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fundamentals of advanced accounting

Questions and Answers of Fundamentals Of Advanced Accounting

Gains from remeasuring a foreign subsidiary’s financial statements from the local currency, which is not the functional currency, into the parent’s currency should be reported as a(n)a. Deferred
The following accounts are denominated in pesos as of December 31, 2011. For reporting purposes, these amounts need to be stated in U.S. dollars. For each balance, indicate the exchange rate that
On December 18, 2011, Stephanie Corporation acquired 100 percent of a Swiss company for 3.7 million Swiss francs (CHF), which is indicative of fair value. At the acquisition date, the exchange rate
Fenwicke Company began operating a subsidiary in a foreign country on January 1, 2011, by acquiring all of its common stock for LCU 40,000, which was equal to fair value. This subsidiary immediately
Watson Company has a subsidiary in the country of Alonza where the local currency unit is the kamel (KM). On December 31, 2010, the subsidiary has the following balance sheet:The subsidiary acquired
Aerkion Company starts 2011 with two assets: cash of 22,000 LCU (local currency units) and land that originally cost 60,000 LCU when acquired on April 4, 2005. On May 1, 2011, Aerkion rendered
Lancer, Inc., starts a subsidiary in a foreign country on January 1, 2010. The following account balances for the year ending December 31, 2011, are stated in kanquo (KQ), the local currency: Lancer
Board Company has a foreign subsidiary that began operations at the start of 2011 with assets of 132,000 kites (the local currency unit) and liabilities of 54,000 kites. During this initial year of
Kingsfield starts a subsidiary operation in a foreign country on January 1, 2011. The country’s currency is the kumquat (KQ). To start this business, Kingsfield invests 10,000 kumquats. Of this
Livingston Company is a wholly owned subsidiary of Rose Corporation. Livingston operates in a foreign country with financial statements recorded in goghs (GH), the company’s functional
The following account balances are for the Agee Company as of January 1, 2011, and December 31, 2011. All figures are denominated in kroner (Kr). January 1, 2011 Accounts payable (18,000) December
Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in
On January 1, 2010, Cayce Corporation acquired 100 percent of Simbel Company for consideration paid of $126,000, which was equal to fair value. Cayce is a U.S.-based company headquartered in Buffalo,
Diekmann Company, a U.S.-based company, acquired a 100 percent interest in Rakona A.S. in the Czech Republic on January 1, 2010, when the exchange rate for the Czech koruna (Kc˘ s) was
The C-P partnership has the following capital account balances on January 1, 2011:Com is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Pack after interest
The partnership agreement of Jones, King, and Lane provides for the annual allocation of the business’s profit or loss in the following sequence:• Jones, the managing partner, receives a bonus
On January 1, 2010, the dental partnership of Left, Center, and Right was formed when the partners contributed $20,000, $60,000, and $50,000, respectively. Over the next three years, the business
Boswell and Johnson form a partnership on May 1, 2009. Boswell contributes cash of $50,000;Johnson conveys title to the following properties to the partnership:The partners agree to start their
Gray, Stone, and Lawson open an accounting practice on January 1, 2009, in San Diego, California, to be operated as a partnership. Gray and Stone will serve as the senior partners because of their
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
On October 1, 2011, Mud Co., a U.S. company, purchased parts from Terra, a Portuguese company, with payment due on December 1, 2011. If Mud’s 2011 operating income included no foreign exchange gain
Post, Inc., had a receivable from a foreign customer that is payable in the customer’s local currency.On December 31, 2011, Post correctly included this receivable for 200,000 local currency
On July 1, 2011, Houghton Company borrowed 200,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2012. The note is denominated in euros. The U.S. dollar equivalent
Slick Co. had a Swiss franc receivable resulting from exports to Switzerland and a Mexican peso payable resulting from imports from Mexico. Slick recorded foreign exchange gains related to both its
Grete Corp. had the following foreign currency transactions during 2011:• Purchased merchandise from a foreign supplier on January 20, 2011, for the U.S. dollar equivalent of $60,000 and paid the
A U.S. exporter has a Thai baht account receivable resulting from an export sale on April 1 to a customer in Thailand. The exporter signed a forward contract on April 1 to sell Thai baht and
Lawrence Company ordered parts costing FC100,000 from a foreign supplier on May 12 when the spot rate was $0.20 per FC. A one-month forward contract was signed on that date to purchase FC100,000 at a
Assuming that MNC did not enter into a forward contract, how much foreign exchange gain or loss should it report on its 2011 income statement with regard to this transaction?a. $5,000 gain.b. $3,000
Assuming that MNC entered into a forward contract to sell 10 million South Korean won on December 1, 2011, as a fair value hedge of a foreign currency receivable, what is the net impact on its net
Palmer Corporation, operating as a U.S. corporation, expects to order goods from a foreign supplier at a price of 200,000 pounds, with delivery and payment to be made on April 15. On January 15,
What was the net impact on Jensen Company’s 2011 income as a result of this fair value hedge of a firm commitment?a. $–0–.b. $680.30 decrease in income.c. $300 increase in income.d. $980.30
What was the net impact on Jensen Company’s 2012 income as a result of this fair value hedge of a firm commitment?a. $–0–.b. $1,319.70 decrease in income.c. $77,980.30 increase in income.d.
