When are unrealized gains and losses from intercompany sales of land realized from the viewpoint of the selling affiliate?
> The stockholders’ equities of Pam Corporation and its 80 percent–owned subsidiary, Sun Corporation, on December 31, 2016, are as follows (in thousands): Pam’s Investment in Sun account balance on De
> Pop Corporation paid $2,548,000 cash for 70 percent of the common stock of Son Corporation on June 1, 2016. The assets and liabilities of Son were fairly valued, and any fair value/book value differential is goodwill. Data related to the stockholders’ eq
> The balance of Pam Corporation’s investment in Sun Company account at December 31, 2015, was $436,000, consisting of 80 percent of Sun’s $500,000 stockholders’ equity on that date and $36,000 goodwill. On May 1, 2016, Pam sold a 20 percent interest in Su
> Pam Corporation acquired a 75 percent interest in Sun Corporation on January 1, 2016. Financial statements of Pam and Sun Corporations for the year 2016 are as follows (in thousands): REQUIRED: Prepare consolidation workpapers for Pam Corporation and S
> Pop Corporation owns 100 percent (300,000 shares) of the outstanding shares of Son Corporation’s common stock on January 1, 2016. Its Investment in Son account on this date is $4,400,000, equal to Son’s $4,000,000 stockholders’ equity plus $400,000 goodw
> On January 1, 2016, Pam Corporation purchased a 40 percent interest in Sun Corporation for $1,600,000, when Sun’s stockholders’ equity consisted of $2,000,000 capital stock and $2,000,000 retained earnings. On September 1, 2016, Pam purchased an addition
> Pop Corporation increases its ownership interest in its subsidiary, Son Corporation, from 70 percent on January 1, 2016, to 90 percent at July 1, 2016. Son’s net income for 2016 is $200,000, and it declares $60,000 dividends on March 1 and $60,000 on Sep
> Calculate the parent’s income from its 75 percent–owned subsidiary if the reported net income of the subsidiary for the period is $100,000 and the consolidated entity has a constructive loss of $8,000 from the parent’s acquisition of subsidiary bonds.
> Prepare a journal entry (or entries) to account for the parent’s investment income for the current year if the reported income of its 80 percent–owned subsidiary is $50,000 and the consolidated entity has a $4,000 constructive gain from the subsidiary’s
> The following information related to intercompany bond holdings was taken from the adjusted trial balances of a parent and its 90 percent–owned subsidiary four years before the bond issue matured: Construct the consolidation workpaper
> If a subsidiary purchases parent bonds at a price in excess of recorded book value, is the gain or loss attributed to the parent or the subsidiary? Explain.
> Describe the process by which constructive gains on intercompany bonds are realized and recognized on the books of the affiliates. Does recognition of a constructive gain in consolidated financial statements precede or succeed recognition on the books of
> Compare a constructive gain on intercompany bonds with an unrealized gain on the intercompany sale of land.
> A company has a $1,000,000 bond issue outstanding with unamortized premium of $10,000 and unamortized issuance cost of $5,300. What is the book value of its liability? If an affiliate purchases half the bonds in the market at 98, what is the gain or loss
> Pop Corporation acquired 70 percent of the outstanding voting stock of Son Corporation for $182,000 cash on January 1, 2016, when Son’s stockholders’ equity was $260,000. All the assets and liabilities of Son were stat
> What are constructive gains and losses? Describe a transaction having a constructive gain.
> Do direct lending and borrowing transactions between affiliates give rise to unrealized gains or losses and unrecognized gains or losses?
> If a parent reports interest expense of $4,300 with respect to bonds held intercompany and the subsidiary reports interest income of $4,500 for the same bonds: (a) Was there a constructive gain or loss on the bonds? (b) Is the gain or loss attributed to
> What reciprocal accounts arise when one company borrows from an affiliate?
> A firm issues mandatorily redeemable preferred stock. Should this be classified as debt or equity in the consolidated financial statements?
> How should a company determine the fair value of long-term debt?
