Sloane, Inc., issues 25,000 shares of its own common stock in exchange for all of the outstanding shares of Benjamin Company. Benjamin will remain a separately incorporated operation. How does Sloane record the issuance of these shares?
> Many companies make annual reports available on their corporate website. Annual reports also can be accessed through the SEC’s EDGAR system at www.sec.gov (under Filing Type, search for 10-K). Access the most recent annual report for a company with which
> Access a recent copy of The Coca-Cola Company’s financial statements (www.coca-colacompany .com). Identify and discuss the following aspects of consolidated tax expense disclosed in the financial statements: 1. Loss carry-forwards. 2. Components of defer
> How does the presence of an indirect ownership (such as a father-son-grandson relationship) affect the mechanical aspects of the consolidation process?
> Able Company owns 70 percent of the outstanding voting stock of Baker Company, which, in turn, holds 80 percent of Carter Company. Carter possesses 60 percent of Dexter Company’s capital stock. How much income actually accrues to the consolidated entity
> Describe the concept of a synergy. What are some examples of possible synergies in business combinations?
> What advantages does a company achieve when it possesses significant influence over another company through voting stock ownership?
> What disclosure is necessary to describe the liquidity position of a not-for-profit entity? Why is this disclosure viewed as significant to readers of the financial statements?
> What are board-designated funds, and how are they reported?
> In reporting the functional expenses of a not-for-profit entity, what are the two general types of expenses? How can functional expenses be reported?
> Haynes, Inc., obtained 100 percent of Turner Companyâ€™s common stock on January 1, 2020, by issuing 9,000 shares of $10 par value common stock. Haynesâ€™s shares had a $15 per share fair value. On that date, Turner report
> What are net assets with donor restrictions?
> What are net assets without donor restrictions?
> A private not-for-profit health care entity charges patients $4 million that will be covered by various government programs. These programs are entitled to $1.9 million in explicit price concessions. The health care entity believes it has a 60 percent ch
> In the reporting of a private not-for-profit health care entity, officials are allowed to apply a portfolio approach. What is meant by a portfolio approach?
> A private not-for-profit entity applies for and receives status as a 501(c)(3) organization. What is the importance of this tax-exempt status?
> Helping Hand NFP is a private not-for-profit entity that has equipment with a net book value of $1.1 million but a fair value of $1.4 million. Fancy Fingers NFP is also a private not-for-profit entity that has equipment with a net book value of $1.0 mill
> Sunshine NFP, a private not-for-profit entity, gains control over Dancing Ducks NFP, another not- for-profit entity. The acquisition price is $2.5 million although the identifiable assets and liabilities of Dancing Ducks only have a total net fair value
> A donor conveys a gift to a charity that is to be conveyed to a separate beneficiary. What is the normal method for each party to report this transfer?
> A not-for-profit museum receives a painting by Monet valued at $750,000. The museum chose not to report the painting on its financial statements. What are the rules for such reporting?
> A not-for-profit entity reports contributed services valued at $38,000. How was the decision made to report these services?
> Herbert, Inc., acquired all of Rambis Company’s outstanding stock on January 1, 2020, for $574,000 in cash. Annual excess amortization of $12,000 results from this transaction. On the date of the takeover, Herbert reported retained earnings of $400,000,
> What is an in-kind donation? How are in-kind donations reported?
> A not-for-profit entity receives a pledge for $50,000, money that must be used for a stipulated purpose. How is the pledge reported if it is judged to be unconditional? How is the pledge reported if it is judged to be conditional?
> The accountant for a not-for-profit entity is trying to determine whether a gift is conditional. How is that decision made?
> A not-for-profit entity receives $20,000 as a donation. They money must be spent for a stipulated purpose. How does the reporting differ based on whether the gift is unconditional or conditional?
> How does the reporting of a statement of cash flows by a not-for-profit entity differ from the reporting by a for-profit business?
