Question: On March 1, Derby Corporation (a U.

> Christina Company (a U.S.-based company) has a subsidiary in Canada that began operations at the start of 2020 with assets of 132,000 Canadian dollars (CAD) and liabilities of CAD 54,000. During this initial year of operation, the subsidiary reported a p

> Lancer, Inc. (a U.S.-based company), establishes a subsidiary in Croatia on January 1, 2019. The following account balances for the year ending December 31, 2020, are stated in kuna (K), the local currency: The following U.S.$ per kuna exchange rates are

> Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2020 with three assets: Cash of 20,000 dinars, Accounts receivable of 80,000 dinars, and Land that cost 200,000 dinars when acquired on April 1, 2019. On January 1, 2020, Z

> Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria, where the local currency unit is the naira (NGN). On December 31, 2019, the subsidiary had the following balance sheet (amounts are in thousands [000s]): The subsidiary acquired the invent

> Refer to the information in problem 26. Prepare a statement of cash flows in pounds for Sullivan’s Island Company’s foreign subsidiary, and then translate this statement into U.S. dollars.

> 2. Sullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 perce

> The Isle of Palms Company (IOP), a U.S.-based entity, has a wholly owned subsidiary in Israel that has been determined as having the Israeli shekel (ILS) as its functional currency. On October 1, 2019, the Israeli subsidiary borrowed 500,000 Swiss francs

> On December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the bo

> The following accounts are denominated in rubles as of December 31, 2020. For reporting purposes, these accounts need to be stated in U.S. dollars. For each account, indicate the exchange rate that would be used to translate the ruble balance into U.S. d

> What amount of foreign exchange gain or loss should be reflected in McCarthy’s 2020 consolidated net income? a. $8,000 loss. b. $10,000 loss. c. $2,000 gain. d. $5,000 gain.

> Highpoint owns a 95 percent majority voting interest in Middlebury. In turn, Middlebury owns an 80 percent majority voting interest in Lowton. In the current year, each firm reports the following income and dividends. Separate Company income figures do n

> At what amount should the Brazilian subsidiary’s euro note payable be reported on McCarthy’s December 31, 2020, consolidated balance sheet? a. $84,000. b. $86,000. c. $92,000. d. $128,800.

> A U.S. company’s foreign subsidiary had these amounts in local currency units (LCU) in 2020: The average exchange rate during 2020 was $1.00 = LCU 1. The beginning inventory was acquired when the exchange rate was $0.80 = LCU 1. Ending

> Assume that the U.S. dollar is the subsidiary’s functional currency. What balances does a consolidated balance sheet report as of December 31, 2020? a. Marketable equity securities = $16,000 and Inventory = $16,000 b. Marketable equity securities = $17,0

> Assume that the won is the subsidiary’s functional currency. What balances does a consolidated balance sheet report as of December 31, 2020? a. Marketable equity securities = $16,000 and Inventory = $16,000. b. Marketable equity securities = $17,000 and

> 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 that date to purchase €100,000 at a forward rate of $1.23. Th

> 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 it as a cash flow hedge of a recognized Thai baht rece

> 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 invoice on April 20 at the U.S. dollar equivalent of $50,000.

> Grace Co. had a Chinese yuan payable resulting from imports from China and a Mexican peso receivable resulting from exports to Mexico. Grace recorded foreign exchange losses related to both its yuan payable and peso receivable. Did the foreign currencies

> 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 of the note principal is as follows: In its 2021 income

> Pacifico Company, a U.S.-based importer of beer and wine, purchased 1,000 cases of Oktoberfest- style beer from a German supplier for 50,000 euros. Relevant U.S. dollar exchange rates for the euro are as follows: The company closes its books and prepares

> 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 purchased all of these bonds in the open market at a pr

> Based on past experience, Maas Corp. (a U.S.-based company) expects to purchase raw materials from a foreign supplier at a cost of 1,000,000 francs on March 15, 2021. To hedge this forecasted transaction, on December 15, 2020, the company acquires a call

> Amaretta Company (a U.S.-based company) ordered merchandise from a foreign supplier on November 20 at a price of 1,000,000 rupees when the spot rate was $0.050 per rupee. Delivery and payment were scheduled for December 20. On November 20, Amaretta acqui