> Financial statements for Pop Corporation and its 75 percent–owned subsidiary, Son Corporation, for 2017 are summarized as follows (in thousands): Pop Corporation acquired its interest in Son at book value during 2014, when the fair va
> Selected amounts from the separate unconsolidated financial statements of Pam Corporation and its 90 percent–owned subsidiary, Sun Company, at December 31, 2016, are as follows (in thousands). ADDITIONAL INFORMATION: 1. On January 2,
> Pop Corporation acquired an 80 percent interest in Son Corporation on January 1, 2016, for $640,000, at which time Son had capital stock of $400,000 outstanding and retained earnings of $200,000. The price paid reflected a $200,000 undervaluation of Son&
> Financial statements for Pam Corporation and its 75 percent–owned subsidiary, Sun Corporation, for 2016 are summarized as follows (in thousands): Pam acquired its interest in Sun at book value during 2013, when the fair values of Sun&
> Pam Corporation purchased 75 percent of the outstanding voting stock of Sun Corporation for $4,800,000 on January 1, 2016. Sun’s stockholders’ equity on this date consisted of the following (in thousands): Capital sto
> Intercompany transactions between Pop Corporation and Son Corporation, its 80 percent–owned subsidiary, from January 2016, when Pop acquired its controlling interest, to December 31, 2019, are summarized as follows: 2016 P
> Partial adjusted trial balances for Pam Corporation and its 90 percent–owned subsidiary, Sun Corporation, for the year ended December 31, 2016, are as follows: Sun Corporation acquired $100,000 par of Pam’s bonds on
> Pop Corporation acquired an 80 percent interest in Son Corporation at book value equal to fair value on January 1, 2017, at which time Son’s capital stock and retained earnings were $200,000 and $80,000, respectively. On January 2, 2018, Son purchased $1
> Pop Corporation, which owns an 80 percent interest in Son Corporation, purchases $100,000 of Son’s 8 percent bonds at 106 on July 2, 2016. The bonds pay interest on January 1 and July 1 and mature on July 1, 2019. Pop uses the equity me
> Comparative income statements for Pam Corporation and its 80 percent–owned subsidiary, Sun Corporation, for the year ended December 31, 2017, are summarized as follows: Pam purchased its 80 percent interest in Sun at book value on Jan
> Pop Corporation has $8,000,000 of 12 percent bonds outstanding on December 31, 2016, with unamortized premium of $240,000. These bonds pay interest semiannually on July 1 and January 1 and mature on January 1, 2022. On January 2, 2017, Son Corporation, a
> The balance sheets of Pam and Sun Corporations, an 80 percent–owned subsidiary of Pam, at December 31, 2016, are as follows (in thousands): The book value of Pam’s bonds reflects a $100,000 unamortized discount. The
> The consolidated balance sheet of Pop Corporation and Son (an 80 percent–owned subsidiary) at December 31, 2016, includes the following items related to an 8 percent, $500,000 outstanding bond issue: Current Liabilities Bond interest payable (6 months’
> Comparative balance sheets of Pam and Sun Corporations at December 31, 2016, follow: Pam acquired 80 percent of Sun’s capital stock for $3,320,000 on January 1, 2014, when Sun’s capital stock was $4,000,000 and Sun&a
> Pop Corporation owns a 70 percent interest in Son Corporation acquired several years ago at book value equal to fair value. On January 1, 2016, Son had outstanding $1,000,000 of 9 percent bonds with a book value of $990,000. On January 2, 2016, Pop purch
> Pop Company paid $88,000 for an 80% interest in Son Company on January 5, 2016, when Son’s capital stock was $60,000 and its retained earnings $40,000. Trial balances for the companies at December 31, 2016, are as follows (in thousands)
> Comparative income statements for Pam Corporation and its 100 percent–owned subsidiary, Sun Corporation, for the year ended December 31, 2024, are summarized as follows: Pam purchased its interest in Sun at fair value equal to book va
> Pop Company acquired an 80 percent interest in Son Company on January 1, 2016, for $1,600,000 in excess of book value and fair value. On January 1, 2019, Pop had $4,000,000 par, 8 percent bonds outstanding with a $160,000 unamortized discount. On January
> Pam Corporation’s long-term debt on January 1, 2016, consists of $400,000 par value of 10 percent bonds payable due on January 1, 2020, with an unamortized discount of $8,000. On January 2, 2016, Sun Corporation, Pam’s 90 percentowned subsidiary, purchas
> Son Corporation is a 70 percent–owned subsidiary of Pop Corporation. On January 2, 2016, Son purchased $600,000 par of Pop’s $900,000 outstanding bonds for $602,000 in the bond market. Pop’s bonds have an 8 percent interest rate, pay interest on January
> 1. Which of the following is not a characteristic of a constructive retirement of bonds from an intercompany bond transaction? a Bonds are retired for consolidated statement purposes only. b The reciprocal intercompany bond investment and liability amoun
> What is the effect of intercompany sales of plant assets on the parent and consolidated net income in years subsequent to the year of sale?
