All Related Questions of Subsidiary

Q: Lebron Co. owns most but not all of the shares of

Lebron Co. owns most but not all of the shares of its subsidiary Bryant Inc. Lebron reported net income of $124,700. The amount to be attributed to the non-controlling interest in Bryant is $30,000....

Q: Wade Corp. has 150,000 shares of common stock outstanding

Wade Corp. has 150,000 shares of common stock outstanding. In 2014, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in t...

Q: As audit partner for Grupo and Rijo, you are in charge

As audit partner for Grupo and Rijo, you are in charge of reviewing the classification of unusual items that have occurred during the current year. The following material items have come to your att...

Q: Presented below is a list of items that could be included in

Presented below is a list of items that could be included in the intangible assets section of the balance sheet. 1. Investment in a subsidiary company. 2. Timberland. 3. Cost of engineering activ...

Q: Presented below are a number of independent situations.1.

Presented below are a number of independent situations. 1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to subsidiary of $980,000; utility deposit paid to gas...

Q: Marvin Company is a subsidiary of Hughes Corp. The controller believes

Marvin Company is a subsidiary of Hughes Corp. The controller believes that the yearly allowance for doubtful accounts for Marvin should be 2% of net credit sales. Given the recession and the high i...

Q: Simms Corp. controlled four domestic subsidiaries and one foreign subsidiary.

Simms Corp. controlled four domestic subsidiaries and one foreign subsidiary. Prior to the current year, Simms Corp. had excluded the foreign subsidiary from consolidation. During the current year, th...

Q: You have completed the field work in connection with your audit of

You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2014. The balance sheet accounts at the beginning and end of the year are shown...

Q: You are auditing the December 31, 2014, financial statements of

You are auditing the December 31, 2014, financial statements of Hockney, Inc., manufacturer of novelties and party favors. During your inspection of the company garage, you discovered that a used auto...

Q: Thinken Technology recently merged with College Electronix (CE), a computer

Thinken Technology recently merged with College Electronix (CE), a computer graphics manufacturing firm. In performing a comprehensive audit of CE’s accounting system, Gerald Ott, internal audit manag...

Q: The City of Marion adopted the following General Fund budget for fiscal

The City of Marion adopted the following General Fund budget for fiscal year 2011: Required a. Assuming that a city ordinance mandates a balanced budget, what must be the minimum amount in the Fund...

Q: During July 2010, the first month of the 2011 fiscal year

During July 2010, the first month of the 2011 fiscal year, the City of Marion issued the following purchase orders and contracts, Required a. Show the general journal entry to record the issuance of...

Q: The printout of the Estimated Revenues and Revenues subsidiary ledger accounts for

The printout of the Estimated Revenues and Revenues subsidiary ledger accounts for the General Fund of the City of Salem as of February 28, 2011, appeared as follows: Required Assuming that this pri...

Q: The Town of Bedford Falls approved a General Fund operating budget for

The Town of Bedford Falls approved a General Fund operating budget for the fiscal year ending June 30, 2011. The budget provides for estimated revenues of $2,700,000 as follows: property taxes, $1,900...

Q: The Village of Darby’s budget calls for property tax revenues for the

The Village of Darby’s budget calls for property tax revenues for the fiscal year ending December 31, 2011, of $2,660,000. Village records indicate that, on average, 2 percent of taxes levied are not...

Q: The Village of Baxter uses the purchases method of accounting for its

The Village of Baxter uses the purchases method of accounting for its inventories of supplies in the General Fund. GASB standards, however, require that the consumption method be used for the governme...

Q: The following transactions affected various funds and activities of the City of

The following transactions affected various funds and activities of the City of Atwater. 1. The Fire Department, a governmental activity, purchased $100,000 of water from the Water Utility Fund, a bus...

Q: The City of Ashland’s General Fund had the following post-closing

The City of Ashland’s General Fund had the following post-closing trial balance at April 30, 2010, the end of its fiscal year: During the year ended April 30, 2011, the following t...

Q: The following are examples of documentation typically obtained by auditors:

The following are examples of documentation typically obtained by auditors: 1. Vendors' invoices 2. General ledger files 3. Bank statements 4. Cancelled payroll checks 5. Payroll time records 6. Purch...

Q: For each engagement described below, indicate whether the engagement is likely

For each engagement described below, indicate whether the engagement is likely to be conducted under international auditing standards, U.S. generally accepted auditing standards, or PCAOB auditing sta...

Q: The following questions concern internal controls in the acquisition and payment cycle

The following questions concern internal controls in the acquisition and payment cycle. Choose the best response. a. A client erroneously recorded a large purchase twice. Which of the following intern...

Q: The following are a list of possible errors or fraud (1

The following are a list of possible errors or fraud (1 through 5) involving cash receipts and controls (a through g) that may prevent or detect the errors or fraud: Possible Errors or Fraud 1. Custom...

Q: The following questions address fraud risks in specific audit areas and accounts

The following questions address fraud risks in specific audit areas and accounts. a. Cash receipts from sales on account have been misappropriated. Which of the following acts will conceal this embezz...

Q: The following are various changes in audit circumstances. Audit Circumstance

The following are various changes in audit circumstances. Audit Circumstance 1. Analytical procedures indicated a significant slowing in accounts receivable turnover. 2. The client entered into sales...

Q: For each of the following types of misstatements (parts a through

For each of the following types of misstatements (parts a through d), select the control that should have prevented the misstatement: a. A manufacturing company received a substantial sales return in...

Q: The following internal controls were tested in prior audits. Evaluate each

The following internal controls were tested in prior audits. Evaluate each internal control independently and determine which controls must be tested in the current year's audit of the December 31, 20...

Q: An investment in a foreign subsidiary is estimated to have a positive

An investment in a foreign subsidiary is estimated to have a positive NPV after the discount rate used in the calculations is adjusted for political risk and any advantages from diversification. Does...

Q: Lakonishok Equipment has an investment opportunity in Europe. The project costs

Lakonishok Equipment has an investment opportunity in Europe. The project costs €19 million and is expected to produce cash flows of €3.6 million in Year 1,€4.1 million in Year 2, and €5.1 million in...

Q: You are evaluating a proposed expansion of an existing subsidiary located in

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 25 million. The cash flows from the project would be SF 6.9 million per...

Q: Discuss whether the following items would meet the definition of an asset

Discuss whether the following items would meet the definition of an asset using the IFRS definitions currently in place. If so, explain with reference to the appropriate criteria. (a) Maxwell Ltd. own...

Q: Refer to BE2-4. Discuss whether the items identified would

Refer to BE2-4. Discuss whether the items identified would be considered assets if the definition proposed by IFRS were applied. BE2·4 Discuss whether the following items would meet the definition o...

Q: Comminc Industries (CI) is a leader in delivering communications technology

Comminc Industries (CI) is a leader in delivering communications technology that powers global commerce and secures the world's most critical information. Its shares trade on the Canadian and U.S. nat...

Q: The statement of financial position of Rodges Corporation follows (in thousands

The statement of financial position of Rodges Corporation follows (in thousands): Instructions Evaluate the statement of financial position. Briefly describe the proper treatment of any item that you...

Q: Assume that PAC Inc. decided to sell SBT, a subsidiary

Assume that PAC Inc. decided to sell SBT, a subsidiary, on September 30, 2014. There is a formal plan to dispose of the business component, and the sale qualifies for discontinued operations treatment...

Q: Faldo Corp. is a public company and has 100,000

Faldo Corp. is a public company and has 100,000 common shares outstanding. In 2014, the company reported income from continuing operations before income tax of $2,710,000. Additional transactions not...

Q: As a reviewer for the Ontario Securities Commission, you are in

As a reviewer for the Ontario Securities Commission, you are in the process of reviewing the financial statements of public companies. The following items have come to your attention: 1. A merchandisi...

Q: TEL US Corporation is one of Canada’s; largest telecommunications companies and

TEL US Corporation is one of Canada’s; largest telecommunications companies and provides both products and services. Its shares are traded on the Toronto and New York stock exchanges. The credit facil...

Q: Rudolph Corp. is a subsidiary of Hundey Corp. The ethical

Rudolph Corp. is a subsidiary of Hundey Corp. The ethical accountant, working as Rudolph's controller, believes that the yearly charge for doubtful accounts for Rudolph should be 2% of net credit sale...

Q: Canadian Tire Corporation, Limited is one of Canada's best-known

Canadian Tire Corporation, Limited is one of Canada's best-known retailers. The company operates 488 "hard-goods" retail stores through associate dealers, and a total of 385 corporate and franchise st...

Q: Several independent situations follow. l. Chequing account balance $

Several independent situations follow. l. Chequing account balance $625,000; certificate of deposit $1.1 million; cash advance to subsidiary $980,000; utility deposit paid to gas company $ 180. 2. Che...

Q: Theriault Inc. shows a balance of $420,289 in

Theriault Inc. shows a balance of $420,289 in the Accounts Receivable account on December 31, 2014. The balance consists of the following: Instructions Show how the information above should be presen...

Q: The following is a list of items that could be included in

The following is a list of items that could be included in the intangible assets section of the statement of financial position: 1. An investment in a subsidiary company 2. Timberland 3. The cost of a...

Q: Berrie Inc. has the following amounts included in its general ledger

Berrie Inc. has the following amounts included in its general ledger at December 31, 2014: Organization costs ………………………………………………………………….…………….. $34,000 Purchased trademark ………………………………………………………….……..…...

Q: Six examples follow of purchased intangible assets. They are reported on

Six examples follow of purchased intangible assets. They are reported on the consolidated statement of financial position of Phelp Enterprises Limited and include information about their useful and le...

Q: Beckett Corp. is facing a decision of whether to purchase 40

Beckett Corp. is facing a decision of whether to purchase 40% of Kyla Corp.'s shares for $1.6 million cash, giving Beckett significant influence over the investee company, or 60% of Kyla's shares for...

Q: The following are two independent situations. Situation 1: Lauren

The following are two independent situations. Situation 1: Lauren Inc. received dividends from its common share investments during the year ended December 31, 2014, as follows: • A cash dividend of $1...

Q: Refer to the annual financial statements of Shoppers Drug Mart for its

Refer to the annual financial statements of Shoppers Drug Mart for its fiscal year ended December 31, 2011, found in Appendix 5B. Instructions (a) Review Shoppers Drug Mart's balance sheet. Identify...

Q: After all foreign and U.S. taxes, a U

After all foreign and U.S. taxes, a U.S. corporation expects to receive 3 pounds of dividends per share from a British subsidiary this year. The exchange rate at the end of the year is expected to be...

Q: Peripatetic Enterprises, a U.S. import-export trading

Peripatetic Enterprises, a U.S. import-export trading firm, is considering its international tax situation. Tax law in the Unites States requires U.S. corporations to pay taxes on their foreign earnin...

Q: Tailor Johnson, a U.S. maker of fine menswear

Tailor Johnson, a U.S. maker of fine menswear, has a subsidiary in Ethiopia. This year, the subsidiary reported and repatriated earnings before interest and taxes (EBIT) of 100 million Ethiopian birrs...

Q: The following actions occurred at Sanibel Sheet Metal Company relative to accounting

The following actions occurred at Sanibel Sheet Metal Company relative to accounting for materials costs for April. Mar. 31 The factory manager informs the storeroom keeper that for the month of April...

Q: Which of the forms shown in the chapter is the source for

Which of the forms shown in the chapter is the source for the following entries to subsidiary ledger accounts? a. Debits in materials ledger to record materials purchased b. Credits in materials ledg...

Q: GGT Products, Inc., uses a job order cost system.

GGT Products, Inc., uses a job order cost system. Selected transactions dealing with factory items for the month follow: a. Requisitioned indirect materials from storeroom, $3,200. b. Purchased, on a...

Q: GlaxoSmithKline Plc. (GSK) is a global pharmaceutical and consumer

GlaxoSmithKline Plc. (GSK) is a global pharmaceutical and consumer health-related products company located in the United Kingdom. The company prepares its financial statements in accordance with Inter...

Q: Marshall Companies, Inc., holds a note receivable from a former

Marshall Companies, Inc., holds a note receivable from a former subsidiary. Due to financial difficulties, the former subsidiary has been unable to pay the previous year’s interest on the note. Marsha...

Q: The unadjusted trial balance of the Manufacturing Equitable at December 31,

The unadjusted trial balance of the Manufacturing Equitable at December 31, 2018, the end of its fiscal year, included the following account balances. Manufacturing’s 2018 financial statements were is...

Q: The following events are indicated in note 15 of J. Crew’s

The following events are indicated in note 15 of J. Crew’s 10-K annual report for the fiscal year ended January 29, 2011, and its 10-K was filed on March 21, 2011. Acquisition On November 23, 2010, th...

Q: There is often more than one way to improve a performance measure

There is often more than one way to improve a performance measure. Unfortunately, some of the actions taken by managers to make their performance look better may actually harm the organization. For ex...

Q: Explain the difference between the general ledger and a subsidiary ledger.

Explain the difference between the general ledger and a subsidiary ledger.

Q: The issuance of FASB guidance regarding consolidation of all majority-owned

The issuance of FASB guidance regarding consolidation of all majority-owned subsidiaries required Ford Motors to include a previously unconsolidated finance subsidiary as part of the reporting entity....

Q: Indicate with the appropriate letter the nature of each situation described below

Indicate with the appropriate letter the nature of each situation described below: Type of Change PR ……………………. Change in principle reported retrospectively PP …………..………… Change in principle reported p...

Q: Explain whether a corporate shareholder recognizes gains and losses on the receipt

Explain whether a corporate shareholder recognizes gains and losses on the receipt of distributions of property from the complete liquidation of a subsidiary corporation.

Q: Robert and Sylvia propose to have their corporation, Wolverine Universal (

Robert and Sylvia propose to have their corporation, Wolverine Universal (WU), acquire another corporation, EMU, Inc., in a tax-deferred triangular Type A merger using an acquisition subsidiary of WU....

Q: Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan.

Spartan Corporation manufactures quidgets at its plant in Sparta, Michigan. Spartan sells its quidgets to customers in the United States, Canada, England, and Australia. Spartan markets its products...

Q: Consider the following two situations: For the situations presented,

Consider the following two situations: For the situations presented, describe the recommendations the internal auditors should make to prevent the following problems. Situation 1: Many employees...

Q: The transactions completed by Revere Courier Company during December, the first

The transactions completed by Revere Courier Company during December, the first month of the fiscal year, were as follows: Dec. 1. Issued Check No. 610 for December rent, $4,200. 2. Issued Invoice No....

Q: A subsidiary ledger is used for accounts receivable and accounts payable.

A subsidiary ledger is used for accounts receivable and accounts payable. Thus, transactions that are made “on account” are posted to the individual customer or creditor accounts. a. Why do companies...

Q: West Texas Exploration Co. was established on October 15 to provide

West Texas Exploration Co. was established on October 15 to provide oil-drilling services. West Texas uses field equipment (rigs and pipe) and field supplies (drill bits and lubricants) in its operati...

Q: The transactions completed by AM Express Company during March, the first

The transactions completed by AM Express Company during March, the first month of the fiscal year, were as follows: Mar. 1. Issued Check No. 205 for March rent, $2,450. 2. Purchased a vehicle on accou...

Q: Sage Learning Centers was established on July 20 to provide educational services

Sage Learning Centers was established on July 20 to provide educational services. The services provided during the remainder of the month are as follows: July 21. Issued Invoice No. 1 to J. Dunlop for...

