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business
modern advanced accounting

Questions and Answers of Modern Advanced Accounting

On November 1, 2020, Cheng Company (a U.S.-based company) forecasts the purchase of goods from a foreign supplier for 100,000 yuan. Cheng expects to receive the goods on April 30, 2021, and make
On September 1, Westbrook Corporation purchased goods from a foreign supplier at a price of 1,000,000 francs and will make payment in three months on December 1. On September 1, Westbrook acquired an
On June 1, Maxwell Corporation (a U.S.-based company) 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, Maxwell
Use the same facts as in Problem 31 except that Icebreaker Company purchases materials from a foreign supplier on December 1, 2020, with payment of 16,000 dinars to be made on March 1, 2021. The
Icebreaker Company (a U.S.-based company) sells parts to a foreign customer on December 1, 2020, with payment of 16,000 dinars to be received on March 1, 2021. Icebreaker enters into a forward
On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a twoyear, 1,000,000 Chinese yuan loan from a Chinese bank at an interest rate of 2 percent per year. The
Spindler, Inc. (a U.S.-based company), imports surfboards from a supplier in Brazil and sells them in the United States. Purchases are denominated in terms of the Brazilian real (BRL). During 2020,
On April 1, 2020, Mendoza Company (a U.S.-based 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
Voltac Corporation (a U.S.-based company) has the following import/export transactions denominated in Mexican pesos in 2020:March 1 Bought inventory costing 100,000 pesos on credit.May 1 Sold 60
On December 15, 2020, Lisbeth Inc. (a U.S.-based company) purchases merchandise inventory from a foreign supplier for 50,000 schillings. Lisbeth agrees to pay in 45 days, after it sells the
On December 20, 2020, Momeier Company (a U.S.-based company) sold parts to a foreign customer at a price of 50,000 rials. Payment is received on January 10, 2021. Currency exchange rates are as
Bento Corporation (a U.S.-based company) acquired merchandise on account from a foreign supplier on November 1, 2020, for 100,000 crowns. It paid the foreign currency account payable on January 15,
What is the net impact on Good Life Company’s 2021 net income as a result of this hedge of a forecasted foreign currency transaction and import purchase? Assume that the raw materials are consumed
What is the net impact on Good Life Company’s 2020 net income as a result of this hedge of a forecasted foreign currency transaction?a. $–0–b. $400 decrease in net incomec. $1,000 decrease in
What is Munchkin’s net increase or decrease in cash flow from having entered into this forward contract hedge?a. $–0–b. $1,000 increase in cash flowc. $1,500 decrease in cash flowd. $2,000
What is the net impact on Munchkin’s net income for the quarter ended September 30, 2020, as a result of this forward contract hedge of a firm commitment and export sale?a. $–0–b. $115,000
What is the net impact on Munchkin’s net income for the quarter ended June 30, 2020, as a result ofthis forward contract hedge of a firm commitment?a. $–0–b. $2,400 increase in net incomec.
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 flowc.
What was the net impact on Stone Company’s 2020 income as a result of this fair value hedge of a firm commitment?a. $–0–b. $700 decrease in incomec. $300 increase in incomed. $700 increase in
What was the net impact on Stone Company’s 2021 income as a result of this fair value hedge of a firm commitment and export sale?a. $–0–.b. $1,300 decrease in incomec. $78,000 increase in
Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 100,000 pounds, with delivery and payment to be made on April 20. On February 20, when the spot
On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a supplier in Norway in three months. On March 1, when the spot rate is $0.10 per Norwegian krone, Derby enters
Assuming that Brandt entered into a forward contract to sell 10 million South Korean won on December 1, 2020, as a fair value hedge of a foreign currency receivable, what is the net impact on its net
Assuming that Brandt did not hedge its foreign exchange risk, how much foreign exchange gain or loss should it report on its 2020 income statement with regard to this transaction?a. $5,000 gainb.
On December 1, 2020, Venice Company (a U.S.-based company) entered into a three-month forward contract to purchase 1,000,000 pesos on March 1, 2021. The following U.S. dollar per peso exchange rates
Monument Company (a U.S.-based company) ordered a machine costing €100,000 from a foreign supplier on January 15, when the spot rate was $1.20 per €. A one-month forward contract was signed on
A U.S. exporter has a Thai baht account receivable resulting from an export sale on June 1 to a customer in Thailand. The exporter signed a forward contract on June 1 to sell Thai baht and designated
Matthias Corp. had the following foreign currency transactions during 2020:∙ Purchased merchandise from a foreign supplier on January 20 for the U.S. dollar equivalent of $60,000 and paid the
On July 1, 2020, Mifflin Company borrowed 200,000 euros from a foreign lender evidenced by an interest-bearing note due on July 1, 2021. The note is denominated in euros. The U.S. dollar equivalent
Brief, Inc., had a receivable from a foreign customer that is payable in the customer’s local currency. On December 31, 2020, Brief correctly included this receivable for 200,000 local currency
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
Under what conditions can a foreign currency derivative be considered “highly effective” as a hedge without conducting a quantitative assessment?