> How does a parent eliminate the effects of unrealized gains on intercompany sales of plant assets under the equity method?
> Describe the computation of noncontrolling interest share in the year of an upstream sale of depreciable plant assets.
> How are unrealized gains and losses from intercompany transactions involving depreciable assets eventually realized?
> Consolidation workpaper entries are made to eliminate 100 percent of the unrealized profit from the land account in downstream sales of land. Is 100 percent also eliminated for upstream sales of land?
> Pop Company paid $198,000 for a 90 percent interest in Son on January 5, 2016, when Son’s capital stock was $120,000 and its retained earnings $40,000. Trial balances for the companies at December 31, 2019, are as follows (in thousands)
> How is the computation of noncontrolling interest share affected by downstream sales of land? By upstream sales of land?
> In accounting for unrealized profits and losses from intercompany sales of plant assets, does it make any difference if the parent is the purchaser or the seller? Would your answer be different if the subsidiary were 100 percent owned?
> Explain the sequence of workpaper adjustments and eliminations for unrealized gains and losses on depreciable plant assets. Is your answer affected by whether the intercompany transaction occurred in the current year or in prior years?
> What is the objective of eliminating the effects of intercompany sales of plant assets in preparing consolidated financial statements?
> What information should be disclosed about property, plant, and equipment in the consolidated financial statements?
> How should a company treat intercompany sales of assets in the consolidated financial statements?
> Separate company and consolidated financial statements for Pop Corporation and its only subsidiary, Son Corporation, for 2017 are summarized here. Pop acquired its interest in Son on January 1, 2016, at a price in excess of book value, which was due to a
> Financial statements for Pam and Sun Corporations for 2016 are as follows (in thousands): ADDITIONAL INFORMATION: 1. Pam acquired an 80 percent interest in Sun on January 2, 2014, for $290,000, when Sun’s stockholdersâ€
> Pam Corporation acquired an 80 percent interest in Sun Corporation on January 1, 2016, for $108,000 cash, when Sun’s capital stock was $100,000 and retained earnings were $10,000. The difference between investment fair value and book va
> The information needed to prepare the Cash Flow from Operating Activities section of Pop Corporation’s consolidated statement of cash flows is included in the following list (in thousands): Cash received from customers...................................
> Describe how total noncontrolling interest at the end of an accounting period is determined.
> Customer Rob Hufnagel owes Kellman Corp. $1,250. Kellman determines that the total amount is uncollectible and writes off all of Hufnagel’s debt. Hufnagel later pays $350 to Kellman. Required: Make the appropriate journal entries (if any) to record the
> At the beginning of the year, Kullerud Manufacturing had a credit balance in its allowance for doubtful accounts of $10,670, and at the end of the year it was a credit balance of $11,240. During the year, Kullerud made credit sales of $1,270,990, collect
> Perkinson Corporation sells paper products to a large number of retailers. Perkinson’s accountant has prepared the following aging schedule for its accounts receivable at the end of the year. Before adjusting entries are entered, the ba
> Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year. The balance in Glencoe’s allowance for doubtful accounts at the beginning of the year was $58,620 (credit). During the year, accounts in th
> Murphy Inc. maintains a balance of $2,500 in its petty cash fund. On December 31, Murphy’s petty cash account has a balance of $216. Murphy replenishes the petty cash account to bring it back up to $2,500. Murphy classifies all petty cash transactions as
> Bradford Plumbing had the following data for a recent year: Credit sales...................................................................................... $547,900 Allowance for doubtful accounts, 1/1 (a credit balance)................. 8,740 Accoun
> Gilmore Electronics had the following data for a recent year: Cash sales....................................................................................... $135,000 Credit sales........................................................................