Q: Guardian Security Services was established on January 15 to provide security services

Guardian Security Services was established on January 15 to provide security services. The services provided during the remainder of the month are as follows: Jan. 18. Issued Invoice No. 1 to Murphy C...

Q: Transactions related to revenue and cash receipts completed by Crowne Business Services

Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period April 2–30 are as follows: Apr. 2. Issued Invoice No. 793 to Ohr Co., $4...

Q: Plumb Line Surveyors provides survey work for construction projects. The office

Plumb Line Surveyors provides survey work for construction projects. The office staff use office supplies, while surveying crews use field supplies. Purchases on account completed by Plumb Line Survey...

Q: Transactions related to revenue and cash receipts completed by Sterling Engineering Services

Transactions related to revenue and cash receipts completed by Sterling Engineering Services during the period June 2–30 are as follows: June 2. Issued Invoice No. 717 to Yee Co., $1...

Q: Transactions related to purchases and cash payments completed by Wisk Away Cleaning

Transactions related to purchases and cash payments completed by Wisk Away Cleaning Services Inc. during the month of May 20Y5 are as follows: May 1. Issued Check No. 57 to Bio Safe Supplies Inc. in p...

Q: Happy Tails Inc. has a September 1, 20Y4, accounts

Happy Tails Inc. has a September 1, 20Y4, accounts payable balance of $620, which consists of $320 due Labradore Inc. and $300 due Meow Mart Inc. Transactions related to purchases and cash payments co...

Q: After Bunker Hill Assay Services Inc. had completed all postings for

After Bunker Hill Assay Services Inc. had completed all postings for March in the current year (20Y4), the sum of the balances in the following accounts payable ledger did not agree with the $36,600 b...

Q: The debits and credits from three related transactions are presented in the

The debits and credits from three related transactions are presented in the following customer’s account taken from the accounts receivable subsidiary ledger: Describe each transac...

Q: Transactions related to revenue and cash receipts completed by Sycamore Inc.

Transactions related to revenue and cash receipts completed by Sycamore Inc. during the month of March 20Y8 are as follows: Mar. 2. Issued Invoice No. 512 to Santorini Co., $905. 4. Received cash from...

Q: Lasting Summer Inc. has $2,510 in the October

Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash...

Q: Using the following purchases journal, identify each of the posting references

Using the following purchases journal, identify each of the posting references, indicated by a letter, as representing (1) A posting to a general ledger account, (2) A posting to a subsidiary ledger a...

Q: Using the following cash payments journal, identify each of the posting

Using the following cash payments journal, identify each of the posting references, indicated by a letter, as representing (1) A posting to a general ledger account, (2) A posting to a subsidiary ledg...

Q: Sterling Forest Landscaping designs and installs landscaping. The landscape designers and

Sterling Forest Landscaping designs and installs landscaping. The landscape designers and office staff use office supplies, while field supplies (rock, bark, etc.) are used in the actual landscaping....

Q: AquaFresh Water Testing Service was established on April 16. AquaFresh uses

AquaFresh Water Testing Service was established on April 16. AquaFresh uses field equipment and field supplies (chemicals and other supplies) to analyze water for unsafe contaminants in streams, lakes...

Q: For the past few years, your client, Omni Care,

For the past few years, your client, Omni Care, has operated a small medical practice. Omni Care’s current annual revenues are $945,000. Because the accountant has been spending more time each month r...

Q: During the current month, the following errors occurred in recording transactions

During the current month, the following errors occurred in recording transactions in the purchases journal or in posting from it: a. An invoice for $1,875 of supplies from Kelly Co. was recorded as ha...

Q: Classify the following as a transaction reported in a sub-component

Classify the following as a transaction reported in a sub-component of the current account, or the capital and financial accounts of the two countries involved: a. A U.S. food chain imports wine from...

Q: Palisade Creek Co. is a merchandising business that uses the perpetual

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2019 (unless otherwise indicated), are as follows: D...

Q: Prior to adjustment at the end of the year, the balance

Prior to adjustment at the end of the year, the balance in Trucks is $296,900 and the balance in Accumulated Depreciation—Trucks is $99,740. Details of the subsidiary ledger are as f...

Q: Palisade Creek Co. is a merchandising business that uses the perpetual

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2019 (unless otherwise indicated), are as follows: D...

Q: Prior to adjustment at the end of the year, the balance

Prior to adjustment at the end of the year, the balance in Trucks is $296,900 and the balance in Accumulated Depreciation—Trucks is $99,740. Details of the subsidiary ledger are as f...

Q: Subsidiary Alpha in Country Able faces a 40% income tax rate

Subsidiary Alpha in Country Able faces a 40% income tax rate. Subsidiary Beta in Country Baker faces only a 20% income tax rate. Presently each subsidiary imports from the other an amount of goods and...

Q: In the context of unbundling cash flows from subsidiary to parent,

In the context of unbundling cash flows from subsidiary to parent, why might a host government be more lenient in its treatment of fees than its treatment of dividends? What difference does it make to...

Q: Assume a firm purchases inventory with one foreign currency and sells it

Assume a firm purchases inventory with one foreign currency and sells it for another foreign currency, neither currency being the home currency of the parent or subsidiary where the manufacturing proc...

Q: What is the difference between a foreign branch and a foreign subsidiary

What is the difference between a foreign branch and a foreign subsidiary of a home-country bank?

Q: In the context of unbundling cash flows from subsidiary to parent,

In the context of unbundling cash flows from subsidiary to parent, explain how each of the following creates a conduit. What are the tax consequences of each? a. Imports of components from the parent....

Q: Subsidiary Alpha in Country Able faces a 40% income tax rate

Subsidiary Alpha in Country Able faces a 40% income tax rate. Subsidiary Beta in Country Baker faces only a 20% income tax rate. At present each subsidiary imports from the other an amount of goods an...

Q: What is the difference between a self-sustaining foreign subsidiary and

What is the difference between a self-sustaining foreign subsidiary and an integrated foreign subsidiary?

Q: Taxes are classified on the basis of whether they are applied directly

Taxes are classified on the basis of whether they are applied directly to income, called direct taxes, or to some other measurable performance characteristic of the firm, called indirect taxes. Identi...

Q: A foreign subsidiary does not have an independent cost of capital.

A foreign subsidiary does not have an independent cost of capital. However, in order to estimate the discount rate for a comparable host country firm, the analyst should try to calculate a hypothetica...

Q: Assume that Goss has a subsidiary company based in Japan.

Assume that Goss has a subsidiary company based in Japan. Requirements 1. Translate into dollars the foreign-currency balance sheet of the Japanese subsidiary of Goss. ____________________________Yen...

Q: Assume that Mattson has a subsidiary company based in Japan.

Assume that Mattson has a subsidiary company based in Japan. Requirements 1. Translate into dollars the foreign-currency balance sheet of the Japanese subsidiary of Mattson. _________________________...

Q: This case is based on the consolidated financial statements of RadioShack Corporation

This case is based on the consolidated financial statements of RadioShack Corporation given in Appendix B at the end of this book. 1. Read Note 4: Acquisitions. Does RadioShack Corporation own any for...

Q: The company being audited has an internal auditor who is both competent

The company being audited has an internal auditor who is both competent and objective. The independent auditor wants to assign tasks for the internal auditor to perform. Under these circumstances, the...

Q: Which of the following would the auditor consider to be an incompatible

Which of the following would the auditor consider to be an incompatible operation if the cashier receives remittances? a. The cashier prepares the daily deposit. b. The cashier makes the daily deposit...

Q: Which of these arrangements of duties could most likely lead to an

Which of these arrangements of duties could most likely lead to an embezzlement or theft? a. The inventory warehouse manager has responsibility for making the physical inventory observation and reconc...

Q: You are the in-charge auditor examining the financial statements of

You are the in-charge auditor examining the financial statements of the Gutzler Company for the year ended December 31. During late October, with the help of Gutzler’s controller, yo...

Q: Immediately upon receipt of cash, a responsible employee should a

Immediately upon receipt of cash, a responsible employee should a. Record the amount in the cash receipts journal. b. Prepare a remittance listing. c. Update the subsidiary accounts receivable records...

Q: Exhibit 7.64.1 contains an arrangement of examples of

Exhibit 7.64.1 contains an arrangement of examples of transaction errors (lettered a–g) and a set of client control procedures and devices (numbered 1–15). Require...

Q: Each morning the controller gets the prior day’s list of remittances,

Each morning the controller gets the prior day’s list of remittances, a copy of the payment report, and a copy of the deposit slip returned from the bank. When comparing these items, the controller wo...

Q: The study and evaluation of management risk mitigation control is not easy

The study and evaluation of management risk mitigation control is not easy. First, auditors must determine the risks and the controls subject to audit. Then they must find a standard by which performa...

Q: The following narrative description of a company’s cash receipts and billing system

The following narrative description of a company’s cash receipts and billing system is in the auditors’ audit files: Rural Building Supplies Inc. is a single-store retailer that sells a variety of too...

Q: Upon receipt of customers’ checks in the mail room, a responsible

Upon receipt of customers’ checks in the mail room, a responsible employee should prepare a remittance list that is forwarded to the cashier. A copy of the list should be sent to the a. Internal audit...

Q: Cash receipts from sales on account have been misappropriated. Which of

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor? a. Understating the sales jo...

Q: Cash receipts from sales on account have been misappropriated. Which of

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor? a. Understating the sales jo...

Q: You are the continuing auditor of Sussex Inc. and are beginning

You are the continuing auditor of Sussex Inc. and are beginning the audit of the common stock and treasury stock accounts. You have decided to design substantive procedures with reliance on internal c...

Q: Follow the instructions preceding the case in problem 10.60.

Follow the instructions preceding the case in problem 10.60. Write the audit approach section like the cases in the chapter. In Plane View Whiz Corporation owned 160,000 shares of Wing Company stock,...

Q: Which of the following is the best audit procedure for determining the

Which of the following is the best audit procedure for determining the existence of unrecorded liabilities? a. Examine confirmation requests returned by creditors whose accounts are on a subsidiary tr...

Q: An audit plan to examine long-term debt most likely would

An audit plan to examine long-term debt most likely would include steps that require a. Comparing the carrying amount of held-to-maturity securities with their year-end market values. b. Correlating i...

Q: You are supervising the audit fieldwork of Sparta Springs Company and need

You are supervising the audit fieldwork of Sparta Springs Company and need certain information from Sparta’s equipment records, which are maintained on a computer file. The particular information is (...

Q: Which of the following internal control activities most likely addresses the completeness

Which of the following internal control activities most likely addresses the completeness assertion for inventory? a. The work-in-process account is periodically reconciled with subsidiary inventory r...

Q: Lando Corporation is a domestic company with two wholly owned subsidiaries.

Lando Corporation is a domestic company with two wholly owned subsidiaries. Michaels, CPA, has been engaged to audit the financial statements of the parent company and one of its subsidiaries and to s...

Q: Assume that the auditors encountered the following separate situations when deciding on

Assume that the auditors encountered the following separate situations when deciding on the report to issue for the current-year financial statements. 1. The auditors decided that sufficient appropri...

Q: An audit team is auditing sales transactions. One step is to

An audit team is auditing sales transactions. One step is to vouch a sample of debit entries from the accounts receivable subsidiary ledger back to the supporting sales invoices. The purpose of this a...

Q: In January 2002 the government of Argentina broke away from its currency

In January 2002 the government of Argentina broke away from its currency board system that had tied the peso to the U.S. dollar, and devalued the peso from APs1.0000/$ to APs1.4000/$. This caused some...

Q: Was Linderman Industries’ adoption of project organization an appropriate one for getting

Was Linderman Industries’ adoption of project organization an appropriate one for getting the Mexican subsidiary started?

Q: On subsidized Stafford loans, a common source of financial aid for

On subsidized Stafford loans, a common source of financial aid for college students, interest does not begin to accrue until repayment begins. Who receives a bigger subsidy, a freshman or a senior? Ex...

Q: USCo, a U.S. corporation, has decided to

USCo, a U.S. corporation, has decided to set up a headquarters subsidiary in Europe. Management has narrowed its location choice to either Spain, Ireland, or Switzerland. The company has asked you t...

Q: Petoskey Stone, Inc., a U.S. corporation,

Petoskey Stone, Inc., a U.S. corporation, received the following sources of income during the current year. Identify the source of each item as either U.S. or foreign. a. Interest income from a loan t...

Q: An acquired firm’s financial records sometimes show goodwill from previous business combinations

An acquired firm’s financial records sometimes show goodwill from previous business combinations. How does a parent company account for the preexisting goodwill of its newly acquired subsidiary? a. Th...

Q: What is push-down accounting? a. A requirement

What is push-down accounting? a. A requirement that a subsidiary must use the same accounting principles as a parent company. b. Inventory transfers made from a parent company to a subsidiary. c. A su...

Q: On January 1, 2018 Casey Corporation exchanged $3,300

On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with...

Q: Pratt Company acquired all of Spider, Inc.’s outstanding shares

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal...

Q: On December 31, Pacifica, Inc., acquired 100 percent of

On December 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as a wholly owned subsidiary with its own legal and accounting identity. The...

Q: Explain how a non-consolidated subsidiary can be a form of

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Polska Corporation, in preparation of its December 31, 2012, financial statements, is attempting to determine the proper accounting treatment for each of the following situations. 1. As a result of un...

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Polska Corporation, in preparation of its December 31, 2012, financial statements, is attempting to determine the proper accounting treatment for each of the following situations. 1. As a result of un...

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Inc. In 1993 Icelandic Enterprises was incorporated in Reykjavik to manufacture and distribute women’s cosmetics in Iceland. All of its outstanding stock was acquired at the beginnin...

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Ninsuvaan Corporation, a U.S. subsidiary in Bangkok, Thailand, begins and ends its calendar year with an inventory balance of BHT500 million. The dollar/baht exchange rate on January 1 was $0.02 = BHT...

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Based on the balance sheet and income statement data contained in Exhibit 9-5, and using the suggested worksheet format shown in Exhibit 9-20 or one of your own choosing, show how the statement of cas...

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Kowloon Trading Company, a wholly owned subsidiary incorporated in Hong Kong, imports macadamia nuts from its parent company in Honolulu for export to various duty-free shops in the Far East. During t...

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A foreign subsidiary of Thun Corporation has one asset (inventory) and no liabilities. The functional currency for this subsidiary is the yuan. The inventory was acquired for 100,000 yuan when the exc...

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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 percent. A...

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Q: What amount of foreign exchange gain or loss should be reflected in

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Q: The Isle of Palms Company (IOP), a U.S

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, 2016...

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Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2016, the subsidiary had the following balance sheet (amounts are in...

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Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 20,000 dinars, accounts receivable of 80,000 dinars, and land that cost 200,000 dinars...

Q: Lancer, Inc. (a U.S.-based company

Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ),...

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Board Company has a foreign subsidiary that began operations at the start of 2017 with assets of 132,000 kites (the local currency unit) and liabilities of 54,000 kites. During this initial year of op...

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Q: Why might a subsidiary decide to issue new shares of common stock

Why might a subsidiary decide to issue new shares of common stock to parties outside the business combination?

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Charles Edward Company established a subsidiary in a foreign country on January 1, 2017, by investing FC 3,200,000 when the exchange rate was $0.50/FC. Charles Edward negotiated a bank loan of FC 3,00...

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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 20...

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A subsidiary has a debt outstanding that was originally issued at a discount. At the beginning of the current year, the parent company acquired the debt at a slight premium from outside parties. Which...

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Net cash flows from operating activities were a. $12,000 b. $20,000 c. $24,000 d. $25,000 Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned sub...