The Coca-Cola Company is organized geographically and defines reportable operating segments as regions of the world. The following information was extracted from Note 19 Operating Segments in the
The following information was extracted from quarterly reports for Walmart Inc. (amounts in millions):The following information was extracted from the notes to the financial statements in the Walmart
Many companies make quarterly reports available on their corporate website. Quarterly reports also can be accessed through the SEC’s EDGAR system at www.sec.gov (under Filing Type, search for
Volata Company began operations on January 1, 2019. In the second quarter of 2020, it adopted the FIFO method of inventory valuation. In the past, it used the LIFO method. The company’s interim
Ecru Company has identified five industry segments: plastics, metals, lumber, paper, and finance. It appropriately consolidated each of these segments in producing its annual financial statements.
Assume the company expects to replace the units of beginning inventory sold in April at a cost of $45 per unit and expects inventory at year-end to be between 2,100 and 2,500 units. What amount of
Assume the company does not expect to replace the units of beginning inventory sold; it plans to reduce inventory by year-end to 500 units. What amount of cost of goods sold should be recorded for
In March of the current year, Mooney Company estimated its year-end executive bonuses to be $800,000. The executive bonus paid in the previous year was $950,000. What amount of bonus expense, if any,
For a U.S.-based company, which of the following would be an acceptable presentation of countries for providing information by geographic area?a. United States, Mexico, Japan, Spain, All Other
Why are publicly traded companies in the United States required to prepare interim reports on a quarterly basis?
Under what conditions should a company disclose the amount of sales from a major customer?
Under what conditions must an enterprise provide information about products and services?
What information must an enterprise provide for each of its separately reportable operating segments?
How should a company determine operating segments when it organizes business activities in more than one way and the chief operating decision maker uses multiple sets of reports?
On January 1, 2019, Alpha acquired 80 percent of Delta. Of Delta’s total business fair value, $125,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2020,
Parson Company acquired an 80 percent interest in Syber Company on January 1, 2020. Any portion of Syber’s business fair value in excess of its corresponding book value was assigned to trademarks.
On January 1, 2020, Travers Company acquired 90 percent of Yarrow Company’s outstanding stock for $720,000. The 10 percent noncontrolling interest had an assessed fair value of $80,000 on that
Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2020, for $420,000 in cash. Lowly’s book value at that date was reported as $600,000, and the fair value of the
House Corporation has been operating profitably since its creation in 1960. At the beginning of 2019, House acquired a 70 percent ownership in Wilson Company. At the acquisition date, House prepared
King’s Road recently acquired all of Oxford Corporation’s stock and is now consolidating the financial data of this new subsidiary. King’s Road paid a total of $850,000 for Oxford, which has
Garrison holds a controlling interest in Robertson’s outstanding stock. For the current year, the following information has been gathered about these two companies: Garrison uses the
Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually reported the following income (exclusive of any investment
On January 1, 2020, Abbey acquires 90 percent of Benjamin’s outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by
Martin has a controlling interest in Rowen’s outstanding stock. At the current year-end, the following information has been accumulated for these two companies:Martin uses the initial value method
Sienna Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2021, these licensing
Arriba and its 80 percent–owned subsidiary (Abajo) reported the following figures for the year ending December 31, 2021 (credit balances indicated by parentheses). Abajo paid dividends of $30,000
Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $22,000 is applicable on the allocations of Rock’s acquisition-date business fair value. On January
On January 1, 2019, Uncle Company purchased 80 percent of Nephew Company’s capital stock for $500,000 in cash and other assets. Nephew had a book value of $600,000, and the 20 percent
On January 1, 2019, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000. Birch reported a $300,000 book value, and the fair value of the noncontrolling interest was
Lanister Company purchases all of Mountain Company for $401,600 in cash. On that date, the subsidiary has net assets with a $355,000 fair value but a $315,000 book value and tax basis. The tax rate
What would be the answer to Problem 11 if a consolidated tax return were filed?a. –0–b. $1,785c. $2,100d. $8,925Data from problem 11Paloma, Inc., owns 85 percent of Blanca Corporation. Both
Paloma, Inc., owns 85 percent of Blanca Corporation. Both companies have been profitable for many years. During the current year, the parent sold merchandise to the subsidiary at a transfer price of
Kyle, Inc., owns 75 percent of CRT Company. During the current year, CRT reported net income of $425,000 but paid a total cash dividend of only $105,000. What deferred income tax liability must be
Arnold Corporation holds 70 percent of Belvista, which, in turn, owns 70 percent of Stang. Separate operating income figures (excluding investment income) and intra-entity upstream gains (on assets
On January 1, Balanger Company buys 10 percent of the outstanding shares of its parent, Altgeld, Inc. Although the total book and fair values of Altgeld’s net assets equaled $3.2 million, the price
What is a father-son-grandson relationship?