> A donor gives $10,000 to a not-for-profit entity to be used to pay for a new piece of equipment with a 10-year life. Subsequently, the money is properly spent. How is the expenditure reported?
> A donor gives $10,000 to a not-for-profit entity to be used to pay the salary of a new administrator. Subsequently, the money is properly spent. How is the expenditure reported?
> Wilson Helps is a not-for-profit entity that has exchange transactions but also receives donor contributions. How can the entity’s accountant differentiate the exchange transactions from the contributions?
> A private not-for-profit hospital provides services for patients without any health insurance. The standard charge for individuals with some ability to pay is $700,000. The standard charge for individuals with no ability to pay is $300,000. How will the
> A city believes its new landfill will fill to capacity gradually over a 10-year period. At the end of the first year of operations, the landfill is only 7 percent filled. How much liability for closure and postclosure costs should be recognized on govern
> SK Corporation acquired Neptune, Inc., on January 1, 2020, by issuing 125,000 shares of common stock with a $5 per share par value and a $30 market value. This transaction resulted in recognizing $95,000 of goodwill. SK also agreed to compensate Neptune’
> Pittston County has an empty school building with a net book value of $700,000 and a remaining life of 10 years with no expected residual value. The building is leased to the City of Lincoln at the start of the current year for 10 years. Annual payments
> At the start of Year 1, the City Peacock leases 30 computers for use by various officials in school administration and public safety at a total cost of $90,000 per year. The first lease payment is made immediately. The contracts are for five years, the e
> A teacher employed by the City of Lights qualifies for a defined benefit pension plan. The city sets up a pension trust fund to monitor the resources held for these future payments. How is the amount of net pension liability to be reported in the governm
> What effect does application of the modified approach have on reporting within the government- wide financial statements?
> How are safe payments to partners calculated when cash becomes available for distribution?
> What authoritative pronouncements make up International Financial Reporting Standards (IFRS)?
> Was the IASB–FASB convergence process successful?
> How are changes in the fair value of an option accounted for in a cash flow hedge? In a fair value hedge?
> How does the accounting for a hedge of a foreign currency firm commitment affect assets and liabilities reported on the balance sheet differently from the accounting for a hedge of a forecasted foreign currency transaction?
> Under what conditions can a foreign currency derivative be considered “highly effective” as a hedge without conducting a quantitative assessment?
> On its December 31, 2021, consolidated balance sheet, what amount should Phoenix report for Sedona’s customer list? a. $10,000 b. $20,000 c. $25,000 d. $50,000
> When an indirect ownership is present, why is a specific ordering necessary for determining the incomes of the component corporations?
> In a recent acquisition, the consolidated value of a subsidiary’s assets exceeded the basis appropriate for tax purposes. How does this difference affect the consolidated balance sheet?
> If a parent and its subsidiary file separate income tax returns, why will the parent frequently have to recognize deferred income taxes? Why might the subsidiary have to recognize deferred income taxes?
> What is a father-son-grandson relationship?
> A subsidiary that has a net operating loss carry-forward is acquired. The related deferred income tax asset is $230,000. Because the parent believes that a portion of this carry-forward likely will never be used, it also recognizes a valuation allowance
> Jones acquires Wilson, in part because the new subsidiary has an unused net operating loss carry- forward for tax purposes. How does this carry-forward affect the consolidated figures at the acquisition date?
> Reimers Company acquires Rollins Corporation on January 1, 2020. As part of the agreement, the parent states that an additional $100,000 cash payment to the former owners of Rollins will be made in 2021, if Rollins achieves certain income thresholds duri
> Why is the allocation of the income tax expense figure between the members of a business combination important? By what methods can this allocation be made?
> What are the advantages to a business combination filing a consolidated tax return? Considering these advantages, why do some members of a business combination file separate tax returns?
> What is Phoenix’s consolidated retained earnings balance at December 31, 2021? a. $250,000 b. $290,000 c. $330,000 d. $360,000
> For income tax purposes, how is affiliated group defined?