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Net cash flows from financing activities were a. $(25,000) b. $(37,000) c. $(38,000) d. $(42,000) Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–o...

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In July 2004, the U.S. government filed civil and criminal charges against four former executives of Netherlands-based Ahold’s subsidiary U.S. Foodservice, Inc., an operator of supermarkets such as Bi...

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Q: Under what conditions would you recommend that the foreign subsidiary conform to

Under what conditions would you recommend that the foreign subsidiary conform to the local norm of financial structure?

Q: Following such high-profile corporate scandals as Enron and WorldCom in

Following such high-profile corporate scandals as Enron and WorldCom in the UnitedStates, European business executives smugly proclaimed that the same could not happenon their side of the Atlantic as...

Q: It is Tuesday afternoon, February 14, 2012. Richard May

It is Tuesday afternoon, February 14, 2012. Richard May, Assistant Treasurer atAmerican Digital Graphics (ADG), sits in his office on the thirty-fourth floor of thebuilding that dominates Rockefeller...

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The Alpha Company plans to establish a subsidiary in Hungary to manufactureand sell fashion wristwatches. Alpha has total assets of $70 million, of which$45 million is equity financed. The remainder i...

Q: Discuss the conditions under which the capital expenditure of a foreign subsidiary

Discuss the conditions under which the capital expenditure of a foreign subsidiary might have a positive NPV in local currency terms but be unprofitable from the parent firm’s perspective.

Q: Exhibit 8.29 presents the separate financial statements at December 31

Exhibit 8.29 presents the separate financial statements at December 31, 2015, of Prestige Resorts and its 80%-owned subsidiary Booking, Inc. Two years earlier on January 1, 2014, Prestige acquired 80%...

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Foreign Sub is a wholly owned subsidiary of U.S. Domestic Corporation. U.S. Domestic Corporation acquired the subsidiary several years ago. The financial statements for Foreign Sub for 2014 in its own...

Q: Stebbins Corporation established a wholly owned Canadian subsidiary on January 1,

Stebbins Corporation established a wholly owned Canadian subsidiary on January 1, Year 1, by contributing US$500,000 for all of the subsidiary’s common stock. The exchange rate on th...

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Refer to Problem 8.25 for Stebbins Corporation for Year 1, its first year of operations. Exhibit 8.34 shows the amounts for the Canadian subsidiary for Year 2. The average exchange rate during Year 2...

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Henry Company is a marketer of branded foods to retail and foodservice channels. Exhibit 6.18 presents Henry’s income statements for Year 10, Year 11, and Year 12. Notes to the finan...

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On June 24, Year 4, a major airline entered into a revolving accounts receivable facility (Facility) providing for the sale of $489 million of a defined pool of accounts receivable (Receivables) throu...

Q: Vulcan Materials Company, a member of the S&P 500

Vulcan Materials Company, a member of the S&P 500 Index, is the nation’s largest producer of construction aggregates, a major producer of asphalt mix and concrete, and a leading...

Q: Steller Corporation had the following transactions in June: /

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Q: When dealing with receivables, give an example of a subsidiary account

When dealing with receivables, give an example of a subsidiary account.

Q: What type of account must the sum of all subsidiary accounts be

What type of account must the sum of all subsidiary accounts be equal to?

Q: Why do businesses use subsidiary ledgers?

Why do businesses use subsidiary ledgers?

Q: From the perspective of the parent corporation, contrast the tax consequences

From the perspective of the parent corporation, contrast the tax consequences of a subsidiary liquidation under the general nonrecognition rules with a subsidiary liquidation that follows a § 338 elec...

Q: Jerry Jeff Keen, the CFO of Boots Unlimited, a Texas

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Paloma purchased all of the outstanding Dove stock six years ago. Dove has prospered under Paloma’s direction, and now Hawk Corporation is interested in acquiring Dove, but not directly. Hawk forms a...

Q: True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated

True Corporation, a wholly owned subsidiary of Trumaine Corporation, generated a $400,000 taxable loss in its first year of operations. True’s activities and sales are restricted to...

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A subsidiary corporation is liquidated under § 332. Pursuant to its liquidation, the subsidiary distributed property to a minority shareholder. With respect to this distribution, what are the tax cons...

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Goose Corporation has a basis of $2.4 million in the stock of Swift Corporation, a wholly owned subsidiary acquired 30 years ago. Goose liquidates Swift Corporation and receives assets that are worth...

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Roadrunner, Inc., is an exempt medical organization. Quail, Inc., a sporting goods retailer, is a wholly owned subsidiary of Roadrunner. Roadrunner inherited the Quail stock last year from a major ben...

Q: Partin, Inc., a foreign subsidiary of Jones, Inc.,

Partin, Inc., a foreign subsidiary of Jones, Inc., a U.S. corporation, reports pretax income of 200,000 euros for the current year. Partin accrues 60,000 euros in foreign taxes on this income. The ave...

Q: In terms of the rules applying to a § 332 parent-

In terms of the rules applying to a § 332 parent-subsidiary liquidation, comment on each of the following: a. The parent corporation’s ownership interest in the subsidiary. b. The period of time in wh...

Q: Wujo is a Shanghai company that designs high-end software to

Wujo is a Shanghai company that designs high-end software to enhance and edit digital images. Its software, EzPhoto, is more powerful and easier to use than Adobe Photoshop, but sells at a much lower...

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The following data summarize the operating performance of your company’s wholly owned Canadian subsidiary for 2009 to 2011. The cost of capital for this subsidiary is 10 percent. Req...

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Kay Enterprises is a small, family-owned and managed business. It has a patented production process for manufacturing a digital switch used in large telephone switches. It manufactures two models in i...

Q: Hochstedt is a German firm with a wholly owned U.S

Hochstedt is a German firm with a wholly owned U.S. subsidiary. The parent firm manufactures and exports products from Germany to its U.S. subsidiary for sale in the United States. Hochstedt also has...

Q: Wedig Diagnostics manufactures two laser photometers that are used in preparing DNA

Wedig Diagnostics manufactures two laser photometers that are used in preparing DNA tests. The U.S. model is designed for use in the United States and the EU model is designed to meet the specificatio...

Q: Madden International is a large ($7 billion sales), successful international

Madden International is a large ($7 billion sales), successful international pharmaceuticals firm operating in 23 countries with 15 autonomous subsidiaries. The corporate office consists of five vice...

Q: In March, a devastating ice storm struck Monroe County, New

In March, a devastating ice storm struck Monroe County, New York, causing millions of dollars of damage. Mathews & Peat (M&P), a large horticultural nursery, was hit hard. As a result of the s...

Q: Outback Opals mines and processes opals from its Australian opal mines.

Outback Opals mines and processes opals from its Australian opal mines. The process consists of removing large chunks of stones, carefully splitting the stones and removing the opals, and then cutting...

Q: Pam Corporation acquired an 80 percent interest in Sun Corporation on January

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. Th...

Q: Financial statements for Pam and Sun Corporations for 2016 are as follows

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Q: Separate company and consolidated financial statements for Pop Corporation and its only

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Q: In accounting for unrealized profits and losses from intercompany sales of plant

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...

Q: Son Corporation is a 70 percent–owned subsidiary of Pop Corporation

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 hav...

Q: Pam Corporation’s long-term debt on January 1, 2016,

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...

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Q: Comparative income statements for Pam Corporation and its 100 percent–owned

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 purcha...

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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 compani...

Q: The balance sheets of Pam and Sun Corporations, an 80 percent

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Q: Comparative income statements for Pam Corporation and its 80 percent–owned

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 purchas...

Q: Pam Corporation purchased 75 percent of the outstanding voting stock 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 c...

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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 a...

Q: Selected amounts from the separate unconsolidated financial statements of Pam Corporation and

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 t...

Q: Financial statements for Pop Corporation and its 75 percent–owned subsidiary

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 inter...

Q: If a parent reports interest expense of $4,300 with

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 los...

Q: Pop Corporation acquired 70 percent of the outstanding voting stock of Son

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 $26...

Q: A company has a $1,000,000 bond issue

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 t...

Q: If a subsidiary purchases parent bonds at a price in excess of

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.

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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...

Q: Prepare a journal entry (or entries) to account for the

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...

Q: Calculate the parent’s income from its 75 percent–owned subsidiary if

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...

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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: Prep...

Q: What is the difference in reporting income from a subsidiary in the

What is the difference in reporting income from a subsidiary in the parent’s separate income statement and in consolidated financial statements?

Q: Comparative adjusted trial balances for Pam Corporation and Sun Corporation are given

Comparative adjusted trial balances for Pam Corporation and Sun Corporation are given here. Pam Corporation acquired an 80 percent interest in Sun Corporation on January 1, 2016, for $80,000 cash. Exc...

Q: Comparative income statements of Pop Corporation and Son Corporation for the year

Comparative income statements of Pop Corporation and Son Corporation for the year ended December 31, 2018, are as follows (in thousands): ADDITIONAL INFORMATION: 1. Son is a 90 percentâ€&...

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1. A 75 percent–owned subsidiary should not be consolidated when: a Its operations are dissimilar from those of the parent company b Control of the subsidiary does not lie with the parent company c Th...

Q: 1. Under GAAP, a parent company should exclude a subsidiary

1. Under GAAP, a parent company should exclude a subsidiary from consolidation if: a It measures income from the subsidiary under the equity method b The subsidiary is in a regulated industry c The su...

Q: 1. Cobb Company’s current receivables from affiliated companies at December 31

1. Cobb Company’s current receivables from affiliated companies at December 31, 2016, are (1) a $75,000 cash advance to Hill Corporation (Cobb owns 30 percent of the voting stock of...

Q: Pop Corporation paid $3,600,000 for a 90

Pop Corporation paid $3,600,000 for a 90 percent interest in Son Corporation on January 1, 2016; Son’s total book value was $3,600,000. The excess was allocated as follows: $120,000...

Q: Summary income statement information for Pam Corporation and its 70 percent–

Summary income statement information for Pam Corporation and its 70 percent–owned subsidiary, Sun, for the year 2017 is as follows (in thousands): REQUIRED: 1. Assume that Pam acqu...

Q: On December 31, 2016, Pam Corporation purchased 80 percent of

On December 31, 2016, Pam Corporation purchased 80 percent of the stock of Sun Company at book value. The data reported on their separate balance sheets immediately after the acquisition follow. At De...

Q: Pop Corporation acquired 70 percent of the outstanding common stock of Son

Pop Corporation acquired 70 percent of the outstanding common stock of Son Corporation on January 1, 2016, for $350,000 cash. Immediately after this acquisition the balance sheet informati...

Q: Pam Corporation purchased a block of Sun Company common stock for $

Pam Corporation purchased a block of Sun Company common stock for $1,040,000 cash on January 1, 2016. Separate-company and consolidated balance sheets prepared immediately after the acquisition are su...

Q: Adjusted trial balances for Pop and Son Corporations at December 31,

Adjusted trial balances for Pop and Son Corporations at December 31, 2016, are as follows (in thousands): Pop purchased all the stock of Son for $3,200,000 cash on January 1, 2016, when Sonâ&#...

Q: Pam Corporation paid $1,800,000 cash for 90

Pam Corporation paid $1,800,000 cash for 90 percent of Sun Corporation’s common stock on January 1, 2016, when Sun had $1,200,000 capital stock and $400,000 retained earnings. The bo...

Q: Pop Corporation acquired 80 percent of the outstanding stock of Son Corporation

Pop Corporation acquired 80 percent of the outstanding stock of Son Corporation for $1,120,000 cash on January 3, 2016, on which date Son’s stockholders’ equity con...

Q: On January 1, 2016, Pop Corporation made the following investments

On January 1, 2016, Pop Corporation made the following investments: 1. Acquired for cash, 80 percent of the outstanding common stock of Son Corporation at $280 per share. The stockholdersâ€...

Q: Pam Corporation purchased 90 percent of Sun Corporation’s outstanding stock for $

Pam Corporation purchased 90 percent of Sun Corporation’s outstanding stock for $14,400,000 cash on January 1, 2016, when Sun’s stockholders’ equi...

Q: Pop Corporation acquired a 70 percent interest in Son Corporation on January

Pop Corporation acquired a 70 percent interest in Son Corporation on January 1, 2016, for $2,800,000, when Son’s stockholders’ equity consisted of $2,000,000 capita...

Q: Pop Corporation acquired an 80 percent interest in Son Corporation on October

Pop Corporation acquired an 80 percent interest in Son Corporation on October 1, 2016, for $82,400, equal to 80 percent of the underlying equity of Son on that date plus $16,000 goodwill (total goodwi...

Q: When does a corporation become a subsidiary of another corporation?

When does a corporation become a subsidiary of another corporation?

Q: Describe the circumstances under which the accounts of a subsidiary would not

Describe the circumstances under which the accounts of a subsidiary would not be included in the consolidated financial statements.

Q: Comparative consolidated financial statements for Pam Corporation and its 90 percent–

Comparative consolidated financial statements for Pam Corporation and its 90 percent–owned subsidiary, Sun Corporation, at and for the years ended December 31 are as follows: REQUI...

Q: Define or explain the terms parent company, subsidiary company, affiliates

Define or explain the terms parent company, subsidiary company, affiliates, and associates.

Q: How should the parent’s investment in subsidiary account be classified in a

How should the parent’s investment in subsidiary account be classified in a consolidated balance sheet? In the parent’s separate balance sheet?

Q: The consolidated workpaper balances of Pop, Inc., and its subsidiary

The consolidated workpaper balances of Pop, Inc., and its subsidiary, Son Corporation, as of December 31 are as follows (in thousands): ADDITIONAL INFORMATION: 1. On January 20, 2016, Pop issued 10...

Q: Pop Corporation acquired a 70 percent interest in Son Corporation on January

Pop Corporation acquired a 70 percent interest in Son Corporation on January 1, 2016, for $420,000 cash, when Son’s equity consisted of $300,000 capital stock and $200,000 retained e...

Q: 1. In preparing a statement of cash flows, the cost

1. In preparing a statement of cash flows, the cost of acquiring a subsidiary is reported: a As an operating activity under the direct method b As an operating activity under the indirect method c As...

Q: Comparative consolidated financial statements for Pam Corporation and its 80 percent–

Comparative consolidated financial statements for Pam Corporation and its 80 percent–owned subsidiary at and for the years ended December 31 are summarized as follows: REQUIRED: P...

Q: If a parent in accounting for its subsidiary amortizes patents on its

If a parent in accounting for its subsidiary amortizes patents on its separate books, why do we include an adjustment for patents amortization in the consolidation workpaper?

Q: How is reciprocity established between a parent company’s investment account and the

How is reciprocity established between a parent company’s investment account and the equity accounts of its subsidiary when the cost method is used?

Q: Pam Corporation acquired a 70 percent interest in Sun Corporation’s outstanding voting

Pam Corporation acquired a 70 percent interest in Sun Corporation’s outstanding voting common stock on January 1, 2016, for $980,000 cash. The stockholders’ equity...

Q: Son Corporation’s outstanding capital stock (and paid in capital) has

Son Corporation’s outstanding capital stock (and paid in capital) has been $200,000 since the company was organized in 2016. Son’s retained earnings account since 2...

Q: Can the method used by a parent company in accounting for its

Can the method used by a parent company in accounting for its subsidiary investments be determined by examining the separate financial statements of the parent and subsidiary companies?

Q: 1. The separate incomes of Pop Corporation and Son Corporation,

1. The separate incomes of Pop Corporation and Son Corporation, a 100 percent–owned subsidiary of Pop, for 2017 are $2,000 and $1,000, respectively. Pop sells all of its output to So...

