Describe the basic rules for computing cost of goods sold and inventory on an interim basis. In what circumstances are estimates permitted to determine costs?
> Refer to the information presented in Problem P12-17 and your answer to part a of Problem P12-17. Required: Prepare a schedule providing a proof of the translation adjustment. Data from Problem P12-17: On January 1, 20X5, Taft Company acquired all
> Refer to the information in Problem P12-17. Assume the U.S. dollar is the functional currency, not the krone. Required: Prepare a schedule remeasuring the trial balance from Norwegian kroner into U.S. dollars. Assume that Taft uses the fully adju
> On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix Inc., a Norwegian company, at a cost of $151,200. Vikix’s net assets on the date of acquisition were 700,000 kroner (NKr). On January 1, 20X5, the book and
> MaMi Co. Ltd. located in Mexico City is a wholly owned subsidiary of Special Foods, a U.S. company. At the beginning of the year, MaMi’s condensed balance sheet was reported in Mexican pesos (MXP) as follows: During the year, the comp
> The U.S. parent company is preparing its consolidated financial statements for December 31, 20X4. The foreign company’s local currency (LCU) is the functional currency. Information is presented in Data Set A and Data Set B. Data Set A:
> On January 1, 20X1, Par Company purchased all the outstanding stock of North Bay Company, located in Canada, for $120,000. On January 1, 20X1, the direct exchange rate for the Canadian dollar (C$) was C$1 = $0.80. North Bay’s book value on January 1, 20X
> Refer to the information in Problem P12-29 for Kiner Company and its foreign subsidiary. Required: Prepare a schedule translating the selected accounts into U.S. dollars as of December 31, 20X1, and December 31, 20X2, respectively, assuming that the
> On January 1, 20X1, Kiner Company formed a foreign subsidiary that issued all of its currently outstanding common stock on that date. Selected accounts from the balance sheets, all of which are shown in local currency units, are as follows: Additional
> Refer to the information given in Problems P12-23 and P12-27 for Alamo and its subsidiary, Western Ranching. Assume that the U.S. dollar is the functional currency and that Alamo uses the fully adjusted equity method for accounting for its investment in
> Multiplex Inc., a public company whose stock is traded on a national stock exchange, reported the following information on its consolidated financial statements for 20X5: Multiplex management determined that it had the following operating seg
> During the third quarter of its 20X7 fiscal year, Press Company is considering the different methods of reporting accounting changes on its interim segments. Preliminary data are available for the third quarter of 20X7, ending on September 30, 20X7, prio
> For many years, Clark Company operated exclusively in the United States but recently expanded its operations to the Pacific Rim countries of New Zealand, Singapore, and Australia. After a modest beginning in these countries, recent successes have resulte
> At the end of the second quarter of 20X1, Malta Corporation assembled the following information: The first quarter resulted in a $90,000 loss before taxes. During the second quarter, sales were $1,200,000; purchases were $650,000; and operating expens
> Chris Inc. has accumulated the following information for its second-quarter income statement for 20X2: Additional Information: First-quarter income before taxes was $100,000, and the estimated effective annual tax rate was 40 percent. At the end o
> Calvin Inc. has operating segments in five different industries: apparel, building, chemical, furniture, and machinery. Data for the five segments for 20X1 are as follows: Additional Information: The corporate headquarters had general corporate expe
> West Corporation reported the following consolidated data for 20X2: Data reported for West’s four operating divisions are as follows: Intersegment sales are priced at cost, and all goods have been subsequently sold to non-
> Watson Inc., a multinational company, has operating divisions in France, Mexico, and Japan as well as in the United States. The company reported the following information on its consolidated financial statements for 20X5: The following additional
> Haskins and Sells formed a partnership on January 2, 20X3. Each had been a sole proprietor before forming their partnership. Part I: Each partner’s contributions follow. The amounts under the cost column represent the amounts report
> The DELS partnership was formed by combining individual accounting practices on May 10, 20X1. The initial investments were as follows: Required: Prepare the journal entry to record the initial investments using GAAP accounting. Calculate the tax
> The partnership of Jordan and O’Neal began business on January 1, 20X7. Each partner contributed the following assets (the noncash assets are stated at their fair values on January 1, 20X7): The land was subject to a $50,000 mortgage,
> Select the correct answer for each of the following questions. When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the contributing partner’s capital account?