> 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 units (LCU) in its balance sheet at $110,000. When Brief col

> On June 1, Parker-Mae Corporation (a U.S.-based company) received an order to sell goods to a foreign customer at a price of 100,000 francs. Parker-Mae will ship the goods and receive payment in three months, on September 1. On June 1, Parker-Mae purchas

> 37. On August 1, Pure Joy Corporation (a U.S.-based importer) placed an order to purchase merchandise from a foreign supplier at a price of 400,000 pounds. Pure Joy will receive and make payment for the merchandise in three months on October 31. On Augus

> On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,000,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PL

> On November 30, 2020, Walter Corporation (a U.S.-based company) forecasts the sale of equipment to a foreign customer at a price of 500,000 crowns. The equipment is expected to be delivered on January 31, 2021, with payment received upon delivery. Also o

> 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 immediate payment. On November 1, 2020, Cheng enters into a

> 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, West- brook acquired an option to purchase 1,000,000 francs in three months

> 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 materials are consumed immediately and recognized as cost o

> On January 1, 2019, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of 52,000,000 British pounds (£), which was equal to fair value. The excess of fair value over book valu

> On September 30, 2020, Peace Frog International (PFI) (a U.S.-based company) negotiated a two- year, 1,000,000 Chinese yuan loan from a Chinese bank at an interest rate of 2 percent per year. The company makes interest payments annually on September 30 a

> On October 1, Tile Co., a U.S. company, purchased products from Azulejo, a Portuguese company, with payment due on December 1. If Tile’s operating income included no foreign exchange gain or loss, the transaction could have a. Been denominated in U.S. do

> 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, Spindler acquires 200 surfboards at a price of BRL 1,600

> 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 October 1, 2020, and will make a second interest payment

> Voltac Corporation (a U.S.-based company) has the following import/export transactions denominated in Mexican pesos in 2020: Currency exchange rates for 1 peso for 2020 are as follows: For each of the following accounts, what amount will Voltac report on

> 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 merchandise. Lisbeth makes sales rather quickly and pays the ent

> 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 follows: a. How does the fluctuation in the U.S. dollar per

> 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, 2021. The following exchange rates are relevant: a. How

> 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 and become a part of the cost of goods sold in 2021. a. $

> 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 income c. $1,000 decrease in net income d. $1,400 decrease in net income

> On January 1, 2021, Acme Co. is considering purchasing a 40 percent ownership interest in PHC Co., a privately held enterprise, for $700,000. PHC predicts its profit will be $185,000 in 2021, projects a 10 percent annual increase in profits in each of th

> 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 increase in net income c. $118,000 increase in net income d. $1

> What is the net impact on Munchkin’s net income for the quarter ended June 30, 2020, as a result of this forward contract hedge of a firm commitment? a. $–0– b. $2,400 increase in net income c. $4,000 decrease in net income d. $8,000 increase in net inco

> 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 income c. $78,000 increase in income d. $78,700 increase in income

> 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 income c. $300 increase in income d. $700 increase in income

> 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 rate is $1.00 per pound, Shandra purchases a two-month

> 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 income in 2020 resulting from a fluctuation in the val

> 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 gain b. $3,000 gain c. $2,000 loss d. $1,000 loss

> On December 1, 2020, Venice Company (a U.S.-based company) entered into a three-month for- ward contract to purchase 1,000,000 pesos on March 1, 2021. The following U.S. dollar per peso exchange rates apply: Ignoring present values, which of the followin

> Which of the following statements concerning FASB ASC 280 is true? a. Does not require segment information to be reported in accordance with generally accepted accounting principles b. Does not require a reconciliation of segment assets to consolidated a

> In 2018, CVS Health Corporation reported a $6.1 billion charge for the impairment of goodwill in one of its reporting units (segments) in its 10-K annual report. Referring to CVS Health’s 2018 financial statements and any other information from the media

> 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 Coca-Cola Company 2017 Annual Report: Required 1. Calculat

> 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 income statements as originally reported u

> How much of this expense should Calloway’s income statement reflect for the quarter ending March 31? a. –0– b. $40,000 c. $120,000 d. $480,000