Q: Pam Corporation owns an 80 percent interest in Sun Corporation acquired several

Pam Corporation owns an 80 percent interest in Sun Corporation acquired several years ago. Sun regularly sells merchandise to Pam at 125 percent of Sun’s cost. Gross profit data of P...

Q: Pam Corporation acquired 80 percent of Sun Corporation’s common stock on January

Pam Corporation acquired 80 percent of Sun Corporation’s common stock on January 1, 2016, for $840,000 cash. The stockholders’ equity of Sun at this time consisted...

Q: 1. Intercompany profit elimination entries in consolidation workpapers are prepared in

1. Intercompany profit elimination entries in consolidation workpapers are prepared in order to: a Nullify the effect of intercompany transactions on consolidated statements b Defer intercompany profi...

Q: Sun Corporation became a subsidiary of Pam Corporation on July 1,

Sun Corporation became a subsidiary of Pam Corporation on July 1, 2016, when Pam paid $1,980,000 cash for 90 percent of Sun’s outstanding common stock. The price paid by Pam reflecte...

Q: Pop Corporation purchased 80 percent of the outstanding voting common stock of

Pop Corporation purchased 80 percent of the outstanding voting common stock of Son Corporation on January 2, 2016, for $1,200,000 cash. Son’s balance sheets on this date and on Decem...

Q: Pop Corporation acquired an 80 percent interest in Son Corporation for $

Pop Corporation acquired an 80 percent interest in Son Corporation for $240,000 on January 1, 2016, when Son’s stockholders’ equity consisted of $200,000 capital st...

Q: Is there any difference in computing goodwill impairment losses for a controlled

Is there any difference in computing goodwill impairment losses for a controlled subsidiary versus an equity method investment?

Q: Comparative income statements of Son Corporation for the calendar years 2016,

Comparative income statements of Son Corporation for the calendar years 2016, 2017, and 2018 are as follows (in thousands): ADDITIONAL INFORMATION: 1. Son was a 75 percent–owned su...

Q: Pam Corporation acquired 100 percent of Sun Corporation’s outstanding voting common stock

Pam Corporation acquired 100 percent of Sun Corporation’s outstanding voting common stock on January 1, 2016, for $660,000 cash. Sun’s stockholdersâ€...

Q: Pop Corporation acquired a 75 percent interest in Son Corporation for $

Pop Corporation acquired a 75 percent interest in Son Corporation for $600,000 on January 1, 2016, when Son’s equity consisted of $300,000 capital stock and $100,000 retained earning...

Q: Pam Corporation purchased a 90 percent interest in Sun Corporation on December

Pam Corporation purchased a 90 percent interest in Sun Corporation on December 31, 2015, for $2,700,000 cash, when Sun had capital stock of $2,000,000 and retained earnings of $500,000. All Sunâ...

Q: Pop Corporation acquired 100 percent of Son Corporation’s outstanding voting common stock

Pop Corporation acquired 100 percent of Son Corporation’s outstanding voting common stock on January 1, 2016, for $660,000 cash. Son’s stockholders&acir...

Q: 1. Consolidation workpaper entries normally: a Are posted to

1. Consolidation workpaper entries normally: a Are posted to the general ledger accounts of one or more of the affiliates b Are posted to the general ledger accounts only when the financial statement...

Q: Pop Corporation purchased a 90 percent interest in Son Corporation on December

Pop Corporation purchased a 90 percent interest in Son Corporation on December 31, 2016, for $5,400,000 cash, when Son had capital stock of $4,000,000 and retained earnings of $1,000,000. All Son&acir...

Q: Pam Corporation acquired its 90 percent interest in Sun Corporation at its

Pam Corporation acquired its 90 percent interest in Sun Corporation at its book value of $3,600,000 on January 1, 2016, when Sun had capital stock of $3,000,000 and retained earnings of $1,000,000. Th...

Q: 1. Pam Corporation owns a 70 percent interest in Sun Corporation

1. Pam Corporation owns a 70 percent interest in Sun Corporation, acquired several years ago at book value. On December 31, 2016, Sun mailed a check for $80,000 to Pam in part payment of an $160,000 a...

Q: What special procedures are required to consolidate the statements of a parent

What special procedures are required to consolidate the statements of a parent that reports on a calendar year basis and a subsidiary whose fiscal year ends on October 31?

Q: Pop Corporation acquired a 75 percent interest in Son Corporation on January

Pop Corporation acquired a 75 percent interest in Son Corporation on January 1, 2016, for $720,000 in cash. Financial statements of Pop and Son Corporations for 2016 are as follows (in thousands):...

Q: Separate-company financial statements for Pop Corporation and its subsidiary,

Separate-company financial statements for Pop Corporation and its subsidiary, Son Company, at and for the year ended December 31, 2017, are summarized as follows (in thousands): ADDITIONAL INFORMATI...

Q: 1. Pam Corporation owns 70 percent of Sun Company’s common stock

1. Pam Corporation owns 70 percent of Sun Company’s common stock, acquired January 1, 2017. Patents from the investment are being amortized at a rate of $20,000 per year. Sun regular...

Q: The stockholder’s equity accounts of Pop Corporation and Son Corporation at December

The stockholder’s equity accounts of Pop Corporation and Son Corporation at December 31, 2015, were as follows (in thousands): On January 1, 2016, Pop Corporation acquired an 80 pe...

Q: How is the combined cost of goods sold affected by unrealized profit

How is the combined cost of goods sold affected by unrealized profit in (a) the beginning inventory of the subsidiary and (b) the ending inventory of the subsidiary?

Q: How do the treasury stock transactions of a subsidiary affect the parent’s

How do the treasury stock transactions of a subsidiary affect the parent’s accounting for its investment under the equity method?

Q: Pop Company sells land with a book value of $5,

Pop Company sells land with a book value of $5,000 to Son Company for $6,000 in 2016. Son is a wholly owned subsidiary of Pop. Son Company holds the land during 2017. Son Company sells the land for $8...

Q: Sun Corporation is a 90 percent–owned subsidiary of Pam Corporation

Sun Corporation is a 90 percent–owned subsidiary of Pam Corporation, acquired in 2016. During 2019 Pam sells land to Sun for $100,000 for which it paid $50,000. Sun still owns this land at December 31...

Q: Son Company is a 90 percent–owned subsidiary of Pop Corporation

Son Company is a 90 percent–owned subsidiary of Pop Corporation, acquired several years ago at book value equal to fair value. For 2016 and 2017, Pop and Son report the following:...

Q: Sun is a 90 percent–owned subsidiary of Pam Corporation,

Sun is a 90 percent–owned subsidiary of Pam Corporation, acquired at book value several years ago. Comparative separate-company income statements for the affiliates for 2016 are as f...

Q: 1. Son Corporation is an 80 percent–owned subsidiary of

1. Son Corporation is an 80 percent–owned subsidiary of Pop Corporation. In 2016, Son sold land that cost $15,000 to Pop for $25,000. Pop held the land for eight years before reselling it in 2024 to R...

Q: The separate incomes (which do not include investment income) of

The separate incomes (which do not include investment income) of Pop Corporation and Son Corporation, its 80 percent– owned subsidiary, for 2016 were determined as follow...

Q: A summary of the separate income of Pam Corporation and the net

A summary of the separate income of Pam Corporation and the net income of its 75 percent–owned subsidiary, Sun Corporation, for 2016 is as follows: Sun Corporation sold machinery w...

Q: Do common stock dividends and stock splits by a subsidiary affect the

Do common stock dividends and stock splits by a subsidiary affect the amounts that appear in the consolidated financial statements? Explain, indicating the items, if any, that would be affected.

Q: Pop Industries manufactures heavy equipment used in construction and excavation. On

Pop Industries manufactures heavy equipment used in construction and excavation. On January 3, 2016, Pop sold a piece of equipment from its inventory that cost $360,000 to its 60 percent–owned subsidi...

Q: Son Corporation, a 90 percent–owned subsidiary of Pop Corporation

Son Corporation, a 90 percent–owned subsidiary of Pop Corporation, was acquired on January 1, 2016, at a price of $90,000 in excess of underlying book value. The excess was due to go...

Q: Pam Corporation acquired a 90 percent interest in Sun Corporation on January

Pam Corporation acquired a 90 percent interest in Sun Corporation on January 1, 2016, for $540,000, at which time Sun’s capital stock and retained earnings were $300,000 and $180,000...

Q: Pop Corporation acquired a 90 percent interest in Son Corporation’s outstanding voting

Pop Corporation acquired a 90 percent interest in Son Corporation’s outstanding voting common stock on January 1, 2016, for $630,000 cash. The stockholders’ equity...

Q: Pam Corporation acquired a 90 percent interest in Sun Corporation on January

Pam Corporation acquired a 90 percent interest in Sun Corporation on January 1, 2016, for $2,700,000, at which time Sun’s capital stock and retained earnings were $1,500,000 and $900...

Q: Financial statements for Pop and Son Corporations for 2016 are as follows

Financial statements for Pop and Son Corporations for 2016 are as follows (in thousands): ADDITIONAL INFORMATION: 1. Pop acquired an 80 percent interest in Son on January 2, 2014, for $580,000, when...

Q: Pam Corporation acquired all the outstanding stock of Sun Corporation on April

Pam Corporation acquired all the outstanding stock of Sun Corporation on April 1, 2016, for $15,000,000, when Sun’s stockholders’ equity consisted of $5,000,000 cap...

Q: Separate company financial statements for Pop Corporation and its subsidiary, Son

Separate company financial statements for Pop Corporation and its subsidiary, Son Company, at and for the year ended December 31, 2017, are summarized as follows (in thousands): ADDITIONAL INFORMATI...

Q: When a parent sells a part of its interest in a subsidiary

When a parent sells a part of its interest in a subsidiary during an accounting period, is the income applicable to the interest sold up to the time of sale included in consolidated net income and par...

Q: Pop Corporation purchased an 80 percent interest in Son Corporation for $

Pop Corporation purchased an 80 percent interest in Son Corporation for $1,200,000 on January 1, 2017, at which time Son’s stockholders’ equity consisted of $1,000,...

Q: Assume that a subsidiary has 10,000 shares of stock outstanding

Assume that a subsidiary has 10,000 shares of stock outstanding, of which 8,000 shares are owned by the parent. What equity method adjustment will be necessary on the parent books if the subsidiary se...

Q: Assume that a subsidiary has 10,000 shares of stock outstanding

Assume that a subsidiary has 10,000 shares of stock outstanding, of which 8,000 shares are owned by the parent. If the parent purchases an additional 2,000 shares of stock directly from the subsidiary...

Q: Comparative consolidated financial statements for Pop Corporation and its subsidiary, Son

Comparative consolidated financial statements for Pop Corporation and its subsidiary, Son Corporation, at and for the years ended December 31, 2017 and 2016 follow (in thousands). Pop Corporation and...

Q: Elixir Corporation has just filed for bankruptcy. Elixir is a holding

Elixir Corporation has just filed for bankruptcy. Elixir is a holding company whose assets consist of real estate worth $80 million and 100% of the equity of its two operating subsidiaries. It is fina...

Q: Sensor, a Netherlands business organization wholly owned by Geosource, Inc

Sensor, a Netherlands business organization wholly owned by Geosource, Inc., of Houston, Texas, made a contract with C.E.P. to deliver 2,400 strings of geophones to Rotterdam by September 20, 1982. Th...

Q: Richard Ramlall was hired by CloseCall (MD) Inc. to

Richard Ramlall was hired by CloseCall (MD) Inc. to negotiate a billing dispute with Verizon involving some $2 million in asserted overcharges. CloseCall (MD) agreed to a contingent fee “ bonus ” for...

Q: Marc Rich & Co., A.G., a Swiss commodities

Marc Rich & Co., A.G., a Swiss commodities trading corporation, refused to comply with a grand jury subpoena requesting certain business records maintained in Switzerland and relating to crude oil tra...

Q: Consolidated financial statements are typically prepared when one company has a controlling

Consolidated financial statements are typically prepared when one company has a controlling interest in another unless a. The subsidiary is a finance company. b. The fiscal year-ends of the two compan...

Q: Tally Corporation and its subsidiary reported consolidated net income of $164

Tally Corporation and its subsidiary reported consolidated net income of $164,300 for 20X2. Tally owns 60 percent of the common shares of its subsidiary, acquired at book value. Noncontrolling interes...

Q: Tear Company, a newly established subsidiary of Stern Corporation, received

Tear Company, a newly established subsidiary of Stern Corporation, received assets with an original cost of $260,000, a fair value of $200,000, and a book value of $140,000 from the parent in exchange...

Q: What must be done if the fiscal periods of the parent and

What must be done if the fiscal periods of the parent and its subsidiary are not the same?

Q: Why are subsidiary shares not reported as stock outstanding in the consolidated

Why are subsidiary shares not reported as stock outstanding in the consolidated balance sheet?

Q: McDermott Corporation has been in the midst of a major expansion program

McDermott Corporation has been in the midst of a major expansion program. Much of its growth had been internal, but in 20X1 McDermott decided to continue its expansion through the acquisition of other...

Q: Topper Company established a subsidiary and transferred equipment with a fair value

Topper Company established a subsidiary and transferred equipment with a fair value of $72,000 to the subsidiary. Topper had purchased the equipment with ten-year expected life of four years earlier f...

Q: Lead Corporation established a new subsidiary and transferred to it assets with

Lead Corporation established a new subsidiary and transferred to it assets with a cost of $90,000 and a book value of $75,000. The assets had a fair value of $100,000 at the time of transfer. The tran...

Q: When an existing company creates a new subsidiary and transfers a portion

When an existing company creates a new subsidiary and transfers a portion of its assets and liabilities to the new entity a. The new entity records both the assets and liabilities it received at fair...

Q: Which of the following is not an appropriate reason for establishing a

Which of the following is not an appropriate reason for establishing a subsidiary? a. The parent wishes to protect existing operations by shifting new activities with greater risk to a newly created...

Q: Which of the following actions is likely to result in recording goodwill

Which of the following actions is likely to result in recording goodwill on Randolph Company’s books? a. Randolph acquires Penn Corporation in a business combination recorded as a merger. b. Randolph...

Q: Tab Corporation decided to establish Collon Company as a wholly owned subsidiary

Tab Corporation decided to establish Collon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Collon issued Tab 30,000 sh...

Q: Eagle Corporation established a subsidiary to enter into a new line of

Eagle Corporation established a subsidiary to enter into a new line of business considered to be substantially more risky than Eagle’s current business. Eagle transferred the followi...

Q: Thumb Company created New Company as a wholly owned subsidiary by transferring

Thumb Company created New Company as a wholly owned subsidiary by transferring assets and accounts payable to New in exchange for its common stock. New recorded the following entry when it received th...

Q: At a recent staff meeting, the vice president of marketing appeared

At a recent staff meeting, the vice president of marketing appeared confused. The controller had assured him that the parent company and each of the subsidiary companies had properly accounted for all...

Q: What portion of the balances of subsidiary stockholders’ equity accounts is included

What portion of the balances of subsidiary stockholders’ equity accounts is included in the consolidated balance sheet?

Q: 1. Pet Company pays $1,440,000 for

1. Pet Company pays $1,440,000 for an 80 percent interest in Sit Corporation on December 31, 2016, when Sit’s net assets at book value and fair value are $1,600,000. Under entity theory, the noncontro...

Q: Balance sheets for Pop Corporation and its 80 percent–owned subsidiary

Balance sheets for Pop Corporation and its 80 percent–owned subsidiary, Son Company, at December 31, 2017, are summarized as follows (in thousands): ADDITIONAL INFO R MATION: 1. Po...

