Rod Corporation purchased 100 percent ownership of Stafford Corporation on January 1, 20X4, for $65,000, which was $10,000 above the underlying book value. Half the additional amount was attributable to an increase in the value of land held by Stafford, and half was due to an increase in the value of equipment. The equipment had a remaining economic life of five years on January 1, 20X4. During 20X4, Stafford reported net income of $12,000 and paid dividends of $4,500. Required Give the journal entries that Rod Corporation recorded during 20X4 related to its investment in Stafford Corporation, assuming Rod uses the equity method in accounting for its investment.
> Identify each of the following as land (L) or land improvements (LI): ______ 1. Survey fees ______ 2. Fencing ______ 3. Lighting ______ 4. Clearing land ______ 5. Parking lot
> Inland Industrial Supply’s income statement data for the year ended October 31, 2016, follow. Assume the ending inventory was accidentally overstated by $2,800. What are the correct amounts for cost of goods sold and gross profit?
> According to the Real World Accounting Video, a working capital loan is used to finance _______________. a. buildings and equipment b. intangible assets c. current assets d. tangible assets
> Top Flight Airways purchased a baggage-handling truck for $64,000. Suppose Top Flight Airways sold the truck on December 31, 2016, for $42,000 cash, after using the truck for three full years and accumulating depreciation of $27,000. Make the journal ent
> According to the Real World Accounting Video, the cost of a fixed asset minus its estimated residual value is called an asset’s ____________________. a. cost b. depreciable cost c. liquidation value d. depreciation expense
> Claire Billiot, the office manager of a local office supply company, is designing its internal control system. Billiot proposes the following procedures for credit checks on new customers, sales on account, cash collections, and write-offs of uncollectib
> According to the Real World Accounting Video, cash sales account for approximately _______ of all sales at Alphabet City Beer. a. half, or 50 percent b. a quarter, or 25 percent c. none, or 0 percent d. all, or 100 percent
> Place the corresponding letter of the defnition next to the term. _______ 1. Unqualifed opinion _______ 2. Audit _______ 3. IFRS _______ 4. GAAP _______ 5. External audit _______ 6. CPA _______ 7. FASB _______ 8. Qualifed opinion _______ 9. IASB _______
> According to the Real World Accounting Video, CPAs are very special people in the accounting world. The initials CPA stand for _______. a. Chartered Public Auditor b. Certified Public Accountant c. Certified Pubic Auditor d. Commerce Practicing Accountan
> Match the accounting terms on the right with the corresponding definitions on the left a. Conservatism b. Full-disclosure c. LIFO d. Average cost e. FIFO f. Consistency g. Materiality h. Specific-Identification ______ 1. Assigns the most recent invento
> In the Real World Accounting Video, Bill Mencer talks about being a controller. A controller is _______________. a. the individual who controls the production of a product b. the individual who controls the hiring and firing of all personnel c. the indi
> How should a capital expenditure for a long-term asset be recorded? a. Debit a liability b. Debit an expense c. Debit capital d. Debit an asset
> Classify each of the following expenditures for machinery as a capital expenditure (CAP) or a revenue expenditure (REV): a. Purchase price b. Ordinary recurring repairs to keep the machinery in good working order c. Lubrication of the machinery before i
> According to the Real World Accounting Video, a quantitative expression of a plan is called a ____________________. a. directive b. scheme c. budget d. dream
> Umbrella.com had the following balances on December 31, 2016, before the year-end adjustments: The aging of receivables yields these data: Journalize Umbrella’s entry to adjust the allowance account to its correct balance on December 31, 2016.
> In the Real World Accounting Video, Zachery Mack talks about the challenges of cash management. He was able to survive a catastrophe due to Hurricane Sandy. He was able to pay his bills and keep his business operating. He attributed his survival to which
> Each of the following situations has an internal control weakness. a. Crystal Lund has been your trusted employee for 25 years. She performs all cash handling and accounting duties. Crystal just purchased a new Lexus and a new home in an expensive subur
> According to the Real World Accounting Video, Generally Accepted Accounting Principles (GAAP) provide all of the following except _______. a. standardization b. investor confidence c. comparability d. confusion
> At the end of the current year, Cottage Cafe’s inventory account balance was $13,550. A physical count of the inventory revealed that inventory on hand totaled $13,480. What amount should Cottage Cafe report on its balance sheet for inventory?
