included in
> The City of Gargery has a fiscal year ending December 31, Year 5. If the city were to produce financial statements right now, the following figures would be included: – Governmental activities: Assets = $800,000, Liabilities = $300,000, and Change in Ne
> The City of Havisham has a fiscal year ending December 31, Year 5. If the city were to produce financial statements right now, the following figures would be included: – Governmental activities: Assets = $800,000, Liabilities = $300,000, and Change in N
> A city has only one activity, its school system. The school system is accounted for within the general fund. For convenience, assume that, at the start of 2017, the school system and the city have no assets. During the year, the city assessed $400,000 in
> What is a special assessment project? How are special assessment projects reported?
> On the first day of the year, the City of Wolfe bought $20,000 of equipment with a 5-year life and no salvage value for its school system. It was capitalized but no other entries were ever made. The machine was monitored using the modified approach. a.
> The city maintains a landfill that has been recorded during the current year within its parks. The landfill generated program revenues of $4,000 in Year 4 and cash expenses of $15,000. It also paid $3,000 cash for a piece of land. These transactions were
> Following are descriptions of transactions and other financial events for the City of Tetris for the year ending December 2017. Not all transactions have been included here. Only the general fund formally records a budget. No encumbrances were carried ov
> The following unadjusted trial balances are for the governmental funds of the City of Copeland prepared from the current accounting records: Based on the information presented for each of these governmental funds, answer the following questions: a. How
> For each of the following, indicate whether the statement is true or false and include a brief explanation for your answer. a. A pension trust fund appears in the government-wide financial statements but not in the fund financial statements. b. Permane
> Use the information in problem 37 to prepare the 2017 fund financial statements for the governmental funds and the proprietary funds. A statement of cash flows is not required. Assume that “available” is defined as within 60 days and that all funds are m
> The City of Pfeiffer starts the year of 2017 with the general fund and an enterprise fund. The general fund has two activities: education and parks/recreation. For convenience, assume that the general fund holds $123,000 cash and a new school building co
> The City of Bernard starts the year of 2017 with the following unrestricted amounts in its general fund: cash of $20,000 and investments of $70,000. In addition, it holds a small building bought on January 1, 2016, for general government purposes for $30
> When is a receivable recognized for property tax assessments? When is the revenue recognized?
> What are the four classifications of nonexchange revenues that a state or local government can recognize? In each case, when are revenues normally recognized?
> What are the two different ways that supplies and prepaid items can be recorded on fund financial statements?
> The governmental funds of the City of Westchester report $445,000 in assets and $140,000 in liabilities. The following are some of the assets reported by this government. ∙ Prepaid items—$7,000. ∙ Cash from a bond issuance that must be spent within the
> How do governmental funds report capital outlay in fund financial statements? How do government-wide financial statements report capital expenditures?
> A city issues a 60-day tax anticipation note to fund operations until taxes have been collected. What recording should it make? a. The liability should be reported in the government-wide financial statements; an other financing source should be shown in
> The state awards a grant of $50,000 to the Town of Glenville. The state will pay the grant money to the town as a reimbursement for money spent on road repair. At the time of the grant, the state pays $8,000 in advance. During the first year of this prog
> When is an encumbrance recorded? What happens to this balance? How are encumbrances reported in government-wide financial statements?
> The City of Huble has a defined benefit pension plan for a number of its employees. Which of the following is not included immediately in the determination of pension expense that this government should recognize in its government-wide financial statemen
> The Willingham Museum qualifies as a component unit of the City of Willingham. How does an activity or function meet the requirements to be deemed a component unit of a primary government?
> The general fund of a city reports assets of $300,000 and liabilities of $200,000 in the fund financial statements. Explain what is meant by each of the following balances: fund balance—nonspendable of $40,000, fund balance—restricted of $28,000, fund ba
> At the end of the current year, a government reports a fund balance—assigned balance of $9,000 in connection with an encumbrance. What information is being conveyed? a. A donor has given the government $9,000 that must be used in a specified fashion. b
> What are the two major divisions reported in government-wide financial statements? What funds are not reported in these financial statements?