> The partnership of Ace, Jack, and Spade has been in business for 25 years. On December 31, 20X5, Spade decided to retire. The partnership balance sheet reported the following capital balances for each partner at December 31, 20X5: The partners allocate
> Champion Play Company is a partnership that sells sporting goods. The partnership agreement provides for 10 percent interest on invested capital, salaries of $24,000 to Luc and $28,000 to Dennis, and a bonus for Luc. The 20X3 capital accounts were as fol
> The following condensed balance sheet is presented for the partnership of Der, Egan, and Oprins, who share profits and losses in the ratio of 4:3:3, respectively. Assume that the partnership decides to admit Snider as a new partner with a 25 percent i
> Eastwood, A. North, and M. West are manufacturers’ representatives in the architecture business. Their capital accounts in the ENW partnership for 20X1 were as follows: Required: For each of the following independent income-sharing a
> Debra and Merina sell electronic equipment and supplies through their partnership. They wish to expand their computer lines and decide to admit Wayne to the partnership. Debra’s capital is $200,000, Merina’s capital is $160,000, and they share income in
> Some accountants are seeking to harmonize international accounting standards. What is meant by the term harmonize? How might harmonization result in better financial reporting for a U.S. parent company with many foreign investments?
> What factors are used to determine a reporting entity’s functional currency? Provide at least one example for which a company’s local currency may not be its functional currency?
> Define the following terms: local currency unit recording currency reporting currency
> What potential benefits might be achieved if U.S. firms are allowed to use IFRS?
> How widely used are IFRS? Can IFRS be used for listings on U.S. stock exchanges?
> Describe the basic problem of eliminating intercompany transactions with a foreign affiliate.
> Briefly discuss the International Accounting Standards Board (IASB). What is its mission? What is the composition of its membership and how long do members serve? Where is the IASB located?
> Describe the accounting for a foreign investment that is not consolidated with the U.S. company.
> Are all foreign subsidiaries consolidated? Why or why not?
> What is the logic behind the parent company’s recognizing on its books its share of the translation adjustment arising from the translation of its foreign subsidiary?
> A U.S. company paid more than book value in acquiring a foreign affiliate. How is this excess reported in the consolidated balance sheet and income statement in subsequent periods when the functional currency is the local currency unit of the foreign aff
> Comment on the following statement: “The use of the current exchange rate method of translating a foreign affiliate’s financial statements allows for an assessment of foreign management by the same ratio criteria used to manage the foreign affiliate.”
> When the functional currency is the foreign affiliate’s local currency, why are the stockholders’ equity accounts translated at historical exchange rates? How is retained earnings computed?
> Where is the remeasurement gain or loss shown in the consolidated financial statements?
> Discuss the accounting treatment and disclosure of translation adjustments. When does the translation adjustment account have a debit balance? When does it have a credit balance?
> A U.S. company has a foreign sales branch located in Spain. The Spanish branch has selected the U.S. dollar for its functional currency. Describe the methodology for remeasuring the branch’s financial statements into the U.S. Company’s reporting currency
> A Canadian-based subsidiary of a U.S. parent uses the Canadian dollar as its functional currency. Describe the methodology for translating the subsidiary’s financial statements into the parent’s reporting currency.
> Why is there increasing interest in the adoption of a single set of high-quality accounting standards?
> A company has 10 industry segments, of which the largest 5 account for 80 percent of the combined revenues of the company. What considerations are important in determining the number of segments that are separately reportable? How are the remaining segme
> What are the three 10 percent significance tests used to determine reportable segments under ASC 280? Give the numerator and denominator for each test.
> Maness Company made a change in accounting for its inventories during the third quarter of its fiscal year. The company switched from the LIFO method to the average cost method. Describe the reporting of this accounting change on prior interim financial
> Describe the process of updating the estimate of the effective annual tax rate in the second quarter of a company’s fiscal year.
> What is the difference in the application of the lower-of-cost-or-market valuation method for inventories for interim statements and annual statements?
> How might information on a company’s operations in different industries be helpful to investors?
> Define the following terms, which are part of the SEC terminology: Customary review Comment letter Red herring prospectus Shelf registration
> Describe the major requirements of the Sarbanes-Oxley Act of 2002.
> What types of information must be disclosed in the management discussion and analysis
> Describe Parts I and II of the Foreign Corrupt Practices Act. What is this act’s impact on companies and public accountants?
> Explain the process of incorporating a partnership.
> S. Horton contributes assets with a book value of $5,000 to a partnership. The assets have a market value of $10,000 and a remaining liability of $2,000 that the partnership assumes. If the liability is shared equally with the other three partners, what
> Partner A has a capital credit of $25,000. Partner B’s capital credit is also $25,000. Partners A and B share profits and losses in a 60:40 ratio. Which partner will receive the first payment of cash in an installment liquidation?
> Define loss absorption potential and explain its importance in determining cash distributions to partners.
> What is a proxy? What must be included in the proxy material submitted to security holders?
> In which cases of a new partner’s admission does the credit to capital equal the new partners’ investment? In which cases of a new partner’s admission is his or her capital credit less than or more than the amount of the investment?
> What types of items that specifically involve the accounting function are reported on Form 8-K?
> Present the arguments for and against the bonus method of recognizing the admission of a new partner.
> What does Regulation S-X cover? What is included in Regulation S-K?