Q: Use the information and assumptions from Problem P 11-9 for

Use the information and assumptions from Problem P 11-9 for this problem. The accompanying financial statements are for Pam and Sun Corporations, one year after the acquisition. Note that Sunâ&#...

Q: The adjusted trial balances of Pop Corporation and its 80 percent–

The adjusted trial balances of Pop Corporation and its 80 percent–owned subsidiary, Son Corporation, at December 31, 2017, are as follows (in thousands): Pop acquired its interest...

Q: At December 31, 2016, when the fair values of Sun

At December 31, 2016, when the fair values of Sun Corporation’s net assets were equal to their book values of $2,400,000, Pam Corporation acquired an 80 percent interest in Sun for $...

Q: Under the entity theory, a total valuation of the subsidiary is

Under the entity theory, a total valuation of the subsidiary is imputed on the basis of the price paid by the parent company for its controlling interest. Do you see any practical or conceptual proble...

Q: If income from a subsidiary is measured under the equity method and

If income from a subsidiary is measured under the equity method and the statements are consolidated under entity theory, will consolidated net income equal parent net income?

Q: Par Corporation acquired an 80 percent interest in Sip Corporation for $

Par Corporation acquired an 80 percent interest in Sip Corporation for $180,000 cash on January 1, 2016, when Sip had capital stock of $50,000 and retained earnings of $150,000. The excess of fair val...

Q: 1. Fay had a realized foreign exchange loss of $15

1. Fay had a realized foreign exchange loss of $15,000 for the year ended December 31, 2016, and must determine whether the following items will require year-end adjustment: Fay had an $8,000 equity...

Q: 1. A German subsidiary of a U.S. firm

1. A German subsidiary of a U.S. firm has the British pound as its functional currency. Under the provisions of ASC Topic 830, the U.S. dollar from the subsidiary’s viewpoint would be: a Its local cur...

Q: 1. When consolidated financial statements for a U.S.

1. When consolidated financial statements for a U.S. parent and its foreign subsidiary are prepared, the account balances expressed in foreign currency must be converted into the currency of the repor...

Q: On January 1, 2016, Pai, a U.S

On January 1, 2016, Pai, a U.S. firm, purchases all the outstanding capital stock of Sta, a British firm, for $880,000, when the exchange rate for British pounds is $1.55. The book values of Staâ...

Q: Stadt Corporation of the Netherlands is a 100 percent–owned subsidiary

Stadt Corporation of the Netherlands is a 100 percent–owned subsidiary of Port Corporation, a U.S. firm, and its functional currency is the U.S. dollar. Stadt’s books of record are maintained in euros...

Q: The affiliation structure for Pad Corporation and its subsidiaries is diagrammed as

The affiliation structure for Pad Corporation and its subsidiaries is diagrammed as follows: The incomes and dividends for the affiliates for 2016 are (in thousands): ADDITIONAL INFORMATION: 1. Ax...

Q: PWA Corporation paid $1,710,000 for 100 percent

PWA Corporation paid $1,710,000 for 100 percent of the stock of SAA Corporation on January 1, 2016, when the stockholders’ equity of SAA consisted of 5,000,000 LCU capital stock and...

Q: San is a 90 percent–owned foreign subsidiary of Par,

San is a 90 percent–owned foreign subsidiary of Par, acquired by Par on January 1, 2016, at book value equal to fair value, when the exchange rate for LCUs of San’s...

Q: In the current-rate-method example in the chapter,

In the current-rate-method example in the chapter, the parent’s other comprehensive income adjustment related to its investment in the subsidiary was larger than the other comprehensive income adjustm...

Q: How does the choice of functional currency affect how the gain or

How does the choice of functional currency affect how the gain or loss on a hedge of a net investment in a foreign subsidiary is reported in the financial statements?

Q: Pop Corporation owns 80 percent of Son Corporation, and properly included

Pop Corporation owns 80 percent of Son Corporation, and properly included Son as a subsidiary in preparing consolidated financial statements for the year ended December 31, 2016. Pop issued the financ...

Q: Mer Corporation has five major operating segments and operates in both domestic

Mer Corporation has five major operating segments and operates in both domestic and foreign markets. Mer is organized internally on an industry basis. Information about its revenue from operating segm...

Q: Parent Company owns 70 percent of the voting stock of Subsidiary A

Parent Company owns 70 percent of the voting stock of Subsidiary A, and Subsidiary A owns 70 percent of the stock of Subsidiary B. Is the inside ownership of Subsidiary B more than 50 percent? Should...

Q: If a parent owns 80 percent of the voting stock of a

If a parent owns 80 percent of the voting stock of a subsidiary, and the subsidiary in turn owns 20 percent of the stock of the parent, what kind of affiliation structure is involved? Explain.

Q: Under the treasury stock approach, a mutually held subsidiary accounts for

Under the treasury stock approach, a mutually held subsidiary accounts for its investment in the parent on a cost basis. Are dividends received by the subsidiary from the parent included in investment...

Q: In using the schedule approach for allocating income of subsidiaries to controlling

In using the schedule approach for allocating income of subsidiaries to controlling and noncontrolling stockholders in an indirect holding affiliation structure, why is it necessary to begin with the...

Q: Pop Corporation and its 70 percent–owned subsidiary, Son Corporation

Pop Corporation and its 70 percent–owned subsidiary, Son Corporation, have pretax operating incomes for 2016 as follows (in thousands): Pop received $280,000 dividends from Son dur...

Q: Sun Corporation is a 100 percent–owned subsidiary of Pam Corporation

Sun Corporation is a 100 percent–owned subsidiary of Pam Corporation. During the current year, Pam sold merchandise that cost $200,000 to Sun for $400,000. A 34 percent income tax rate is applicable,...

Q: Son Corporation, an 80 percent–owned subsidiary of Pop Corporation

Son Corporation, an 80 percent–owned subsidiary of Pop Corporation, sold equipment with a book value of $600,000 to Pop for $1,000,000 at December 31, 2016. Separate income tax returns are filed, and...

Q: The stockholders’ equity of Son Corporation on December 31, 2016,

The stockholders’ equity of Son Corporation on December 31, 2016, was as follows (in thousands): 15% preferred stock, $100 par, cumulative, nonparticipating, with..............$1,000 one year’s divid...

Q: 1. A parent company and its 100 percent–owned subsidiary

1. A parent company and its 100 percent–owned subsidiary have only common stock outstanding (10,000 shares for the parent and 3,000 shares for the subsidiary), and neither company has issued other pot...

Q: Pop Corporation owns an 80 percent interest in Son Corporation. Throughout

Pop Corporation owns an 80 percent interest in Son Corporation. Throughout 2016, Pop had 20,000 shares of common stock outstanding. Son had the following securities outstanding: â–  10...

Q: Taxable incomes for Pop Corporation and Son Corporation, its 70 percent

Taxable incomes for Pop Corporation and Son Corporation, its 70 percent–owned subsidiary, for 2016 are as follows (in thousands): ADDITIONAL INFORMATION: 1. Pop acquired its intere...

Q: Pam Corporation acquired a 90 percent interest in Sun Corporation in a

Pam Corporation acquired a 90 percent interest in Sun Corporation in a taxable transaction on January 1, 2016, for $900,000, when Sun had $500,000 capital stock and $400,000 retained earnings. The $10...

Q: The pretax operating incomes of Pop Corporation and Son Corporation, its

The pretax operating incomes of Pop Corporation and Son Corporation, its 70 percent–owned subsidiary, for 2016 are as follows (in thousands): ADDITIONAL INFORMATION: 1. Pop receive...

Q: Financial statements for Pam and Sun Corporations for 2016 are summarized as

Financial statements for Pam and Sun Corporations for 2016 are summarized as follows (in thousands): Pam owns 90,000 shares of Sun’s outstanding voting common stock at December 31...

Q: Pop Corporation acquired an 80 percent interest in Son Corporation common stock

Pop Corporation acquired an 80 percent interest in Son Corporation common stock for $240,000 on January 1, 2015, when Son’s stockholders’ equity consisted of $200,0...

Q: How should preferred stock of a subsidiary be shown in a consolidated

How should preferred stock of a subsidiary be shown in a consolidated balance sheet in each case? a. If it is held 100 percent by the parent b. If it is held 50 percent by the parent and 50 percent by...

Q: Potentially dilutive securities of a subsidiary may be converted into parent common

Potentially dilutive securities of a subsidiary may be converted into parent common stock or subsidiary common stock. Describe how these situations affect the parent’s EPS procedures.

Q: It may be necessary to compute the earnings per share for subsidiaries

It may be necessary to compute the earnings per share for subsidiaries and equity investees before parent (and consolidated) earnings per share can be determined. When are the subsidiary EPS computati...

Q: Does a parent/investor provide for income taxes on the undistributed

Does a parent/investor provide for income taxes on the undistributed earnings of a subsidiary by adjusting investment and investment income accounts? Explain.

Q: Describe the computation of noncontrolling interest share for an 80 percent–

Describe the computation of noncontrolling interest share for an 80 percent–owned subsidiary with both preferred and common stock outstanding.

Q: Son Corporation’s recorded assets and liabilities are equal to their fair values

Son Corporation’s recorded assets and liabilities are equal to their fair values on July 1, 2017, when Pop Corporation purchases 36,000 shares of Son common stock for $900,000. Identifiable net assets...

Q: Pam Company acquired an 80 percent interest in Sun Corporation at book

Pam Company acquired an 80 percent interest in Sun Corporation at book value equal to fair value on January 1, 2016. During the year, Sun sold $50,000 inventory items to Pam, and at December 31, 2016,...

Q: Pop Corporation acquired an 80 percent interest in Son Company at book

Pop Corporation acquired an 80 percent interest in Son Company at book value a number of years ago. Separate incomes of Pop and Son for 2016 were $120,000 and $60,000, respectively. The only transacti...

Q: A U.S. manufacturing company operating a subsidiary in an

A U.S. manufacturing company operating a subsidiary in an LDC (less-developed country) shows the following results: a. Calculate partial labor and capital productivity figures for the...

Q: Should a multinational corporation operate as a tightly integrated, worldwide business

Should a multinational corporation operate as a tightly integrated, worldwide business system, or would it be more effective to let each national subsidiary operate autonomously? Why?

Q: When the fraud at PepsiCo occurred, the company had five somewhat

When the fraud at PepsiCo occurred, the company had five somewhat diverse groups of divisions: food products, such as Frito-Lay, Inc.; transportation, such as northAmerican Van Lines, Inc.; sporting g...

Q: What portion of the book value of the net assets held by

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The newest clerk in the accounting office recently entered trial balance data for the parent company and its subsidiaries in the company’s consolidation program. After a few minutes of additional work...

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How do other comprehensive income elements reported by a subsidiary affect the consolidated financial statements?

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What portion of other comprehensive income reported by a subsidiary is included in the consolidated statement of comprehensive income as accruing to parent company shareholders?

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Q: Select the most appropriate answer for each of the following questions.

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Q: On January 2, 20X8, Total Corporation acquired 75 percent of

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This problem is a continuation of P5-33. Power Corporation acquired 75 percent of Best Company’s ownership on January 1, 20X8, for $96,000. At that date, the fair value of the noncon...

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Q: This problem is a continuation of P5-35. Mortar Corporation

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Q: Amber Corporation acquired 60 percent ownership of Sparta Company on January 1

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Amber Corporation acquired 60 percent ownership of Sparta Company on January 1, 20X8, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of t...

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Q: Crow Corporation purchased 70 percent of West Company’s voting common stock on

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Q: The trial balance data presented in Problem P6-34 can be

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Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. In the preparation of a consolidated income statement: Income assigned to noncontrolling shareholders always is computed as a p...

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Q: Prime Company holds 80 percent of Lane Company’s stock, acquired on

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Q: On January 1, 20X5, Pond Corporation acquired 80 percent of

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Q: Topp Corporation acquired 70 percent of Morris Company’s voting common stock on

Topp Corporation acquired 70 percent of Morris Company’s voting common stock on January 1, 20X3, for $158,900. Morris reported common stock outstanding of $100,000 and retained earni...

Q: For each question, select the single best answer.

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Q: The Leviathan Steel Company has a coal-mining subsidiary in West

The Leviathan Steel Company has a coal-mining subsidiary in West Virginia. A substantial amount of the coal produced by the subsidiary is used by Leviathan’s steel foundries located in Pennsylvania....

Q: For each of the following items, identify which of the management

For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purpos...

Q: Which of the following statements is true? a.

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Q: The job-order cost sheet is a subsidiary account to

The job-order cost sheet is a subsidiary account to a. Raw Materials. b. Work in Process. c. Finished Goods. d. Cost of Goods Sold. e. Jobs Started.

Q: Edward Nabors owns Enclose, which designs and manufactures perimeter fencing for

Edward Nabors owns Enclose, which designs and manufactures perimeter fencing for large retail and commercial buildings. Each job goes through three stages: design, production, and installation. Three...

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Ialani Corp. uses a job order costing system for the yachts it constructs. On September 1, 2010, the company had the following account balances: Raw Material Inventory …………………………………$ 332,400 Work in P...

Q: When a parent company sells land to a subsidiary at more than

When a parent company sells land to a subsidiary at more than book value, the consolidation entries at the end of the period include a debit to the gain on the sale of land. When a parent purchases th...

Q: How would the relationship between interest income recorded by a subsidiary and

How would the relationship between interest income recorded by a subsidiary and interest expense recorded by the parent be expected to change when comparing a direct placement of the parent’s bonds wi...

Q: A subsidiary purchased bonds of its parent company from a nonaffiliate in

A subsidiary purchased bonds of its parent company from a nonaffiliate in the preceding period, and a gain on bond retirement was reported in the consolidated income statement as a result of the purch...

Q: Intercompany debt, both long term and short term, arises frequently

Intercompany debt, both long term and short term, arises frequently. In some cases, intercorporate borrowings may arise because one affiliate can borrow at a cheaper rate than others, and lending to o...

Q: Shortly after a parent company purchased its subsidiary’s bonds from a nonaffiliate

Shortly after a parent company purchased its subsidiary’s bonds from a nonaffiliate, the subsidiary retired the entire issue. How is the gain or loss on bond retirement reported by the subsidiary trea...

Q: Why are subsidiary preferred dividends that are paid to nonaffiliates normally deducted

Why are subsidiary preferred dividends that are paid to nonaffiliates normally deducted from earnings in arriving at consolidated net income? When is it not appropriate to deduct subsidiary preferred...

Q: How does a call feature on subsidiary preferred stock affect the claim

How does a call feature on subsidiary preferred stock affect the claim of the noncontrolling interest reported in the consolidated balance sheet?

Q: A subsidiary sells additional shares of its common stock to a nonaffiliate

A subsidiary sells additional shares of its common stock to a nonaffiliate at a price that is higher than the previous book value per share. How does the sale benefit the existing shareholders?

Q: A parent company purchases additional common shares of one of its subsidiaries

A parent company purchases additional common shares of one of its subsidiaries from the subsidiary at $10 per share above underlying book value. Explain how this purchase is reflected in the consolida...

Q: How are treasury shares held by a subsidiary reported in the consolidated

How are treasury shares held by a subsidiary reported in the consolidated financial statements?

Q: What portion of subsidiary preferred stock outstanding is reported as part of

What portion of subsidiary preferred stock outstanding is reported as part of the noncontrolling interest in the consolidated balance sheet?

Q: When a subsidiary purchases the bonds of its parent from a nonaffiliate

When a subsidiary purchases the bonds of its parent from a nonaffiliate for less than book value, what will be the effect on consolidated net income and income to the controlling interest?

