Question: ProForm acquired 70 percent of ClipRite on

> 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

> On January 1, 2017, Panther, Inc., issued securities with a total fair value of $577,000 for 100 percent of Stark Corporation’s outstanding ownership shares. Stark has long supplied inventory to Panther. The companies expect to achieve

> The following describes a set of arrangements between TecPC Company and a variable interest entity (VIE) as of December 31, 2017. TecPC agrees to design and construct a new research and development (R&D) facility. The VIE’s sole purpose is to finance and

> On January 1, 2016, Monica Company acquired 70 percent of Young Company’s outstanding common stock for $665,000. The fair value of the noncontrolling interest at the acquisition date was $285,000. Young reported stockholdersâ&#128

> Hillsborough Country Outfitters, Inc., entered into an agreement for HCO Media LLC to exclusively conduct Hillsborough’s e-commerce initiatives through a jointly owned (50 percent each) Internet site known as HCO.com. HCO Media receives 2 percent of all

> Opus, Incorporated, owns 90 percent of Bloom Company. On December 31, 2017, Opus acquires half of Bloom’s $500,000 outstanding bonds. These bonds had been sold on the open market on January 1, 2015, at a 12 percent effective rate. The bonds pay a cash in

> Following are financial statements for Moore Company and Kirby Company for 2018: ∙ Moore purchased 90 percent of Kirby on January 1, 2017, for $657,000 in cash. On that date, the 10 percent noncontrolling interest was assessed to have

> 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 ClipRiteâ€&#153

> 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&#128

> 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

> 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 Sale

> 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