> What is included in Form 10-K? When must a 10-K be filed with the SEC?
> Does a partner leaving the partnership require the partnership to dissolve and wind up its business? Explain how the partnership may purchase the disassociated partner’s interest in the partnership
> Assume that, because of a new law recently passed, the types of significant transactions in which a partnership engages are no longer lawful. Two of the five partners wish to wind up and terminate the partnership. Can these two partners require the partn
> Are salaries to partners a partnership expense? Why or why not?
> When must a company use a Form S-1 registration form? In what circumstances may a company use a Form S-3 registration form?
> The Good-Nite partnership agreement includes a provision for profit distribution of interest on capital balances. Unfortunately, the provision does not state the specific capital balance to be used in computing the profit share. What choices of capital b
> What types of public offerings of securities are exempted from the SEC’s comprehensive registration requirements?
> A partnership agreement specifies that profits will be shared in the ratio of 4:6:5. What percentage of profits will each partner receive? Allocate a profit of $60,000 to each of the three partners.
> Contrast a lump-sum liquidation with an installment liquidation.
> May an individual partner simply decide to leave a partnership? Does the partnership have any legal recourse against that partner? Explain
> Define the following features of a partnership: (a) separate business entity, (b) agency relationship, and (c) partner’s joint and several liability
> X, Y, and Z are partners. The partnership is liquidating, and Partner Z is personally insolvent. What implications may this have for Partners X and Y?
> What items are typically included in the partnership agreement?
> What is the basis of the SEC’s legal authority to regulate accounting principles?
> What are the major causes of a dissolution? What are the accounting implications of a dissolution?
> Why is the partnership form of business organization sometimes preferred over the corporate or sole proprietorship forms?
> Match the items in the left-hand column with the descriptions/explanations in the right-hand column Items 1. Current exchange rate 2. Foreign entity goodwill under translation 3. Credit translation adjustment for the year 4. Other comprehensive inc
> Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items Descriptions/Explanations A. Hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm com
> Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items Descriptions/Explanatlons 1. Direct exchange rate 2. Indirect exchange rate 3. Managing an exposed net asset position 4. Spot rates 5. Curre
> What is the attitude toward the possible use of IFRS in the United States?
> The IASB promulgates International Financial Reporting Standards (IFRS). Briefly describe the standard-setting process used by the IASB.
> Match the items in the left-hand column with the descriptions/explanations in the right-hand column. Items Descriptions/Explanations 1. Reportable operating segment 2. 10 percent significance rules 3. Revenue test for material foreign country dis
> How is revenue recognized on an interim basis?
> What information must be disclosed about a company’s major customers? Are the names of customers disclosed?
> Only two materiality tests are used to determine separately reportable foreign operations. What are these two tests?
> Specifically, what items are in the determination of a segment’s profit or loss?
> What is the relationship between the FASB’s requirements for segment-based disclosures and a company’s profit centers?
> What is a joint venture? How are corporate joint ventures accounted for on the books of the investor companies?
> How is the tax benefit of an interim period’s operating loss treated if the future realizability of the tax benefit is not assured beyond a reasonable doubt?
> The partnership of Bull and Bear is in the process of termination. The partners have disagreed on virtually every decision and have decided to liquidate the present business with each partner taking his own clients from the partnership. Bull wants cash d
> Arrow Manufacturing Co. expects to make 50,000 chairs during the 2017 accounting period. The company made 3,000 chairs in January. Materials and labor costs for January were $36,000 and $48,000, respectively. Arrow produced 4,000 chairs in February. Mate
> Erickson Air is a large airline company that pays a customer relations representative $8,000 per month. The representative, who processed 3,000 customer complaints in January and 2,500 complaints in February, is expected to process 40,000 customer compla
> Production workers for Chadwick Manufacturing Company provided 3,200 hours of labor in January and 2,800 hours in February. The company, whose operation is labor intensive, expects to use 48,000 hours of labor during the year. Chadwick paid a $120,000 an
> Ludmilla Construction Company is composed of two divisions: (1) Home Construction and (2) Commercial Construction. The Home Construction Division is in the process of building 12 houses and the Commercial Construction Division is working on three project
> Owen Company makes a product that sells for $61 per unit. The company pays $37 per unit for the variable costs of the product and incurs annual fixed costs of $360,000. Owen expects to sell 20,000 units of product. Required: Determine Owen’s margin of s
> Information concerning a product produced by Ender Company appears here: Sales price per unit……………………………………………………………………….$200 Variable cost per unit………………………………………………………………………$80 Total annual fixed manufacturing and operating costs…………….$600,000 Requir
> Santiago Company incurs annual fixed costs of $66,000. Variable costs for Santiago’s product are $34 per unit, and the sales price is $50 per unit. Santiago desires to earn an annual profit of $34,000. Required: Use the per unit contribution margin appr