Q: How is the amount of income assigned to the noncontrolling interest affected

How is the amount of income assigned to the noncontrolling interest affected when the parent purchases the bonds of its subsidiary from an unaffiliated company for less than book value?

Q: How will parent company shares held by a subsidiary be reflected in

How will parent company shares held by a subsidiary be reflected in the consolidated balance sheet when the treasury stock method is used?

Q: How does the use of interperiod tax allocation procedures affect the amount

How does the use of interperiod tax allocation procedures affect the amount of income assigned to noncontrolling shareholders in the period in which the subsidiary records unrealized intercompany prof...

Q: Companies sometimes employ accounting practices that are not necessarily in accordance with

Companies sometimes employ accounting practices that are not necessarily in accordance with accounting theory or even current standards. In some cases, companies may be following industry practices ra...

Q: Parent Company holds 80 percent ownership of Subsidiary Company, and Subsidiary

Parent Company holds 80 percent ownership of Subsidiary Company, and Subsidiary Company owns 90 percent of the stock of Tiny Corporation. What effect will $100,000 of unrealized intercompany profits o...

Q: Stellar Corporation purchased bonds of its subsidiary from a nonaffiliate during 20X6

Stellar Corporation purchased bonds of its subsidiary from a nonaffiliate during 20X6. Although Stellar purchased the bonds at par value, a loss on bond retirement is reported in the 20X6 consolidated...

Q: On January 1, 20X5, Pond Corporation purchased 75 percent of

On January 1, 20X5, Pond Corporation purchased 75 percent of Skate Company’s stock at underlying book value. At that date, the fair value of the noncontrolling interest was equal to...

Q: Snerd Corporation’s controller is having difficulty explaining the impact of several of

Snerd Corporation’s controller is having difficulty explaining the impact of several of the company’s intercorporate bond transactions. Required: Snerd receives interest payments in excess of t...

Q: Presley Pools Inc. acquired 60 percent of the common stock of

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Wendy Johnson operates a wholesale computer center and has hired you as her bookkeeper to record the following transactions. She would like you to (1) journalize the following transactions, (2) record...

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Abby Ellen opened Abby’s Toy House. As her newly hired accountant, your tasks are to do the following: 1. Journalize the transactions for the month of March. Use the periodic method....

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Sharon Electronics, an electronics supply company, uses the perpetual inventory system with a subsidiary inventory ledger to maintain control over an inventory of thousands of electronic parts. The qu...

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Q: Journalize, record, and post when appropriate the following transactions into

Journalize, record, and post when appropriate the following transactions into the general journal (p. 2) for Jacob’s Clothing. All purchases discounts are 7/10, n/30. Assume the peri...

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From the following transactions for Autumn Co., journalize, record, post, and prepare a schedule of accounts receivable when appropriate. You will have to set up your own accounts receivable subsidiar...

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From the general journal in Figure 10.30, record to the accounts payable subsidiary ledger and post to the general ledger accounts as appropriate. Figure 10.30:

Q: Journalize, record, and post when appropriate the following transactions into

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Compare and contrast the Controlling Account—Accounts Receivable to the accounts receivable subsidiary ledger.

Q: Why is the accounts receivable subsidiary ledger organized in alphabetical order?

Why is the accounts receivable subsidiary ledger organized in alphabetical order?

Q: To assist you in recording these transactions for the month of January

To assist you in recording these transactions for the month of January, at the end of this problem is the schedule of accounts receivable as of December 31 and an updated chart of accounts with the cu...

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The following is an updated schedule of accounts payable as of January 31, 201X. Schedule of Accounts Payable The Staple Store ………â&#...

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Why is a subsidiary ledger not needed for notes?

Q: What is the normal balance of each creditor in the accounts payable

What is the normal balance of each creditor in the accounts payable subsidiary ledger?

Q: Why could the balance of the controlling account, Accounts Payable,

Why could the balance of the controlling account, Accounts Payable, equal the sum of the accounts payable subsidiary ledger during the month?

Q: Explain the relationship between the Merchandise Inventory account and the subsidiary inventory

Explain the relationship between the Merchandise Inventory account and the subsidiary inventory ledger.

Q: From the general journal in Figure 9.15, record to

From the general journal in Figure 9.15, record to the accounts receivable subsidiary ledger and post to the general ledger accounts as appropriate.

Q: From Exercise 10A-3, prepare a schedule of accounts payable

From Exercise 10A-3, prepare a schedule of accounts payable and verify that the total of the schedule equals the amount in the controlling account. Exercise 10A-3: Journalize, record, and post when...

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From the general journal in Figure 9.16, record to the accounts receivable subsidiary ledger and post to the general ledger accounts as appropriate. Figure 9.16:

Q: From Exercise 10B-3, prepare a schedule of accounts payable

From Exercise 10B-3, prepare a schedule of accounts payable and verify that the total of the schedule equals the amount in the controlling account. Exercise 10B-3: Journalize, record, and post when...

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Match the following activities to the three business transactions (more than one number can be used). 1. Record to the accounts receivable subsidiary ledger. 2. Journalize the transaction. 3. Post to...

Q: The RJM Company uses the perpetual inventory system with a subsidiary ledger

The RJM Company uses the perpetual inventory system with a subsidiary ledger for inventory. Enter the following information in the inventory balance for product U47. Be sure to keep the balance on han...

Q: From the following, prepare a schedule of accounts receivable for Lucky

From the following, prepare a schedule of accounts receivable for Lucky Co. for May 31, 201X.

Q: The ABC Company uses the perpetual inventory system with a subsidiary ledger

The ABC Company uses the perpetual inventory system with a subsidiary ledger for inventory. Enter the following information into the inventory balance for product U47. Be sure to keep the balance on h...

Q: Complete the following table: /

Complete the following table:

Q: Match the following to the three business transactions (more than one

Match the following to the three business transactions (more than one number can be used). 1. Recorded to the accounts payable subsidiary ledger. 2. Recorded to the general journal. 3. Posted to the g...

Q: From the following prepare a schedule of Accounts Payable for Ronson.

From the following prepare a schedule of Accounts Payable for Ronson.com for May 31, 201X:

Q: Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor

Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay...

Q: Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor

Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay...

Q: Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor

Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay...

Q: Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor

Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay...

Q: Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor

Toyota Motor Credit Corporation (TMCC), a subsidiary of Toyota Motor Corporation, offered some securities for sale to the public on March 28, 2008. Under the terms of the deal, TMCC promised to repay...

Q: The following balances are included in the subsidiary records of Dogwood’s Parks

The following balances are included in the subsidiary records of Dogwood’s Parks and Recreation Department on March 31, 20X2: How much does the department have available to purcha...

Q: Circle K was once one of the largest convenience store chains in

Circle K was once one of the largest convenience store chains in the United States. Circle K separated its products into two major categories: gasoline and merchandise (Twinkies, beef jerky, soda pop,...

Q: The income statement of Tawls Company for the year ended December 31

The income statement of Tawls Company for the year ended December 31, 2012, shows the following: /Required a. Compute the net earnings remaining after removing nonrecurring items. b. Determine the e...

Q: Berger was planning to produce a fashion show in Las Vegas.

Berger was planning to produce a fashion show in Las Vegas. In April, Berger entered into a written licensing agreement with CBS Films, Inc., a wholly owned subsidiary of CBS, for presentation of the...

Q: Tretter alleged that his exposure over the years to asbestos products manufactured

Tretter alleged that his exposure over the years to asbestos products manufactured by Philip Carey Manufacturing Corporation caused him to contract asbestosis. Tretter brought an action against Rapid...

Q: New England Petroleum Corporation (NEPCO), a New York corporation,

New England Petroleum Corporation (NEPCO), a New York corporation, was in the business of selling fuel oil in the United States. PETCO, a refinery incorporated in the Bahamas, was a wholly owned subsi...

Q: An investment in a foreign subsidiary is estimated to have a positive

An investment in a foreign subsidiary is estimated to have a positive NPV after the discount rate used in the calculations is adjusted for political risk and any advantages from diversification. Does...

Q: Lakonishok Equipment has an investment opportunity in Europe. The project costs

Lakonishok Equipment has an investment opportunity in Europe. The project costs €19 million and is expected to produce cash flows of €3.6 million in Year 1,€4.1 million in Year 2, and €5.1 million in...

Q: You are evaluating a proposed expansion of an existing subsidiary located in

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 25 million. The cash flows from the project would be SF 6.9 million per...

Q: Following is information from Fredrickson Company for its initial month of business

Following is information from Fredrickson Company for its initial month of business. (1) Identify the balances listed in the accounts receivable subsidiary ledger. (2) Identify the accounts receivab...

Q: Warton Company posts its sales invoices directly and then binds them into

Warton Company posts its sales invoices directly and then binds them into a sales journal. The company had the following credit sales to these customers during July. Required 1. Open an accounts rec...

Q: Simga Company’s Turkish subsidiary reported the following amounts in Turkish lire (

Simga Company’s Turkish subsidiary reported the following amounts in Turkish lire (TL) on its December 31, Year 4, balance sheet: Equipment……...

Q: Alliance Corporation (an Australian company) invests 1,000,

Alliance Corporation (an Australian company) invests 1,000,000 marks in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date, and generates net income of 200,000...

Q: Zesto Company (a U.S. company) establishes a

Zesto Company (a U.S. company) establishes a subsidiary in Mexico on January 1, Year 1. The subsidiary begins the year with 1,000,000 Mexican pesos (MXN) in cash and no other assets or liabilities. It...

Q: Gramado Company was created as a wholly owned subsidiary of Porto Alegre

Gramado Company was created as a wholly owned subsidiary of Porto Alegre Corporation on January 1, Year 1. On that date, Porto Alegre invested $42,000 in Gramado’s capital stock. Given the exchange ra...

Q: Brookhurst Company (a U.S.-based company) established

Brookhurst Company (a U.S.-based company) established a subsidiary in South Africa on January 1, Year 1, by investing 300,000 South African rand (ZAR) when the exchange rate was US$0.09/ZAR 1. On that...

Q: Selected balance sheet accounts of a foreign subsidiary of the Pacter Company

Selected balance sheet accounts of a foreign subsidiary of the Pacter Company have been translated into parent currency ( F - ) as follows: Required: a. Assuming that the foreign subsidiary is dete...

Q: The Year 1 financial statements of the Brazilian subsidiary of Artemis Corporation

The Year 1 financial statements of the Brazilian subsidiary of Artemis Corporation (a Canadian company) revealed the following: Brazilian Reals (BRL) Beginning inventory………………………………………………..100,000 Pu...

Q: Columbia Corporation, a U.S.-based company, acquired

Columbia Corporation, a U.S.-based company, acquired a 100 percent interest in Swoboda Company in Lodz, Poland, on January 1, Year 1, when the exchange rate for the Polish zloty (PLN) was $0.25. The f...

Q: Petrodat Company provides data processing services for companies operating in the petroleum

Petrodat Company provides data processing services for companies operating in the petroleum extraction business. On January 1, Year 1, Petrodat established two foreign subsidiaries—o...

Q: Palmers town Company established a subsidiary in a foreign country on January

Palmers town Company established a subsidiary in a foreign country on January 1, Year 1, by investing 8,000,000 pounds when the exchange rate was $1.00/pound. Palmers town negotiated a bank loan of 4,...

Q: The parent company balance sheet for Babcock International Group PLC at March

The parent company balance sheet for Babcock International Group PLC at March 31, 2010, is as follows: Required: Transform Babcock’s March 31, 2010, balance sheet to a U.S. format....

Q: Assume that Yankee’s operation in Great Britain is incorporated as a subsidiary

Assume that Yankee’s operation in Great Britain is incorporated as a subsidiary. Required: Determine the amount of U.S. taxable income, U.S. foreign tax credit, and net U.S. tax liability related to...

Q: Mama Corporation (a U.S. taxpayer) has a

Mama Corporation (a U.S. taxpayer) has a wholly owned sales subsidiary in the Bahamas (Bahamamama Ltd.) that purchases finished goods from its U.S. parent and sells those goods to customers throughout...

Q: Pendleton Company (a U.S. taxpayer) is a

Pendleton Company (a U.S. taxpayer) is a highly diversified company with wholly owned subsidiaries located in South Korea and Japan. The South Korean operation manufactures electric generators that ar...

Q: Eastwood Company (a U.S.-based company) has

Eastwood Company (a U.S.-based company) has subsidiaries in three countries: X, Y, and Z. All three subsidiaries manufacture and sell products in their host country. Corporate income tax rates in thes...

Q: The corporate income tax rates in two countries, A and B

The corporate income tax rates in two countries, A and B, are 40 percent and 25 percent, respectively. Additionally, both countries impose a 30 percent withholding tax on dividends paid to foreign inv...

Q: Intec Corporation (a U.S.-based company) has

Intec Corporation (a U.S.-based company) has a wholly owned subsidiary located in Shanghai, China, that generated income before tax of 500,000 Chinese renminbi (RMB) in the current year. The Chinese s...

Q: Lahdekorpi OY, a Finnish corporation, owns 100 percent of Three

Lahdekorpi OY, a Finnish corporation, owns 100 percent of Three-O Company, a subsidiary incorporated in the United States. Required: Given the limited information provided, determine the best transfe...

Q: Superior Brakes Corporation manufactures truck brakes at its plant in Mansfield,

Superior Brakes Corporation manufactures truck brakes at its plant in Mansfield, Ohio, at a cost of $10 per unit. Superior sells its brakes directly to U.S. truck makers at a price of $15 per unit. It...

Q: Litchfield Corporation is a U.S.-based manufacturer of fashion

Litchfield Corporation is a U.S.-based manufacturer of fashion accessories that produces umbrellas in its plant in Roanoke, Virginia, and sells directly to retailers in the United States. As chief fin...

Q: Akku Company imports die-cast parts from its German subsidiary that

Akku Company imports die-cast parts from its German subsidiary that are used in the production of children’s toys. Per unit, part 169 costs the German subsidiary $1.00 to produce and $0.20 to ship to...

Q: Guari Company, based in Melbourne, Australia, has a wholly

Guari Company, based in Melbourne, Australia, has a wholly owned subsidiary in Taiwan. The Taiwanese subsidiary manufactures bicycles at a cost equal to A$20 per bicycle, which it sells to Guari at an...

Q: ABC Company has subsidiaries in Countries X, Y, and Z

ABC Company has subsidiaries in Countries X, Y, and Z. Each subsidiary manufactures one product at a cost of $10 per unit that it sells to each of its sister subsidiaries. Each buyer then distributes...

Q: Denker Corporation has a wholly owned subsidiary in Sri Lanka that manufactures

Denker Corporation has a wholly owned subsidiary in Sri Lanka that manufactures wooden bowls at a cost of $3 per unit. Denker imports the wooden bowls and sells them to retailers at a price of $12 per...

Q: The IRS has the authority to impose penalties on companies that significantly

The IRS has the authority to impose penalties on companies that significantly underpay taxes as a result of inappropriate transfer pricing. Acme Company transfers a product to a foreign affiliate at $...

Q: Cooper Grant is the president of Acme Brush of Brazil, the

Cooper Grant is the president of Acme Brush of Brazil, the wholly owned Brazilian subsidiary of U.S.-based Acme Brush Inc. Cooper Grant’s compensation package consists of a combination of salary and b...

Q: How are gains and losses on foreign currency borrowings used to hedge

How are gains and losses on foreign currency borrowings used to hedge the net investment in a foreign subsidiary reported in the consolidated financial statements?