What was the net increase or decrease in cash flow from having purchased the foreign currency option to hedge this exposure to foreign exchange risk?a. $–0–.b. $1,000 increase in cash flow.c.
What is the net impact on Werner’s net income for the quarter ended March 31, 2011, as a result of this forward contract hedge of a firm commitment?a. $–0–.b. $1,250 increase in net income.c.
What is the net impact on Werner’s net income for the quarter ended June 30, 2011, as a result of this forward contract hedge of a firm commitment?a. $–0–.b. $59,000 increase in net income.c.
What is the net increase or decrease in cash flow from having entered into this forward contract hedge?a. $–0–.b. $1,000 increase in cash flow.c. $1,500 decrease in cash flow.d. $2,500 increase
What is the net impact on Dos Santos Company’s 2011 net income as a result of this hedge of a forecasted foreign currency transaction?a. $–0–.b. $400 decrease in net income.c. $1,000 decrease
What is the net impact on Dos Santos Company’s 2012 net income as a result of this hedge of a forecasted foreign currency transaction? Assume that the raw materials are consumed and become a part
Rabato Corporation acquired merchandise on account from a foreign supplier on November 1, 2011, for 60,000 LCU (local currency units). It paid the foreign currency account payable on January 15,
On December 20, 2011, 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, 2012.Currency
New Colony Corporation (a U.S. company) made a sale to a foreign customer on September 15, 2011, for 100,000 foreign currency units (FCU). It received payment on October 15, 2011. The following
On December 1, 2011, Dresden Company (a U.S. company located in Albany, New York) purchases inventory from a foreign supplier for 60,000 local currency units (LCU). Dresden will pay in 90 days after
Acme Corporation (a U.S. company located in Sarasota, Florida) has the following import/export transactions in 2011:For each of the following accounts, how much will Acme report on its 2011 financial
Bartlett Company, headquartered in Cincinnati, Ohio, has occasional transactions with companies in a foreign country whose currency is the lira. Prepare journal entries for the following transactions
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
On September 30, 2011, 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
On October 1, 2011, Hanks Company entered into a forward contract to sell 100,000 LCUs in four months (on January 31, 2012) and receive $65,000 in U.S. dollars. Exchange rates for the LCU
Warrenton, Inc., owns 80 percent of Aminable Corporation. On a consolidated income statement, the Noncontrolling Interest in the Subsidiary’s Income is reported as \($37,000.\) Aminable paid a
Net cash flows from operating activities werea. \($12,000\).b. \($20,000\).c. \($24,000\).d. \($25,000\).Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned
Using the same information presented in problem 12, what is the noncontrolling interest’s share of the subsidiary’s net income?a. $27,000.b. $28,290.c. $28,620.d. $30,000.Problem 12Net cash
On January 1, Morgan Company has a net book value of \($1,460,000\) as follows:Leinen Company acquires all outstanding preferred shares for \($106,000\) and 60 percent of the common stock for
On January 1, 2011, Stamford issues 10,000 additional shares of common stock for \($25\) per share. Neill acquires 8,000 of these shares. How will this transaction affect the parent company’s
On January 1, 2011, Stamford issues 10,000 additional shares of common stock for \($15\) per share.Neill does not acquire any of this newly issued stock. How does this transaction affect the parent
On January 1, 2011, Stamford reacquires 8,000 of the outstanding shares of its own common stock for \($24\) per share. None of these shares belonged to Neill. How does this transaction affect the
Hepner Corporation has the following stockholders’ equity accounts:The preferred stock is participating. Wasatch Corporation buys 80 percent of this common stock for \($1,600,000\) and 70 percent
Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2011:Haried Company purchases all of Smith’s common stock on January 1, 2011, for \($14,040,000\). The preferred
Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2011:Additional Information for 2011• Intra-entity inventory transfers during the year
The following separate income statements are for Mason and its 80 percent–owned subsidiary, Dixon:Additional Information • Amortization expense resulting from Dixon’s excess acquisition-date
Albuquerque, Inc., acquired 16,000 shares of Marmon Company several years ago for \($600,000.\) At the acquisition date, Marmon reported a book value of \($710,000,\) and Albuquerque assessed the
On January 1, 2010, 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
Rodriguez Company holds 80 percent of the common stock of Molina, Inc., and 30 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2010 and
On June 30, 2011, 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
King Corporation owns 80 percent of Lee Corporation’s common stock. During October, Lee sold merchandise to King for $100,000. At December 31, 50 percent of this merchandise remains in King’s
Dunn Corporation owns 100 percent of Grey Corporation’s common stock. On January 2, 2010, Dunn sold to Grey for $40,000 machinery with a carrying amount of $30,000. Grey is depreciating the
What is the total of consolidated revenues?a. $500,000.b. $460,000.c. $420,000.d. $400,000.On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash
What is the consolidated total for equipment (net) at December 31?a. $740,000.b. $756,000.c. $760,000.d. $765,000.On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for
Penguin Corporation acquired 80 percent of the outstanding voting stock of Snow Company on January 1, 2010, for $420,000 in cash and other consideration. At the acquisition date, Penguin assessed