> The City of Wilson receives a large sculpture valued at $240,000 as a gift to be placed in front of the municipal building. Which of the following is true for reporting the gift within the governmentwide financial statements? a. A capital asset of $240,
> Cash of $90,000 is transferred from a city’s general fund to start construction on a police station. The city issues a bond at its $1.8 million face value. The police station is built for $1.89 million. Prepare all necessary journal entries for these tra
> How is the issuance of a long-term bond reported on fund financial statements? How is the issuance of a long-term bond reported on government-wide financial statements?
> Padlock Corp. owns 90 percent of Safeco, Inc. During the year, Padlock sold 3,000 locking mechanisms to Safeco for $900,000. By the end of the year, Safeco had sold all but 500 of the locking mechanisms to outside parties. Padlock marks up the cost of it
> The partnership of Anderson, Berry, Hammond, and Winwood is being liquidated. It currently holds cash of $20,000 but no other assets. Liabilities amount to $30,000. The capital balances are Anderson (40% of profits and losses) ................ $ 20,000
> The partnership of Hendrick, Mitchum, and Redding has the following account balances:Â This partnership is being liquidated. Hendrick and Mitchum are each entitled to 40 percent of all profits and losses with the remaining 20 percent going t
> A local partnership is to be liquidated. Commissions and other liquidation expenses are expected to total $19,000. The business’s balance sheet prior to the commencement of liquidation is as follows: Prepare a predistribution plan for
> The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately prior to liquidation: a. Liquidation expenses are estimated to be $15,000. Prepare a predistribution schedule to guide the distribution of cash. b. Assume that a
> The partnership of Larson, Norris, Spencer, and Harrison has decided to terminate operations and liquidate all business property. During this process, the partners expect to incur $8,000 in liquidation expenses. All partners are currently solvent. The b
> Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $5,000. At the date the p
> The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the followin
> A partnership has liquidated all assets but still reports the following account balances: The partners split profits and losses as follows: Cisneros, 40 percent; Beck, 20 percent; Sadak, 10 percent; Emerson, 20 percent; and Page 10 percent. Beck, loan...
> The following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, who share profits and losses in the ratio of 6:2:2, respectively: For how much money must the other assets be sold so that each partner receives some amount of ca
> The following condensed balance sheet is for the partnership of Hardwick, Saunders, and Ferris, who share profits and losses in the ratio of 4:3:3, respectively: The partners decide to liquidate the partnership. Forty percent of the other assets are sol
> When a subsidiary sells inventory to a parent, the intra-entity profit is removed from the subsidiary’s net income for consolidation and reduces the income allocation to the noncontrolling interest. Is the profit permanently eliminated from the noncontro
> Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O’Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2016, O’Donnell invests a building worth
> A partnership of attorneys in the St. Louis, Missouri, area has the following balance sheet accounts as of January 1, 2018: According to the articles of partnership, Athos is to receive an allocation of 50 percent of all partnership profits and losses w
> Gray, Stone, and Lawson open an accounting practice on January 1, 2016, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their years of experience. To establish the business, Gray, Sto
> Boswell and Johnson form a partnership on May 1, 2016. Boswell contributes cash of $50,000; Johnson conveys title to the following properties to the partnership: The partners agree to start their partnership with equal capital balances. No goodwill is t
> In the early part of 2018, the partners of Hugh, Jacobs, and Thomas sought assistance from a local accountant. They had begun a new business in 2017 but had never used an accountant’s services. Hugh and Jacobs began the partnership by contributing $150,
> The E.N.D. partnership has the following capital balances as of the end of the current year: Pineda.................................. $230,000 Adams.................................... 190,000 Fergie ..................................... 160,000 Gomez...
> Purkerson, Smith, and Traynor have operated a bookstore for a number of years as a partnership. At the beginning of 2018, capital balances were as follows: Purkerson................................ $60,000 Smith …………………………………. 40,000 Traynor ............