> In accounting for mutual ownerships, what is the treasury stock approach?
> What is the difference between a connecting affiliation and a mutual ownership?
> What is goodwill? a. An intangible asset representing the excess of consideration transferred over the collective fair values of the net identifiable assets acquired in a business combination b. An expense that an acquiring firm recognizes for the excess
> On January 1, 2021, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zeeâ€™s acquisition-date fair values, Jay concluded that the carrying value of Zeeâ€™s long- term debt (eight-year
> The equity method tends to be most appropriate if a. An investment represents 50 percent or more of the voting stock of an investee. b. An investment enables the investor to influence the operating and financial decisions of the investee. c. Majority own
> In a father-son-grandson business combination, which of the following is true? a. The father company always must have its total accrual-based income computed first. b. The computation of a company’s accrual-based net income has no effect on the accrual-b
> Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spiderâ€™
> 4. On January 1, 2021, Marshall Company acquired 100 percent of the outstanding common stock of Tucker Company. To acquire these shares, Marshall issued $200,000 in long-term liabilities and 20,000 shares of common stock having a par value of $1 per shar
> On January 1, 2021, James Corporation exchanged $3,050,000 cash for 100 percent of the out- standing voting stock of Johnson Corporation. James plans to maintain Johnson as a wholly owned subsidiary with separate legal status and accounting information s
> What is consolidated net income for Phoenix and Sedona for 2021? a. $148,000 b. $203,000 c. $228,000 d. $238,000
> On January 1, 2021, Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information sys
> On June 30, 2020, Wisconsin, Inc., issued $300,000 in debt and 15,000 new shares of its $10 par value stock to Badger Company owners in exchange for all of the outstanding shares of that company. Wisconsin shares had a fair value of $40 per share. Prior
> In the December 31, 2020, consolidated balance sheet of Patrick and its subsidiary, what amount of total stockholders’ equity should be reported? a. $1,100,000 b. $1,125,000 c. $1,150,000 d. $1,355,000
> On January 1, 2020, Stream Company acquired 30 percent of the outstanding voting shares of Q-Video, Inc., for $770,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of
> On January 1, 2020, Fisher Corporation purchased 40 percent (80,000 shares) of the common stock of Bowden, Inc., for $982,000 in cash and began to use the equity method for the investment. The price paid represented a $60,000 payment in excess of the boo
> On July 1, 2019, Killearn Company acquired 88,000 of the outstanding shares of Shaun Company for $13 per share. This acquisition gave Killearn a 25 percent ownership of Shaun and allowed Killearn to significantly influence the investee’s decisions. As of
> On January 1, 2021, Pine Company owns 40 percent (40,000 shares) of Seacrest, Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been properly applied, and the carrying amount of the investment a
> Harper, Inc., acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2020, for $210,000 in cash. The book value of Kinman’s net assets on that date was $400,000, although one of the company’s buildings, with a $60,000 carryin
> Belden, Inc., acquires 30 percent of the outstanding voting shares of Sheffield, Inc., on January 1, 2020, for $312,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $800,000 at January 1, 2020. S
> On December 31, 2019, Akron, Inc., purchased 5 percent of Zip Companyâ€™s common shares on the open market in exchange for $16,000. On December 31, 2020, Akron, Inc., acquires an additional 25 percent of Zip Companyâ€™s ou
> On June 30, 2021, Streeter Company reported the following account balances: On June 30, 2021, Princeton Company paid $310,800 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisit
> Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $335,000. Amo
> In the December 31, 2020, consolidated balance sheet of Patrick and its subsidiary, what amount of total assets should be reported? a. $1,375,000 b. $1,395,000 c. $1,520,000 d. $1,980,000
> Parrot Corporation holds a 42 percent ownership of Sunrise, Inc., and applies the equity method to account for its investment. Parrot assigned the entire original excess purchase price over book value to goodwill. During 2020, the two companies made intr