Bennett acquired 70 percent of Zeigler on June 30, 2010, for $910,000 in cash. Based on Zeigler’s acquisition-date fair value, an unrecorded intangible of $400,000 was recognized and is being
On January 1, 2010, Woods, Inc., acquired a 60 percent interest in the common stock of Scott, Inc., for $372,000. Scott’s book value on that date consisted of common stock of $100,000 and retained
On January 1, 2009, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander’s book value
On January 1, 2009, 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
On January 1, 2010, Parkway, Inc., issued securities with a total fair value of $450,000 for 100 percent of Skyline Corporation’s outstanding ownership shares. Skyline has long supplied inventory
What is the consolidated net income before allocation to the controlling and noncontrolling interests?a. $400,000.b. $486,000.c. $491,600.d. $500,000.West Company acquired 60 percent of Solar Company
Current assets:a. $105,000.b. $102,000.c. $100,000.d. $ 90,000.On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:On January 2, Park borrowed \($60,000\)
Noncurrent liabilities:a. $110,000.b. $104,000.c. $ 90,000.d. $ 50,000.On January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows:On January 2, Park borrowed
On January 1, 2011, Morey, Inc., exchanged $178,000 for 25 percent of Amsterdam Corporation.Morey appropriately applied the equity method to this investment. At January 1, the book values of
Following are several account balances taken from the records of Karson and Reilly as of December 31, 2011. A few asset accounts have been omitted here. All revenues, expenses, and dividends occurred
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for \($414,000\) cash on January 1, 2009. The remaining 40 percent of the Sea-Breeze shares traded near a total value of \($276,000\) both
On January 1, 2010, Pierson Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of Steele Company. The consideration transferred by Pierson provided a reasonable
Father, Inc., buys 80 percent of the outstanding common stock of Sam Corporation on January 1, 2011, for \($680,000\) cash. At the acquisition date, Sam’s total fair value was assessed at
On January 1, 2011, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of \($184,500\) reflected an assessment that all of Sysinger’s accounts were fairly valued
Bon Air, Inc., purchased 70 percent (2,800 shares) of the outstanding voting stock of Creedmoor Corporation on January 1, 2007, for \($250,000\) cash. Creedmoor’s net assets on that date totaled
Watson, Inc., purchased 60 percent of Houston, Inc., on January 1, 2008, for $400,000 in cash. On that date, assets and liabilities of the subsidiary had the following values:Answer each of the
Good Corporation acquired 80 percent of the outstanding stock of Morning, Inc., on January 1, 2008, for \($1,400,000\) in cash, debt, and stock. One of Morning’s buildings, with a 10-year remaining
Atwater Company acquires 80 percent of the outstanding voting stock of Belwood Company. On that date, Belwood possesses a building with a \($160,000\) book value but a \($220,000\) fair value.
Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1, 2011, for \($700,000\) in cash. This portion of the consideration transferred results in a fair-value allocation of
Kaplan Corporation acquired Star, Inc., on January 1, 2011, by issuing 13,000 shares of common stock with a \($10\) per share par value and a \($23\) market value. This transaction resulted in
Treadway Corporation acquires Hooker, Inc. The parent pays more for it than the fair value of the subsidiary’s net assets. On the acquisition date, Treadway has equipment with a book value of
Haynes, Inc., obtained 100 percent of Turner Company’s common stock on January 1, 2011, by issuing 9,000 shares of \($10\) par value common stock. Haynes’s shares had a \($15\) per share fair
Acme Co., a consolidated enterprise, conducted an impairment review for each of its reporting units.One particular reporting unit, Martel, emerged as a candidate for possible goodwill
On January 1, 2011, Peterson Corporation exchanged \($1,090,000\) fair-value consideration for all of the outstanding voting stock of Santiago, Inc. At the acquisition date, Santiago had a book value
On January 1, Prine, Inc., acquired 100 percent of Lydia Company’s common stock for a fair value of \($120,000,000\) in cash and stock. Lydia’s assets and liabilities equaled their fair values
For the fiscal year ending December 31, how will consolidated net income of this business combination be determined if Hill acquires all of Loring’s stock?a. Hill’s income for the past year plus
Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2011, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting
On January 1, 2011, New Tune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of New Tune’s shares has a \($4\) par value and a \($50\)
How would equipment obtained in a business combination have been recorded under each of the following methods? Pooling of Interests a. Recorded value b. Recorded value c. Fair value d. Fair value
What is the accounting basis for consolidating assets and liabilities in a business combination recorded using the acquisition method?
Sisk Company has owned 10 percent of Maust, Inc., for the past several years. This ownership did not allow Sisk to have significant influence over Maust. Recently, Sisk acquired an additional 30
Under the fair-value option, which of the following affects the income the investor recognizes from its ownership of the investee?a. The investee’s reported income adjusted for excess cost over
When an investor elects the fair-value option for a significant influence investment, cash dividends received by the investor from the investee should be recorded asa. A deduction from the

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