> A partnership has the following account balances: Cash $50,000; Other Assets $600,000; Liabilities $240,000; Nixon, Capital (50 percent of profits and losses) $200,000; Hoover, Capital (20 percent) $120,000; and Polk, Capital (30 percent) $90,000. Each o
> Lear is to become a partner in the WS partnership by paying $80,000 in cash to the business. At present, the capital balance for Hamlet is $70,000 and for MacBeth is $40,000. Hamlet and MacBeth share profits on a 7:3 basis. Lear is acquiring 40 percent o
> King Company owns a 90 percent interest in the outstanding voting shares of Pawn Company. No excess fair-value amortization resulted from the acquisition. Pawn reports a net income of $110,000 for the current year. Intra-entity sales occur at regular int
> The following account balances are for the Agee Company as of January 1, 2017, and December 31, 2017. All amounts are denominated in kroner (Kr). Additional Information ∙ Agee issued additional shares of common stock during the year o
> Board Company has a foreign subsidiary that began operations at the start of 2017 with assets of 132,000 kites (the local currency unit) and liabilities of 54,000 kites. During this initial year of operation, the subsidiary reported a profit of 26,000 ki
> Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ), the local currency: Sales ............................
> Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 20,000 dinars, accounts receivable of 80,000 dinars, and land that cost 200,000 dinars when acquired on April 1, 2016. On January 1, 2017, Z
> Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2016, the subsidiary had the following balance sheet (amounts are in thousands (000’s)): The subsidiary
> Refer to the information in problem 26. Prepare a statement of cash flows in pounds for Sullivan’s Island Company’s foreign subsidiary and then translate these amounts into U.S. dollars. From problem 26: Sullivan’s Island Company began operating a subsi
> Sullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 percent interest payable a
> The Isle of Palms Company (IOP), a U.S.-based entity, has a wholly owned subsidiary in Israel that has been determined as having the Israeli shekel (ILS) as its functional currency. On October 1, 2016, the Israeli subsidiary borrowed 500,000 Swiss francs
> On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2017, the bo
> The following accounts are denominated in rubles as of December 31, 2017. For reporting purposes, these accounts need to be stated in U.S. dollars. For each account, indicate the exchange rate that would be used to translate the ruble balance into U.S. d
> A worksheet is being developed to consolidate Allegan, Incorporated, and Stark Company. These two organizations have made considerable intra-entity transactions. How would the consolidation process be affected if these transfers were downstream? How woul
> On January 1, Narnevik Corporation formed a subsidiary in a foreign country. On April 1, the subsidiary purchased inventory on account at a cost of 250,000 local currency units (LCU). One-fifth of this inventory remained unsold on December 31, while 30 p
> Vino Veritas Company, a U.S.-based importer of wines and spirits, placed an order with a French supplier for 1,000 cases of wine at a price of 200 euros per case. The total purchase price is 200,000 euros. Relevant exchange rates for the euro are as foll
> Based on past experience, Leickner Company expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 marks on March 15, 2018. To hedge this forecasted transaction, the company acquires a three-month call option to purchase 1,000,00
> Spitz Company ordered merchandise from a foreign supplier on November 20 at a price of 100,000 forints when the spot rate was $0.50 per forint. Delivery and payment were scheduled for December 20. On November 20, Spitz acquired a call option on 100,000 f
> On June 1, Vandervelde Corporation (a U.S.-based manufacturing firm) received an order to sell goods to a foreign customer at a price of 100,000 leks. Vandervelde will ship the goods and receive payment in three months on September 1. On June 1, Vanderve
> On August 1, Ling-Harvey Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 ringgits. Ling-Harvey will receive and make payment for the merchandise in three months on October 31. On A
> On October 1, 2017, Sharp Company (based in Denver, Colorado) entered into a forward contract to sell 100,000 rubles in four months (on January 31, 2018) and receive $39,000 in U.S. dollars. Exchange rates for the ruble follow: Sharp’s
> Eximco Corporation (based in Champaign, Illinois) has a number of transactions with companies in the country of Mongagua, where the currency is the mong. On November 30, 2017, Eximco sold equipment at a price of 500,000 mongs to a Mongaguan customer that
> On November 1, 2017, Bernard Company (a U.S.-based company) sold merchandise to a foreign customer for 100,000 FCUs with payment to be received on April 30, 2018. At the date of sale, Bernard entered into a six-month forward contract to sell 100,000 FCUs
> On June 1, Cairns Corporation purchased goods from a foreign supplier at a price of 1,000,000 francs and will make payment in three months on September 1. On June 1, Cairns acquired an option to purchase 1,000,000 francs in three months at a strike price
> How do intra-entity profits present in any year affect the noncontrolling interest calculations?