> Echo, Inc., purchased 10 percent of ProForm Corporation on January 1, 2020, for $345,000 and accounted for the investment using the fair-value method. Echo acquires an additional 15 percent of ProForm on January 1, 2021, for $580,000. The equity method o
> On January 1, 2019, Halstead, Inc., purchased 75,000 shares of Sedgwick Company common stock for $1,480,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired wa
> BuyCo, Inc., holds 25 percent of the outstanding shares of Marqueen Company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $10,000 per year. For 2020, M
> Camille, Inc., sold $120,000 in inventory to Eckerle Company during 2020 for $200,000. Eckerle resold $85,000 of this merchandise in 2020 with the remainder to be disposed of during 2021. Assuming that Camille owns 30 percent of Eckerle and applies the e
> Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2020, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2021, Milani purchased an additional 30 percent of Seida for $600,000 which
> On January 1, 2021, Alamar Corporation acquired a 40 percent interest in Burks, Inc., for $210,000. On that date, Burks’s balance sheet disclosed net assets with both a fair and book value of $360,000. During 2021, Burks reported net income of $80,000 an
> On January 1, 2020, Alison, Inc., paid $60,000 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $200,000 and liabilities of $75,000. A patent held by Holister having a $5,000 book value was a
> Allerton Company acquires all of Deluxe Companyâ€™s assets and liabilities for cash on January 1, 2021, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe
> Go to the following story about the bankruptcy filing of Sears Holdings Corp., https://www.cnbc .com/2018/10/15/sears-files-for-bankruptcy.html. Search for other stories about the bankruptcy of Sears Holdings. Next, go to the Securities and Exchange Comm
> On January 1, 2020, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the invest
> On January 1, 2021, Fisher Corporation paid $2,290,000 for 35 percent of the outstanding voting stock of Steel, Inc., and appropriately applied the equity method for its investment. Any excess of cost over Steel’s book value was attributed to goodwill. D
> On January 3, 2021, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole Company for $1,160,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired
> Alex, Inc., buys 40 percent of Steinbart Company on January 1, 2020, for $530,000. The equity method of accounting is to be used. Steinbartâ€™s net assets on that date were $1.2 million. Any excess of cost over book value is attributable
> Jubilee, Inc., owns 35 percent of JPW Company and applies the equity method. During the current year, Jubilee buys inventory costing $60,000 and then sells it to JPW for $75,000. At the end of the year, JPW still holds only $30,000 of merchandise. What a
> Perez, Inc., applies the equity method for its 25 percent investment in Senior, Inc. During 2021, Perez sold goods with a 40 percent gross profit to Senior, which sold all of these goods in 2021. How should Perez report the effect of the intra-entity sal
> Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and goodwill of $88,000. At the acquisit
> Consolidated financial statements are typically prepared when one company has a. Accounted for its investment in another company by the equity method. b. Dividend income from another company. c. Significant influence over the operating and financial poli
> In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $700,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total asset
> On January 1, Belleville Company paid $2,295,000 to acquire 90,000 shares of O’Fallon’s voting common stock, which represents a 30 percent investment. No allocations to goodwill or other specific accounts were made. Significant influence over O’Fallon is
> What is pushdown accounting? a. A requirement that a subsidiary must use the same accounting principles as a parent company. b. Inventory transfers made from a parent company to a subsidiary. c. A subsidiary’s recording of the fair-value allocations as w
> Paar Corporation bought 100 percent of Kimmel, Inc., on January 1, 2018. On that date, Paar’s equipment (10-year remaining life) has a book value of $420,000 but a fair value of $520,000. Kimmel has equipment (10-year remaining life) with a book value of
> James Albemarle created a trust fund at the beginning of 2019. The income from this fund will go to his son Edward. When Edward reaches the age of 25, the principal of the fund will be conveyed to United Charities of Cleveland. Mr. Albemarle specified th