Place Company owns a majority voting interest in Sassano, Inc. On January 1, 2019, Place issued $1,000,000 of 11 percent 10-year bonds at $943,497.77 to yield 12 percent. On January 1, 2021, Sassano
On June 30, 2021, 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
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 2020 and 2021
On January 1, 2020, 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
Fred, Inc., and Herman Corporation formed a business combination on January 1, 2019, when Fred acquired a 60 percent interest in Herman’s common stock for $312,000 in cash. The book value of
Pavin acquires all of Stabler’s outstanding shares on January 1, 2018, for $460,000 in cash. Of this amount, $30,000 was attributed to equipment with a 10-year remaining life and $40,000 was
On January 1, 2019, 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
Bravo, Inc., owns all of the stock of Echo, Inc. For 2021, Bravo reports income (exclusive of any investment income) of $480,000. Bravo has 80,000 shares of common stock outstanding. It also has
Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2021:Additional Information for 2021∙ Intra-entity inventory transfers during the year
Through the payment of $10,468,000 in cash, Drexel Company acquires voting control over Young Company. This price is paid for 60 percent of the subsidiary’s 100,000 outstanding common shares ($40
Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2021:Preferred stock—$100 par, nonvoting andnonparticipating, 8% cumulative dividend . . . . . . . . . . . . . . .
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
Paulina, Incorporated, owns 90 percent of Southport Company. On January 1, 2021, Paulina acquires half of Southport’s $500,000 outstanding 13-year bonds. These bonds had been sold on the open
Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2020:On January 1, 2020, Highlight acquired on the
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
On January 1, 2021, Pikes Corporation loaned Venti Company $300,000 and agreed to guarantee all of Venti’s long-term debt in exchange for (1) decision-making authority over all of Venti’s
On January 1, 2021, Access IT Company exchanged $1,000,000 for 40 percent of the outstanding voting stock of Net Connect. Especially attractive to Access IT was a research project underway at Net
On December 31, 2020, Petra Company invests $20,000 in Valery, a variable interest entity. In contractual agreements completed on that date, Petra established itself as the primary beneficiary of
The following describes a set of arrangements between TecPC Company and a variable interest entity (VIE) as of December 31, 2020. TecPC agrees to design and construct a new research and development
Paige Clothing Company (Paige) helped form Apparel Media LLC, a company that will conduct e-commerce sales for Paige through a dedicated internet site. Two outside investors contributed $50,000 in
On January 1, 2021, 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 parent
On January 1, 2021, 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, 2021, 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
Premier Company owns 90 percent of the voting shares of Stanton, Inc. Premier reports sales of $480,000 during the current year, and Stanton reports $264,000. Stanton sold inventory costing $28,800
Pesto Company possesses 80 percent of Salerno Company’s outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2017, Pesto sold 9 percent bonds
Net cash flows from financing activities werea. $(25,000).b. $(37,000).c. $(38,000).d. $(42,000).Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned subsidiary
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 subsidiary Oakley
The Edison Eagles Players’ Association and Mr. Sideline, the CEO and majority owner of Edison Eagles Soccer, Inc., ask your help in resolving a salary dispute. Mr. Sideline presents the following
On January 1, 2020, James Company purchased 100 percent of the outstanding voting stock of Nolan, Inc., for $1,000,000 in cash and other consideration. At the purchase date, Nolan had common stock of
Kelly Company acquired 75 percent of Helton Company’s outstanding voting shares on January 1, 2019, in exchange for $285,000 in cash. The subsidiary’s stockholders’ equity accounts totaled
On January 1, 2020, Panther, Inc., issued securities with a total fair value of $577,000 for 100 percentof Stark Corporation’s outstanding ownership shares. Stark has long supplied inventory
The individual financial statements for Gibson Company and Keller Company for the year ending December 31, 2021, follow. Gibson acquired a 60 percent interest in Keller on January 1, 2020, in

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