Q: What are the circumstances under which a subsidiary could, and perhaps

What are the circumstances under which a subsidiary could, and perhaps should, be excluded from consolidation?

Q: Under what circumstances will the income earned by a foreign subsidiary of

Under what circumstances will the income earned by a foreign subsidiary of a U.S. taxpayer be taxed as if it had been earned by a foreign branch?

Q: In translating the financial statements of a foreign subsidiary into the parent’s

In translating the financial statements of a foreign subsidiary into the parent’s reporting currency under the current rate method, which of the following statements is true? a. Expenses are translate...

Q: A foreign subsidiary of Wampoa Ltd. has one asset (inventory

A foreign subsidiary of Wampoa Ltd. has one asset (inventory) and no liabilities. The subsidiary operates with a significant degree of autonomy from Wampoa and primarily uses the local currency (the w...

Q: Which of the following best explains how a translation loss arises when

Which of the following best explains how a translation loss arises when the temporal method of translation is used to translate the foreign currency financial statements of a foreign subsidiary? a. Th...

Q: The functional currency of Garland Inc.’s Japanese subsidiary is the

The functional currency of Garland Inc.’s Japanese subsidiary is the Japanese yen. Garland borrowed Japanese yen as a partial hedge of its investment in the subsidiary. How should the transaction gain...

Q: How are foreign branch income and foreign subsidiary income taxed differently by

How are foreign branch income and foreign subsidiary income taxed differently by a company’s home country?

Q: China Petroleum and Chemical Corporation (CPCC) is one of a

China Petroleum and Chemical Corporation (CPCC) is one of a growing number of Chinese companies that has cross-listed its stock on foreign stock exchanges. To provide information that might be useful...

Q: Refer to Exhibits 6.3, 6.7, and

Refer to Exhibits 6.3, 6.7, and 6.9. Required: Explain the main areas you would focus on in comparing financial statements prepared by companies in China, Japan, and Mexico with those prepared by com...

Q: Refer to Exhibits 6.3, 6.5, 6

Refer to Exhibits 6.3, 6.5, 6.7, 6.8, and 6.12. Required: Identify a. An issue in respect of which the practices of several countries discussed in this chapter are at variance with IFRS. b. The most...

Q: The April 23, 2012, edition of the Wall Street Journal

The April 23, 2012, edition of the Wall Street Journal Online contains an article by Christopher Bjork entitled “Santander Prepares Record Mexico IPO.” Instructions: Read the article and answer the f...

Q: In a job order costing system, what records serve as a

In a job order costing system, what records serve as a subsidiary ledger for Work in Process Inventory? For Finished Goods Inventory?

Q: Jefferson County’s General Fund began the year 2017 with the following account

Jefferson County’s General Fund began the year 2017 with the following account balances: During 2017, Jefferson experienced the following transactions: 1. The budget was passed by...

Q: The Budgetary Comparison Schedule for the City of Salem appears in Illustration

The Budgetary Comparison Schedule for the City of Salem appears in Illustration 2-16. Assume the general and subsidiary ledgers for the General Fund were lost after a water pipe burst. You are charged...

Q: Appearing below is the subsidiary ledger for the public safety department of

Appearing below is the subsidiary ledger for the public safety department of the City of Boone. After the first month of the year, five entries have been made to the ledger. Describe the most likely...

Q: The Village of Seaside Pines prepared the following General Fund Trial Balance

The Village of Seaside Pines prepared the following General Fund Trial Balance as of December 31, 2017, the last day of its fiscal year. Control accounts are used for budgetary entries. 1. Prepare...

Q: The following transactions relate to Newport City’s special revenue fund.

The following transactions relate to Newport City’s special revenue fund. 1. In 2017, Newport City created a special revenue fund to help fund the 911 emergency call center. The center is to be funde...

Q: Robert Perez is a contractor specializing in custom-built jacuzzis.

Robert Perez is a contractor specializing in custom-built jacuzzis. On May 1, 2014, his ledger contains the following data. Raw Materials Inventory ……â&#...

Q: There are three inventory control accounts in a job order system.

There are three inventory control accounts in a job order system. Identify the control accounts and their subsidiary ledgers.

Q: Poco Company purchased 80% of Solo Company’s common stock on January

Poco Company purchased 80% of Solo Company’s common stock on January 1, 2012, for $250,000. On December 31, 2012, the companies prepared the following trial balances: Required: P...

Q: The following accounts appeared in the separate financial statements at the end

The following accounts appeared in the separate financial statements at the end of 2014 for Pressing Inc. and its wholly-owned subsidiary, Stressing Inc. Stressing was acquired in 2009. Required: 1....

Q: Badco Inc. purchased a 90% interest in Lazytoo Company for

Badco Inc. purchased a 90% interest in Lazytoo Company for $600,000 cash on January 1, 2016. Any excess of implied over book value was attributed to depreciable assets with a 15-year remaining life (s...

Q: (Note that this is the same problem as Problem 4

(Note that this is the same problem as Problem 4-7, but assuming the use of the partial equity method.) Price Company purchased 90% of the outstanding common stock of Score Company on January 1, 2011,...

Q: On January 1, 2012, Parker Company purchased 90% of

On January 1, 2012, Parker Company purchased 90% of the outstanding common stock of Sid Company for $180,000. At that time, Sid’s stockholders’ equity consisted of...

Q: On February 1, 2014, Punto Company purchased 95% of

On February 1, 2014, Punto Company purchased 95% of the outstanding common stock of Sara Company and 85% of the outstanding common stock of Rob Company. Immediately before the two acquisitions, balanc...

Q: On January 1, 2015, Pope Company purchased 90% of

On January 1, 2015, Pope Company purchased 90% of Sun Company’s common stock for $5,800,000 cash. Immediately after the acquisition, the two companies’ balance shee...

Q: The two following separate cases show the financial position of a parent

The two following separate cases show the financial position of a parent company and its subsidiary company on November 30, 2014, just after the parent had purchased 90% of the subsidiaryâ€...

Q: On January 1, 2014, Perry Company purchased 8,000

On January 1, 2014, Perry Company purchased 8,000 shares of Soho Company’s common stock for $120,000. Immediately after the stock acquisition, the statements of financial position of...

Q: Balance sheets for P Company and S Company on August 1,

Balance sheets for P Company and S Company on August 1, 2014, are as follows: Required: Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on August 1, 2014, takin...

Q: (Note that this problem is the same as Problem 4-

(Note that this problem is the same as Problem 4-9, but assuming the use of the partial equity method.) December 31, 2014, trial balances for Pledge Company and its subsidiary Stom Company follow: P...

Q: On January 2, 2014, Phillips Company purchased 80% of

On January 2, 2014, Phillips Company purchased 80% of Sanchez Company and 90% of Thomas Company for $225,000 and $168,000, respectively. Immediately before the acquisitions, the balance sheets of the...

Q: On January 1, 2014, Pat Company purchased 90% of

On January 1, 2014, Pat Company purchased 90% of the outstanding common stock of Solo Company for $236,000 cash. The balance sheet for Pat Company just before the acquisition of Solo Company stock, al...

Q: (Note that this is the same problem as Problem 5-

(Note that this is the same problem as Problem 5-4, but assuming the use of the partial equity method.) On January 1, 2013, Porter Company purchased an 80% interest in the capital stock of Salem Compa...

Q: Punca Company purchased 85% of the common stock of Surrano Company

Punca Company purchased 85% of the common stock of Surrano Company on July 1, 2012, for a cash payment of $590,000. December 31, 2012, trial balances for Punca and Surrano were: Surrano Company decl...

Q: (Note that this is the same problem as Problem 5-

(Note that this is the same problem as Problem 5-5, but assuming the use of the partial equity method.) On January 1, 2014, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,00...

Q: (Note that this is the same problem as Problem 5-

(Note that this is the same problem as Problem 5-4 and Problem 5-11, but assuming the use of the complete equity method.) On January 1, 2013, Porter Company purchased an 80% interest in the capital st...

Q: On January 1, 2014, Palmer Company acquired a 90%

On January 1, 2014, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000. At the purchase date, Stevens Company’s stockholders’ equity...

Q: Pillow Company purchased 90% of the common stock of Satin Company

Pillow Company purchased 90% of the common stock of Satin Company on May 1, 2011, for a cash payment of $474,000. December 31, 2011, trial balances for Pillow and Satin were: Satin Company declared...

Q: A consolidated income statement for 2013 and comparative consolidated balance sheets for

A consolidated income statement for 2013 and comparative consolidated balance sheets for 2012 and 2013 for P Company and its 80% owned subsidiary follow: Other information: 1. Equipment depreciati...

Q: Give several reasons why a parent company would be willing to pay

Give several reasons why a parent company would be willing to pay more than book value for subsidiary stock acquired.

Q: Describe the difference between the economic entity concept and the parent company

Describe the difference between the economic entity concept and the parent company concept approaches to the reporting of subsidiary assets and liabilities in the consolidated financial statements on...

Q: Contrast the consolidated effects of the parent company concept and the economic

Contrast the consolidated effects of the parent company concept and the economic entity concept in terms of: (a) The treatment of noncontrolling interests. (b) The elimination of intercompany profits....

Q: Under the economic entity concept, the net assets of the subsidiary

Under the economic entity concept, the net assets of the subsidiary are included in the consolidated financial statements at the total fair value that is implied by the price paid by the parent compan...

Q: The consolidated income statement for the year December 31, 2014,

The consolidated income statement for the year December 31, 2014, and comparative balance sheets for 2013 and 2014 for Parks Company and its 90% owned subsidiary SCR, Inc. are as follows: SCR, Inc....

Q: What aspects of control must exist before a subsidiary is consolidated?

What aspects of control must exist before a subsidiary is consolidated?

Q: What effect do subsidiary treasury stock holdings have at the time the

What effect do subsidiary treasury stock holdings have at the time the subsidiary is acquired? How should the treasury stock be treated on consolidated work papers?

Q: What assumptions must be made about the realization of undistributed subsidiary

What assumptions must be made about the realization of undistributed subsidiary income when the affiliates file separate income tax returns? Why? (See online appendix 4B available at www.wiley.com/co...

Q: How are dividends declared and paid by a subsidiary during the year

How are dividends declared and paid by a subsidiary during the year eliminated in the consolidated workpapers under each method of accounting for investments?

Q: How is the income reported by the subsidiary reflected on the books

How is the income reported by the subsidiary reflected on the books of the investor under each of the methods of accounting for investments?

Q: At the date of an 80% acquisition, a subsidiary had

At the date of an 80% acquisition, a subsidiary had common stock of $100,000 and retained earnings of $16,250. Seven years later, at December 31, 2015, the subsidiary’s retained earnings had increased...

Q: Describe two methods for treating the preacquisition revenue and expense items of

Describe two methods for treating the preacquisition revenue and expense items of a subsidiary purchased during a fiscal period.

Q: The parent company’s share of the fair value of the net

The parent company’s share of the fair value of the net assets of a subsidiary may exceed acquisition cost. How must this excess be treated in the preparation of consolidated financial statements?

Q: Parry Corporation acquired a 100% interest in Sent Company on January

Parry Corporation acquired a 100% interest in Sent Company on January 1, 2011, paying $140,000. Financial statement data for the two companies for the year ended December 31, 2011 follow: Required:...

Q: Perkins Company acquired 100% of Schultz Company on January 1,

Perkins Company acquired 100% of Schultz Company on January 1, 2012, for $161,500. On December 31, 2012, the companies prepared the following trial balances: Required: A. What method is being used b...

Q: Place Company purchased 92% of the common stock of Shaw,

Place Company purchased 92% of the common stock of Shaw, Inc. on January 1, 2012, for $400,000. Trial balances at the end of 2012 for the companies were: Inventory balances on December 31, 2012, wer...

Q: On November 19, 2009, eBay sold all the capital shares

On November 19, 2009, eBay sold all the capital shares of Skype to Springboard Group. eBay received cash proceeds of approximately $1.9 billion, a subordinated note issued by a subsidiary of the Buyer...

Q: On January 1, 2011, Plank Company purchased 80% of

On January 1, 2011, Plank Company purchased 80% of the outstanding capital stock of Scoba Company for $53,000. At that time, Scoba’s stockholders’ equity consisted...

Q: LoJack is a leading global provider of technology products and services for

LoJack is a leading global provider of technology products and services for the tracking and recovery of valuable mobile assets and people at risk of wandering. According to a recent Federal Bureau of...

Q: Prepare in general journal form the workpaper entries to eliminate Prancer Company’s

Prepare in general journal form the workpaper entries to eliminate Prancer Company’s investment in Saltez Company in the preparation of a consolidated balance sheet at the date of ac...

Q: December 31, 2014, trial balances for Pledge Company and its

December 31, 2014, trial balances for Pledge Company and its subsidiary Stom Company follow: Pledge Company purchased 72,000 shares of Stom Company’s common stock on January 1, 201...

Q: Pool Company purchased 90% of the outstanding common stock of Spruce

Pool Company purchased 90% of the outstanding common stock of Spruce Company on December 31, 2014, for cash. At that time the balance sheet of Spruce Company was as follows: Required: Prepare the el...

Q: On December 31, 2013, Price Company purchased a controlling interest

On December 31, 2013, Price Company purchased a controlling interest in Shipley Company. The balance sheet of Price Company and the consolidated balance sheet on December 3, 2013, were as follows:...

Q: A consolidated income statement and selected comparative consolidated balance sheet data for

A consolidated income statement and selected comparative consolidated balance sheet data for Palano Company and subsidiary follow: Required: Prepare the cash flow from operating activities section o...

Q: What is a basic premise of the acquisition method regarding accounting for

What is a basic premise of the acquisition method regarding accounting for a noncontrolling interest? a. Consolidated financial statements should be primarily for the benefit of the parent company’s...

Q: A parent buys 32 percent of a subsidiary in one year and

A parent buys 32 percent of a subsidiary in one year and then buys an additional 40 percent in the next year. In a step acquisition of this type, the original 32 percent acquisition should be a. Main...

Q: The noncontrolling interest represents an outside ownership in a subsidiary that is

The noncontrolling interest represents an outside ownership in a subsidiary that is not attributable to the parent company. Where in the consolidated balance sheet is this outside ownership interest r...

Q: December 31 consolidated financial statements are being prepared for Allsports Company and

December 31 consolidated financial statements are being prepared for Allsports Company and its new subsidiary acquired on July 1 of the current year. Should Allsports adjust its consolidated balances...

Q: How is the noncontrolling interest in a subsidiary company calculated as of

How is the noncontrolling interest in a subsidiary company calculated as of the end of a reporting period?

Q: On January 1, 2018 Casey Corporation exchanged $3,300

On January 1, 2018 Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with...

Q: Pratt Company acquired all of Spider, Inc.’s outstanding shares

Pratt Company acquired all of Spider, Inc.’s outstanding shares on December 31, 2018, for $495,000 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal...

Q: Angela Corporation (a private company) acquired all of the outstanding

Angela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2018, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Techâ...

Q: Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $600,000 cash. Greenburg’s accounting records showed net assets on th...

Q: On January 3, 2016, Persoff Corporation acquired all of the

On January 3, 2016, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,000,000 in cash. Persoff elected to exercise control over Sea Cliff as a who...

Q: On January 1, 2017, Pinnacle Corporation exchanged $3,

On January 1, 2017, Pinnacle Corporation exchanged $3,200,000 cash for 100 percent of the outstanding voting stock of Strata Corporation. On the acquisition date, Strata had the following balance shee...