> The accountant for Porile Company prepared the following data for sales and losses from uncollectible accounts: * Losses from uncollectible accounts are the actual losses related to sales of that year (rather than write-offs of that year). Required: 1.
> Rubin Enterprises had the following sales-related transactions on a recent day: a. Billed customer $27,500 on account for services already provided. b. Collected $5,875 in cash for services to be provided in the future. c. The customer complained about a
> Wilburton Riding Stables provides stables, care for animals, and grounds for riding and showing horses. The account balances at the beginning of 2019 were: During 2019, the following transactions occurred: a. Wilburton provided animal care services, all
> Citron Mechanical Systems makes all sales on credit, with terms 1/15, n/30. During 2019, the list price (pre discount) of services provided was $687,500. Customers paid $482,000 (list price) of these sales within the discount period and the remaining $20
> Chicago Inc. had a balance of $1,200 in cash in its petty cash fund at the beginning of September. The following transactions took place in September: a. On September 4, the custodian paid $75 out of petty cash for new stationery on which the company pre
> Nevada Company provided services with a list price of $48,500 to Small Enterprises with terms 2/15, n/45. Nevada records sales at gross. Required: 1. Prepare the entries to record this sale in Nevada’s journal. 2. Prepare the entry for Nevada’s journal
> What documents must be present to trigger the recording of a sale (and associated receivable) in the accounting records?
> A business borrows $1,000, signing a note that requires an interest rate of 12% per year and repayment of principal plus interest in a single payment at the end of 1 year. Calculate the total interest on the note. What is the amount of the single payment
> A business borrows $1,000, signing a note that requires repayment of the amount borrowed in two payments of $600 each, one at the end of each of the next two 6-month periods. Calculate the total interest on the note. What is the principal amount of the n
> What kind of account is allowance for doubtful accounts? What does it represent?
> Walker Department Store has one cash register. On a recent day, the cash register tape reported sales in the amount of $13,729.87. Actual cash in the register (after deducting and removing the opening change amount of $75) was $13,747.21, which was depos
> What is the conceptual difference between the (1) Percentage of credit sales and (2) Aging methods of estimating bad debts?
> Why is the direct write-off method not GAAP?
> How do these control activities help protect a company against error, theft, and fraud?
> Under the allowance method, why do we make an entry to record bad debt expense in the period of sale rather than in the period in which an account is determined to be uncollectible?
> What are the principal types of receivables?
> The cash account of Mason Products reveals the following information: The bank statement for May contains the following information: Bank balance, 4/30...................................................... $ 9,750 Add: Deposits during May...............
> What are sales returns?
> At what amount should sales revenue be recorded when sales discounts are present?
> When is a performance obligation satisfied?
> When is revenue recognized?
> How may analyzing sales and receivables provide information about a firm’s profitability?
> Describe the documents that underlie the typical accounting system for sales. Give an example of a failure of internal control that might occur if these documents were not properly prepared.
> On a recent day, Pence Company obtained the following data from its cash registers: Pence deposits its cash receipts in its bank account daily. Required: Prepare a journal entry to record these cash sales. Cash Sales per Register Tape $12,675.12 I1,4
> Port Austin Boat Repair Inc. has entered and posted its adjusting entries for 2019. The following are selected account balances after adjustment: Required: 1. Using the accounts and balances above, prepare the closing entries for 2019. 2. Prepare an inc
> Why is interest typically charged on notes receivable, but not on accounts receivable?
> Accepting major credit cards requires the seller to pay a service charge. What advantages does the seller obtain by accepting major credit cards?
> Describe what happens when receivables are factored.
> Donald Corporation received the bank statement shown below for the month of October: *NSF check **Debit memo (Rent Expense) ***Service charge The cash records of Donald Corporation provide the following information: The items on the bank statement are co
> How much interest will be due at maturity for each of the following interest-bearing notes? Principal Months to Maturity Annual Interest Rate $10,000 42,000 18,000 37,000 a. 12% b. 14 с. 13 d. 11 2546
> Why do companies issue credit when their past experience indicates that some customers will not pay?
> What are trade discounts and quantity discounts?
> What are sales allowances? How do sales allowances differ from sales discounts?
> Why are sales discounts offered?