> A company recognizes a lease as a capital lease when a. the lease transfers title of the leased asset to the lessee at the end of the lease term. b. the present value of the lease payments is less than 90 percent of the market value of the leased asset.
> What are some ways that companies might use improper recording of liabilities to manipulate financial statements?
> On January 1, Harry’s Hot Dogs purchased a hot dog stand for $120,000 with an estimated useful life of 10 years and no residual value. Suppose that after using the hot dog stand for four years and straight-line depreciation, the company determines that t
> What is a lump-sum purchase of assets? How does a company determine how much to allocate to each asset purchased in a lump-sum purchase?
> Which intangible asset is recorded only as part of the acquisition of another company? a. Franchise b. Patent c. Goodwill d. Copyright
> Complete the following analogies. What are some similarities and differences between the two concepts involved in each? a. Depreciation is to fixed assets as ____________________ is to intangible assets. b. Depreciation is to fixed assets as ___________
> Bright Smile Dental Group started 2016 with Accounts Receivable of $134,000 and a credit balance in Allowance for Uncollectible Accounts balance of $9,000. The following information relates to Bright Smile Dental’s 2016 operations: a. Credit sales, $322
> On December 31, you have a $15,000 note receivable from a customer. Interest of 5 percent has also accrued for eight months on the note. What will your financial statements report for this situation? a. The balance sheet will report the note receivable o
> Recently, the United States was in a recession. What would be the expected effect of a recession on accounts receivable turnover ratios?
> Identify the missing internal control in the following situations. Select from these activities: • Proper authorization • Separation of duties • Adequate documents and records a. While reviewing the records of Discount Drug, you find that the same e
> Which of the following is false regarding the Sarbanes-Oxley act? a. It requires that external auditors report to the company president. b. It established the PCAOB. c. It applies to publicly traded companies. d. It requires that the company CEO certify
> What is the difference between a rules-based system and a principles-based system of accounting rules? Under what circumstances would each be preferable? How does the distinction apply to the comparison of US GAAP to IFRS?
> Assume Bob’s Boards has the following LIFO perpetual inventory record for skateboards for the month of March: At March 31, the accountant for Bob’s Boards determines that the current replacement cost of the ending inventory is $10,640. Make any adjus
> Martin’s bonds pay interest semi-annually on July 1 and January 1. If its fiscal year ends on September 30, which statement is true of Martin’s year-end adjusting journal entry for bond interest? a. Martin must record three months’ accrued interest expe
> The T-account for cash and the bank statement of Sinclair Food Services for the month of October 2016 follows: Prepare Sinclair Food Services’ bank reconciliation at October 31.
> On April 30, 2016, Dawson Co., borrowed $6,000 on a one-year, 9 percent note payable. What amounts would Dawson Co., report for the note payable and the related interest payable on its balance sheet at July 31, 2016, and on its income statement for the y
> Nugget Company’s balance sheet on December 31, 20X6, was as follows: On December 31, 20X6, Gold Company acquired all of Nugget’s outstanding common stock for $1,500,000 cash. On that date, the fair (market) value of
> Beni Corporation acquired 100 percent of Carr Corporation’s outstanding capital stock for $430,000 cash. Immediately before the purchase, the balance sheets of both corporations reported the following: At the date of purchase, the fai
> Wright Corporation includes several subsidiaries in its consolidated financial statements. In its December 31, 20X2, trial balance, Wright had the following intercompany balances before consolidation entries: In its December 31, 20X2, consolidated bala
> Select the most appropriate answer for each of the following questions. 1. Goodwill is a. Seldom reported because it is too difficult to measure. b. Reported when more than book value is paid in purchasing another company. c. Reported when the fair value
> Most subsidiaries are wholly owned, although only majority ownership is usually all that is required for consolidation. The parent’s ownership may be direct or indirect. Frequently, a parent’s direct subsidiaries have subsidiaries of their own, thus prov
> Top Corporation acquired 100 percent of Sun Corporation’s common stock on December 31, 20X2. Balance sheet data for the two companies immediately following the acquisition follow: At the date of the business combination, the book valu
> Astor Corporation’s balance sheet at January 1, 20X7, reflected the following balances: Phel Corporation, which had just entered into an active acquisition program, acquired 100 percent of Astor’s common stock on Jan
> Gold Enterprises acquired 100 percent of Premium Builders’ stock on December 31, 20X4. Balance sheet data for Gold and Premium on January 1, 20X5, are as follows: At the date of the business combination, Premium’s ca
> Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $189,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: At the date
> Road Corporation acquired all of Conger Corporation’s voting shares on January 1, 20X2, for $470,000. At that time Conger reported common stock outstanding of $80,000 and retained earnings of $130,000. The book values of Conger’s assets and liabilities a
> Reed Corporation acquired 100 percent of Thorne Corporation’s voting common stock on December 31, 20X4, for $395,000. At the date of combination, Thorne reported the following: At December 31, 20X4, the book values of Thorneâ
> Crumple Car Rentals is planning to expand into the western part of the United States and needs to acquire approximately 400 additional automobiles for rental purposes. Because Crumple’s cash reserves were substantially depleted in replacing the bumpers o
> On June 10, 20X8, Tower Corporation acquired 100 percent of Brown Company’s common stock. Summarized balance sheet data for the two companies immediately after the stock acquisition are as follows: Required a. Give the consolidation
> Turner Corporation reported the following balances at January 1, 20X9: On January 1, 20X9, Gross Corporation purchased 100 percent of Turner’s stock. All tangible assets had a remaining economic life of 10 years at January 1, 20X9. Bo
> During review of the adjusting entries to be recorded on December 31, 20X8, Grand Corporation discovered that it had inappropriately been using the cost method in accounting for its investment in Case Products Corporation. Grand purchased 100 percent own
> Branch Corporation purchased 100 percent of Hardy Company’s common stock on January 1, 20X5, and paid $28,000 above book value. The full amount of the additional payment was attributed to amortizable assets with a life of eight years remaining at January
> Brindle Company purchased 100 percent of Monroe Company’s voting common stock for $648,000 on January 1, 20X4. At that date, Monroe reported assets of $690,000 and liabilities of $230,000. The book values and fair values of Monroe’s assets were equal exc
> Capital Corporation purchased 100 percent of Cook Company’s stock on January 1, 20X4, for $340,000. On that date, Cook reported net assets with a historical cost of $300,000 and a fair value of $340,000. The difference was due to the increased value of b
> Best Corporation acquired 100 percent of the voting common stock of Flair Company on January 1, 20X7, by issuing bonds with a par value and fair value of $670,000 and making a cash payment of $24,000. At the date of acquisition, Flair reported assets of
> Power Corporation purchased 100 percent of the common stock of Snow Corporation on January 1, 20X2, by issuing 45,000 shares of its $6 par value common stock. The market price of Power’s shares at the date of issue was $24. Snow reported net assets with
> Roller Corporation purchased 100 percent ownership of Steam Company on January 1, 20X5, for $270,000. On that date, the book value of Steam’s reported net assets was $200,000. The excess over book value paid is attributable to depreciab
> Although Sloan Company had good earnings reports in 20X5 and 20X6, it had a negative retained earnings balance on December 31, 20X6. Jacobs Corporation purchased 100 percent of Sloan’s common stock on January 1, 20X7. a. Explain how Sloan’s negative reta
> What portion of the book value of the net assets held by a subsidiary at acquisition is included in the consolidated balance sheet?
> Turner Manufacturing Corporation owns 100 percent of the common shares of Straight Lace Company. If Straight Lace reports net income of $100,000 for 20X5, what factors may cause Turner to report less than $100,000 of income from the investee?
> What is a differential? How is a differential treated by an investor in computing income from an investee under (a) cost-method and (b) equity-method reporting?
> When is the carrying value of the investment account reduced under equity-method reporting?
> What happens to the differential when push-down accounting is used following a business combination?
> What does the term push-down accounting mean?
> What determines whether the balance assigned to the differential remains constant or decreases each period?
> Explain why consolidated financial statements become increasingly important when the differential is very large.
> What happens to the differential in the consolidation worksheet prepared as of the date of combination? How is it reestablished so that the proper balances can be reported the following year?
> What portion of the fair value of a subsidiary’s net assets normally is included in the consolidated balance sheet following a business combination?
> Ball Corporation’s owners recently offered to sell 100 percent of their ownership to Timber Corporation for $450,000. Timber’s business manager was told that Ball’s book value was $300,000, and she estimates the fair value of its net assets at approximat
> What conditions must exist for a negative differential to occur?
> What is the term differential used to indicate?
> Under what conditions is push-down accounting considered appropriate?
> When Ajax was preparing its consolidation worksheet, the differential was properly assigned to buildings and equipment. What additional entry generally must be made in the worksheet?