> On June 1, Alexander Corporation sold goods to a foreign customer at a price of 1,000,000 pesos and will receive payment in three months on September 1. On June 1, Alexander acquired an option to sell 1,000,000 pesos in three months at a strike price of
> Use the same facts as in Problem 31 except that Brandlin Company purchases materials from a foreign supplier on December 1, 2017, with payment of 16,000 korunas to be made on March 1, 2018. The materials are consumed immediately and recognized as cost of
> Brandlin Company of Anaheim, California, sells parts to a foreign customer on December 1, 2017, with payment of 16,000 korunas to be received on March 1, 2018. Brandlin enters into a forward contract on December 1, 2017, to sell 16,000 korunas on March 1
> On September 30, 2017, Ericson Company negotiated a two-year, 1,000,000 dudek loan from a foreign bank at an interest rate of 2 percent per year. It makes interest payments annually on September 30 and will repay the principal on September 30, 2019. Eric
> Benjamin, Inc., operates an export/import business. The company has considerable dealings with companies in the country of Camerrand. The denomination of all transactions with these companies is alaries (AL), the Camerrand currency. During 2017, Benjamin
> On April 1, 2017, Mendoza Company borrowed 500,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2017, and will make a second interest payment on March 31, 2018, wh
> Voltac Corporation (a U.S. company located in Charlotte, North Carolina) has the following import/ export transactions denominated in Mexican pesos in 2017: March 1…………………………….Bought inventory costing 100,000 pesos on credit. May 1………………...Sold 60 percen
> On December 20, 2017, Butanta Company (a U.S. company headquartered in Miami, Florida) sold parts to a foreign customer at a price of 50,000 ostras. Payment is received on January 10, 2018. Currency exchange rates for 1 ostra are as follows: December 20,
> Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2018: Additional Information for 2018 ∙ Intra-entity inventory transfers during the year amounted to $90,000. All in
> On June 30, 2018, Plaster, Inc., paid $916,000 for 80 percent of Stucco Company’s outstanding stock. Plaster assessed the acquisition-date fair value of the 20 percent noncontrolling interest at $229,000. At acquisition date, Stucco rep
> James, Inc., sells inventory to Matthews Company, a related party, at James’s standard gross profit rate. At the current fiscal year-end, Matthews still holds some portion of this inventory. If consolidated financial statements are prepared, why are work
> Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2018 Preferred stock—$100 par, nonvoting and nonparticipating, 8% cumulative dividend ………………………...... $2,000,000 Common stock—$20 par value .......................... 4,000,00
> Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2016, Zack Corporation (a wholly ow
> Bolero Company holds 80 percent of the common stock of Rivera, Inc., and 40 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2017 and 2018: Additional Information for 2018 â
> On January 1, 2017, Mona, Inc., acquired 80 percent of Lisa Company’s common stock as well as 60 percent of its preferred shares. Mona paid $65,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share p
> Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2017: On January 1, 2017, Highlight acquired on the open market bonds for $108,000 originally issued by Ki
> Pavin acquires all of Stabler’s outstanding shares on January 1, 2015, for $460,000 in cash. Of this amount, $30,000 was attributed to equipment with a 10-year remaining life and $40,000 was assigned to trademarks expensed over a 20-yea
> On January 1, 2016, Aronsen Company acquired 90 percent of Siedel Company’s outstanding shares. Siedel had a net book value on that date of $480,000: common stock ($10 par value) of $200,000 and retained earnings of $280,000. Aronsen paid $584,100 for t
> Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. C
> On January 1, 2018, Primair Corporation loaned Vista Company $300,000 and agreed to guarantee all of Vista’s long-term debt in exchange for (1) decision-making authority over all of Vista’s activities and (2) an annual
> The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company: Additional Information ∙ Amortization expense resulting from Foreman’s excess acq
> How are intra-entity inventory gross profits created, and what consolidation entries does the presence of these gross profits necessitate?
> Garfun, Inc., owns all of the stock of Simon, Inc. For 2018, Garfun reports income (exclusive of any investment income) of $480,000. Garfun has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a
> Primus, Inc., owns all outstanding stock of Sonston, Inc. For the current year, Primus reports net income (exclusive of any investment income) of $600,000. Primus has 100,000 shares of common stock outstanding. Sonston reports net income of $200,000 for
> On December 31, 2017, PanTech Company invests $20,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as the primary beneficiary of SoftPlus. Previously, PanTech had no equity interest