> Arryn, Inc., owns 95 percent of Stark Corporation’s voting stock. The acquisition price exceeded book and fair value by $85,500, which was appropriately attributed to goodwill. Stark holds 15 percent of Arryn’s voting stock. The price paid for the shares

> 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 remaining within the consolidated group) included in the

> Diamond Company owns 80 percent of Emerald, and Emerald owns 90 percent of Sapphire, Inc. Separate operating income totals for the current year follow; they contain no investment income. None of these acquisitions required amortization expense. Included

> Which of the following is not a reason for two companies to file separate tax returns? a. The parent owns 68 percent of the subsidiary. b. They have no intra-entity transactions. c. Intra-entity dividends are tax-free only on separate returns. d. Neither

> How does the amortization of tax-deductible goodwill affect the computation of a parent com- pany’s income taxes? a. It is a deductible expense only if the parent owns at least 80 percent of the subsidiary’s voting stock. b. It is deductible only as impa

> Which of the following is correct for two companies that want to file a consolidated tax return as an affiliated group? a. One company must hold at least 51 percent of the other company’s voting stock. b. One company must hold at least 65 percent of the

> 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 paid for these shares was $340,000. During the year, Alt

> 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, Delta obtained 70 percent of Omega&acirc

> Costco Wholesale Corporation owns and operates membership warehouses in the United States, Canada, United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, and Iceland. Costco also engages in retail operations through a majority-owned subsidiary i

> 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. This intangible asset has subsequently

> 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 date. Any acquisition-date excess fair valu

> 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 noncontrolling interest was assessed at $280,000. Any excess acq

> 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 the following fair-value allocation schedule: House reg

> 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 the follo

> 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 initial value method to account for the investment in

> 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 income): Lake paid a $90,000 cash dividend during the current y

> 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 parentheses): Assume that a tax rate of 21 p

> 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 to account for the investment in Rowen

> A subsidiary owns shares of its parent company. Which of the following is true concerning the treasury stock approach? a. It is one of several options to account for mutual holdings available under current accounting standards. b. The original cost of th

> Go to the website www.gasb.org and click on “Projects” included in the list that runs across the top of the page. Then click on “Current Projects & Pre-Agenda Research.” Click on one of the current projects that is listed. Read the sections that are titl

> 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 during this period. In 2020, intra-enti

> 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 agreements have a fair value of $900,000 and represent Si

> Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wiscon- sin, in turn, holds 60 percent of Cleveland’s outstanding stock. No excess amortization resulted from these acquisitions. During the current

> 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 1, 2020, Rock acquired 75 percent of S

> 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 non- controlling interest fair value was $125,000 on

> 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 $72,000 on that date. Then, on January 1, 20

> 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 is 21 percent. Neither company has reported any deferred

> What would be the answer to Problem 11 if a consolidated tax return were filed? a. –0– b. $1,785 c. $2,100 d. $8,925

> 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 $175,000. In recording the transfer, the parent recogni

> 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 recognized in the consolidated balance sheet? Assume the

> Kelly Fernandez and Michael Webster have decided to create a business. They have financing available and have a well-developed business plan. However, they have not yet decided which type of legal business structure would be best for them. Required Write

> 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 $229,000. At acquisition date, Stucco rep

> On January 1, Paisley, Inc., paid $560,000 for all of Skyler Corporation’s outstanding stock. This cash payment was based on a price of $180 per share for Skyler’s $100 par value preferred stock and $38 per share for i

> Following are separate income statements for Austin, Inc., and its 80 percent–owned subsidiary, Rio Grande Corporation as well as a consolidated statement for the business combination as a whole (credit balances indicated by parentheses

> 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 (credit balances indicated by parentheses)

> 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 value of 110 percent of the $50 per share p

> 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 Herman’s assets and liabili

> 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 assigned to trademarks expensed over a 20-yea

> 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 retained earnings of $280,000. Aronsen paid $584,100 for th

> 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 fair value of the noncontrolling interest at $150,000. Any excess

> 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 5,000 shares of preferred stock outstanding that pay a divi

> Go to www.epiqbankruptcysolutions.com or www.kccllc.net and select a current active bankruptcy case. If available, go to an online business publication database such as Factiva or ABI-Inform. Search for articles that discuss the issues and problems that

> 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 amounted to $90,000. All int