> Give a definition of consolidated net income.
> Select the correct answer for each of the following questions. 1. On January 1, 20X1, Prim Inc. acquired all of Scrap Inc.’s outstanding common shares for cash equal to the stock’s book value. The carrying amounts of Scrap’s assets and liabilities approx
> On April 1, 20X8, Plum Inc. paid $1,700,000 for all of Long Corp.’s issued and outstanding common stock. On that date, the costs and fair values of Long’s recorded assets and liabilities were as follows: In Plum&acir
> Consolidated financial statements are being prepared for a parent and its four wholly owned subsidiaries that have intercompany loans of $100,000 and intercompany profits of $300,000. How much of these intercompany loans and profits should be eliminated?
> The first examination of Rudd Corporation’s financial statements was made for the year ended December 31, 20X8. The auditor found that Rudd had acquired another company on January 1, 20X8, and had recorded goodwill of $100,000 in connec
> Nugget Company’s balance sheet on December 31, 20X6, was as follows: On December 31, 20X6, Gold Company acquired all of Nugget’s outstanding common stock for $1,500,000 cash. On that date, the fair (market) value of
> The reporting treatment for investments in common stock depends on the level of ownership and the ability to influence the investee’s policies. The reporting treatment may even change over time as ownership levels or other factors change. When investees
> The Global Tea and Organic Juice companies have merged. The following information has been collected for the “Consolidation Project.” 1. Compute the expected time for each activity. 2. Compute the variance for each
> Given the project information below, what is the probability of completing the National Holiday Toy project in 93 time units? Act. ID Doscription Prodocossor Optm. (a) Most likoly (m) Pess. (b) Act timo t, Varlance ((b– ay6 Critical Design package
> Why are lags used in developing project networks?
> Why is slack important to the project manager?
> The project information for the custom order project of the Air Control Company is presented here. Draw a project network for this project. Compute the early and late activity times and the slack times. Identify the critical path. ID Descriptlon Pre
> From the following information, develop an AON project network. Complete the forward and backward pass, compute activity slack, and identify the critical path. How many days will the project take? ID Description Predecessor Time Survey site Excavate
> Draw a project network from the following information. What activity (ies) is a burst activity? What activity (ies) is a merge activity? ID Description Prodecessor Contract signed Survey designed Target market identified Data collection A None B B D
> Draw a project network from the following information. What activity (ies) is a burst activity? What activity (ies) is a merge activity? ID Description Prodecessor A Identify topic Research topic Draft paper Edit paper Create graphics None B A D E
> Given the network below, compute the early, late, and slack time for each activity. Clearly identify the critical path. Lag 1 E Build Cabinets Install Cabinets 7 A Lag 5 Design 3 Tear Down G Install Appliances Lag 2 Inspect 2 Lag 5 Order Ap
> Given the following information, compute the early, late, and slack times for the project network. Which activities on the critical path have only the start or finish of the activity on the critical path? Lahes Lag Pave Post Signs Signng
> You have prepared the following schedule for a project in which the key resource is a backhoe(s). This schedule is contingent on having 3 backhoes. You receive a call from your partner, Brooker, who desperately needs one of your backhoes. You tell Brooke
> You are creating a database for the Oklahoma City Thunder NBA Basketball team. Given the project network that follows, complete the forward and backward pass, compute activity slack, and identify the critical path. Use this information to create a Gant
> A large Southeast city is requesting federal funding for a park-and-ride project. One of the requirements in the request application is a network plan for the design phase of the project. Sophie Kim, the chief engineer, wants you to develop a project net
> K. Nelson, project manager of Print Software, Inc., wants you to prepare a project network; compute the early, late, and slack activity times; determine the planned project duration; and identify the critical path. His assistant has collected the followi
> You are creating a customer database for the Hillsboro Hops minor league baseball team. Draw a project network given the information in the table that follows. Complete the forward and backward pass, compute activity slack, and identify the critical path
> You have signed a contract to build a garage for the Simpsons. You will receive a $500 bonus for completing the project within 17 working days. The contract also contains a penalty clause in which you will lose $100 for each day the project takes longer
> How does the WBS differ from the project network?
> What is a hammock activity, and when is it used?
> What is the difference between free slack and total slack?
> Why bother creating a WBS? Why not go straight to a project network and forget the WBS?
> How are WBS and project networks linked?