Q: Allen Company acquired 100 percent of Bradford Company’s voting stock on January

Allen Company acquired 100 percent of Bradford Company’s voting stock on January 1, 2014, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per s...

Q: On January 1, 2017, Harrison, Inc., acquired 90

On January 1, 2017, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison...

Q: On January 1, Beckman, Inc., acquires 60 percent of

On January 1, Beckman, Inc., acquires 60 percent of the outstanding stock of Calvin for $36,000. Calvin Co. has one recorded asset, a specialized production machine with a book value of $10,000 and no...

Q: Plaza, Inc., acquires 80 percent of the outstanding common stock

Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $900,000 cash. At the acquisition date, Stanford’s total...

Q: On January 1, 2016, Telconnect acquires 70 percent of Bandmor

On January 1, 2016, Telconnect acquires 70 percent of Bandmor for $490,000 cash. The remaining 30 percent of Bandmor’s shares continued to trade at a total value of $210,000. The new...

Q: On July 1, 2018, Truman Company acquired a 70 percent

On July 1, 2018, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $720,000 in cash and equity securities. The remaining 30 percent of Atlanta’s shares...

Q: A company acquires a subsidiary and will prepare consolidated financial statements for

A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the initial value...

Q: Duke Corporation owns a 70 percent equity interest in Salem Company,

Duke Corporation owns a 70 percent equity interest in Salem Company, a subsidiary corporation. During the current year, a portion of this stock is sold to an outside party. Before recording this trans...

Q: A company acquires a subsidiary and will prepare consolidated financial statements for

A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method....

Q: On January 1, 2018, Jay Company acquired all the outstanding

On January 1, 2018, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zee’s acquisition-date fair values, Jay concluded that the carrying value of Zee’s long-term...

Q: One company purchases the outstanding debt instruments of an affiliated company on

One company purchases the outstanding debt instruments of an affiliated company on the open market. This transaction creates a gain that is appropriately recognized in the consolidated financial state...

Q: A subsidiary sells land to the parent company at a significant gain

A subsidiary sells land to the parent company at a significant gain. The parent holds the land for two years and then sells it to an outside party, also for a gain. How does the business combination a...

Q: A parent acquires the outstanding bonds of a subsidiary company directly from

A parent acquires the outstanding bonds of a subsidiary company directly from an outside third party. For consolidation purposes, this transaction creates a gain of $45,000. Should this gain be alloca...

Q: Clarke Company has a subsidiary operating in a foreign country. In

Clarke Company has a subsidiary operating in a foreign country. In relation to this subsidiary, what does the term functional currency mean? How is the functional currency determined?

Q: Top Company holds 90 percent of Bottom Company’s common stock. In

Top Company holds 90 percent of Bottom Company’s common stock. In the current year, Top reports sales of $800,000 and cost of goods sold of $600,000. For this same period, Bottom has sales of $300,000...

Q: A subsidiary has (1) a convertible preferred stock and (

A subsidiary has (1) a convertible preferred stock and (2) a convertible bond. How are these items factored into the computation of earnings per share for the parent company?

Q: Dane, Inc., owns Carlton Corporation. For the current year

Dane, Inc., owns Carlton Corporation. For the current year, Dane reports net income (without consideration of its investment in Carlton) of $185,000 and the subsidiary reports $105,000. The parent had...

Q: Several years ago, Bennett, Inc., bought a portion of

Several years ago, Bennett, Inc., bought a portion of the outstanding bonds of Smith Corporation, a subsidiary organization. The acquisition was made from an outside party. In the current year, how sh...

Q: Aceton Corporation owns 80 percent of the outstanding stock of Voctax,

Aceton Corporation owns 80 percent of the outstanding stock of Voctax, Inc. During the current year, Voctax made $140,000 in sales to Aceton. How does this transfer affect the consolidated statement o...

Q: Comparative consolidated balance sheet data for Iverson, Inc., and its

Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned subsidiary Oakley Co. follow: Additional Information for Fiscal Year 2018 ∙...

Q: Comparative consolidated balance sheet data for Iverson, Inc., and its

Comparative consolidated balance sheet data for Iverson, Inc., and its 80 percent–owned subsidiary Oakley Co. follow: Additional Information for Fiscal Year 2018 ∙...

Q: Bensman Corporation is computing EPS. One of its subsidiaries has stock

Bensman Corporation is computing EPS. One of its subsidiaries has stock warrants outstanding. How do these convertible items affect Bensman’s EPS computation? a. No effect is created because the stoc...

Q: A Clarke Corporation subsidiary buys marketable equity securities and inventory on April

A Clarke Corporation subsidiary buys marketable equity securities and inventory on April 1, 2017, for 100,000 won each. It pays for both items on June 1, 2017, and they are still on hand at year-end....

Q: A Clarke Corporation subsidiary buys marketable equity securities and inventory on April

A Clarke Corporation subsidiary buys marketable equity securities and inventory on April 1, 2017, for 100,000 won each. It pays for both items on June 1, 2017, and they are still on hand at year-end....

Q: The functional currency of Bertrand, Inc.’s Irish subsidiary is

The functional currency of Bertrand, Inc.’s Irish subsidiary is the euro. Bertrand borrowed euros as a partial hedge of its investment in the subsidiary. Since then, the euro has decreased in value. B...

Q: McCarthy, Inc.’s Brazilian subsidiary borrowed 100,000 euros

McCarthy, Inc.’s Brazilian subsidiary borrowed 100,000 euros on January 1, 2017. Exchange rates between the Brazilian real (BRL) and euro (€) and between...

Q: McCarthy, Inc.’s Brazilian subsidiary borrowed 100,000 euros

McCarthy, Inc.’s Brazilian subsidiary borrowed 100,000 euros on January 1, 2017. Exchange rates between the Brazilian real (BRL) and euro (€) and between...

Q: A foreign subsidiary of Thun Corporation has one asset (inventory)

A foreign subsidiary of Thun Corporation has one asset (inventory) and no liabilities. The functional currency for this subsidiary is the yuan. The inventory was acquired for 100,000 yuan when the exc...

Q: Certain balance sheet accounts of a foreign subsidiary of Orchid Company have

Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: This subsidiary’s functional currency is a foreign currency. Wh...

Q: Certain balance sheet accounts of a foreign subsidiary of Orchid Company have

Certain balance sheet accounts of a foreign subsidiary of Orchid Company have been stated in U.S. dollars as follows: This subsidiary’s functional currency is the U.S. dollar. What...

Q: Newberry, Inc., whose reporting currency is the U.S

Newberry, Inc., whose reporting currency is the U.S. dollar ($), has a subsidiary in Argentina, whose functional currency also is the $. The subsidiary acquires inventory on credit on November 1, 2017...

Q: Newberry, Inc., whose reporting currency is the U.S

Newberry, Inc., whose reporting currency is the U.S. dollar ($), has a subsidiary in Argentina, whose functional currency also is the $. The subsidiary acquires inventory on credit on November 1, 2017...

Q: Lynch Corporation has a wholly owned subsidiary in Mexico (Lynmex)

Lynch Corporation has a wholly owned subsidiary in Mexico (Lynmex) with two distinct and unrelated lines of business. Lynmex’s Small Appliance Division manufactures small household appliances such as...

Q: Hughes Inc. has a wholly owned subsidiary in Canada that previously

Hughes Inc. has a wholly owned subsidiary in Canada that previously had been determined as having the Canadian dollar as its functional currency. Due to a recent restructuring, Hughes Inc.’s CFO belie...

Q: Download Pfizer’s 2015 annual report (search Pfizer Investor Relations). Locate

Download Pfizer’s 2015 annual report (search Pfizer Investor Relations). Locate the firm’s consolidated statement of cash flows and answer the following: ∙ Does the firm employ the direct or indirect...

Q: On January 1, 2018, Ackerman sold equipment to Brannigan (

On January 1, 2018, Ackerman sold equipment to Brannigan (a wholly owned subsidiary) for $200,000 in cash. The equipment had originally cost $180,000 but had a book value of only $110,000 when transfe...

Q: The following separate income statements are for Burks Company and its 80

The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company: Additional Information ∙ Amortization expense...

Q: Cairns owns 75 percent of the voting stock of Hamilton, Inc

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 allocat...

Q: Bolero Company holds 80 percent of the common stock of Rivera,

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 20...

Q: Several years ago Brant, Inc., sold $900,000

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 percent. A...

Q: On June 30, 2018, Plaster, Inc., paid $

On June 30, 2018, 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...

Q: On January 1, Narnevik Corporation formed a subsidiary in a foreign

On January 1, Narnevik Corporation formed a subsidiary in a foreign country. On April 1, the subsidiary purchased inventory on account at a cost of 250,000 local currency units (LCU). One-fifth of thi...

Q: The Isle of Palms Company (IOP), a U.S

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, 2016...

Q: Sullivan’s Island Company began operating a subsidiary in a foreign country on

Sullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds...

Q: Refer to the information in problem 26. Prepare a statement of

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 these amounts into U.S. dollars. From problem...

Q: Rolfe Company (a U.S.-based company) has

Rolfe Company (a U.S.-based company) has a subsidiary in Nigeria where the local currency unit is the naira (NGN). On December 31, 2016, the subsidiary had the following balance sheet (amounts are in...

Q: Zugar Company is domiciled in a country whose currency is the dinar

Zugar Company is domiciled in a country whose currency is the dinar. Zugar begins 2017 with three assets: cash of 20,000 dinars, accounts receivable of 80,000 dinars, and land that cost 200,000 dinars...

Q: Lancer, Inc. (a U.S.-based company

Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ),...

Q: Board Company has a foreign subsidiary that began operations at the start

Board Company has a foreign subsidiary that began operations at the start of 2017 with assets of 132,000 kites (the local currency unit) and liabilities of 54,000 kites. During this initial year of op...

Q: When a subsidiary sells inventory to a parent, the intra-

When a subsidiary sells inventory to a parent, the intra-entity profit is removed from the subsidiary’s net income for consolidation and reduces the income allocation to the noncontrolling interest. I...

Q: Padilla Company acquired 80% of the outstanding common stock of Skon

Padilla Company acquired 80% of the outstanding common stock of Skon Company on January 1, 2012, for $132,000. At the date of purchase, Skon Company had a balance in its $2 par value common stock acco...

Q: Pacelli Company issued 10-year, 10% bonds with a

Pacelli Company issued 10-year, 10% bonds with a par value of $1,000,000 on January 2, 2013, for $940,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2014, $800,000 of t...

Q: Pacman Company issued 5-year, 8% bonds with a

Pacman Company issued 5-year, 8% bonds with a par value of $100,000 on December 31, 2012, for $92,278 (sold to yield 10%). Interest is paid semiannually on June 30th and December 31st. On December 31,...

Q: Refer to the data provided in Exercise 9-1.

Refer to the data provided in Exercise 9-1. Required: Prepare in general journal form the intercompany bond elimination entries required in the preparation of the December 31, 2014, December 31, 2015,...

Q: Weber Company issued five-year, 10% bonds on January

Weber Company issued five-year, 10% bonds on January 2, 2014, for 105. Par value is $850,000. Interest is paid semiannually on June 30 and December 31. Weber Company is a 90%-owned subsidiary of Fairf...

Q: Use the information relating to Weber Company and Fairfield Company in Exercise

Use the information relating to Weber Company and Fairfield Company in Exercise 9-3. Required: Prepare in general journal form the intercompany bond elimination entries for the consolidated stateme...

Q: Shell Company, an 85% owned subsidiary of Plaster Company,

Shell Company, an 85% owned subsidiary of Plaster Company, sells merchandise to Plaster Company at a markup of 20% of selling price. During 2014 and 2015, intercompany sales amounted to $442,500 and $...

Q: (Note: This is the same Problem as Problem 7-

(Note: This is the same Problem as Problem 7-4, but assuming the use of the partial equity method.) Prout Company owns 80% of the common stock of Sexton Company. The stock was purchased for $1,600,000...

Q: Using the information presented in Problem 7-10 prepare a consolidated

Using the information presented in Problem 7-10 prepare a consolidated financial statements workpaper for the year ended December 31, 2015, using the trial balance format.

Q: Prather Company owns 80% of the common stock of Stone Company

Prather Company owns 80% of the common stock of Stone Company. The stock was purchased for $960,000 on January 1, 2012, when Stone Company’s retained earnings were $675,000. On Janua...

Q: (Note: This is the same Problem as Problems 7-

(Note: This is the same Problem as Problems 7-4 and 7-10, but assuming the use of the complete equity method.) Prout Company owns 80% of the common stock of Sexton Company. The stock was purchased for...

Q: (This is the same problem as Problem 7-12,

(This is the same problem as Problem 7-12, but assuming the complete equity method.) Prather Company owns 80% of the common stock of Stone Company. The stock was purchased for $960,000 on January 1,...

Q: Padilla Company acquired 90% of the outstanding common stock of Sanchez

Padilla Company acquired 90% of the outstanding common stock of Sanchez Company on June 30, 2014, for $426,000. On that date, Sanchez Company had retained earnings in the amount of $60,000, and the fa...

Q: On January 1, 2015, P Company purchased equipment from its

On January 1, 2015, P Company purchased equipment from its 80% owned subsidiary for $600,000. The carrying value of the equipment on the books of S Company was $450,000. The equipment had a remaining...

Q: On January 2, 2013, Pullen Company purchased, on the

On January 2, 2013, Pullen Company purchased, on the open market, 135,000 shares of Souza Company common stock for $665,000. At that time, Souza Company had common stock ($2 par value) of $300,000 and...

Q: Trial balances for Phan Company and its subsidiary Sato Company on December

Trial balances for Phan Company and its subsidiary Sato Company on December 31, 2013, are as follows: Phan Company acquired its investment in Sato Company through open-market purchases of stock as f...

Q: This is a continuation of Problem 8-12. Trial

This is a continuation of Problem 8-12. Trial balances for Phan Company and its subsidiary Sato Company on December 31, 2014, are as follows: Phan Company acquired its investment in Sato Company thr...

Q: Trial balances for Phan Company and its subsidiary Sato Company on December

Trial balances for Phan Company and its subsidiary Sato Company on December 31, 2013, are as follows: Phan Company acquired its investment in Sato Company through open-market purchases of stock as...

Q: This is a continuation of Problem 8-14. Trial

This is a continuation of Problem 8-14. Trial balances for Phan Company and its subsidiary Sato Company on December 31, 2014, are as follows: Phan Company acquired its investment in Sato Company thr...

Q: (Note: This is the same problem as Problem 8-

(Note: This is the same problem as Problem 8-3, but assuming use of the complete or the partial equity method.) The accounts of Pyle Company and its subsidiary, Stern Company, are summarized below as...

Q: (Note: This is the same problem as Problem 8-

(Note: This is the same problem as Problem 8-4, but assuming use of the complete or the partial equity method.) Trial balances for Porter Company and its subsidiary, Spitz Company, as of December 31,...

Q: On January 1, 2014, Plum Company made an open-

On January 1, 2014, Plum Company made an open-market purchase of 30,000 shares of Spivey Company common stock for $122,000. At that time, Spivey Company had common stock ($2 par) of $600,000 and retai...

Q: Pryor Company acquired 51,000 shares of Spero Company’s common stock

Pryor Company acquired 51,000 shares of Spero Company’s common stock on January 1, 2013, for $400,000 when Spero Company had common stock ($5 par) of $300,000 and retained earnings of $200,000. On Ja...

Q: Condensed financial information for Prince Company and South Company follows:

Condensed financial information for Prince Company and South Company follows: Prince Company purchased 80% of South Company’s common stock for $1,000,000 at the beginning of 2013 a...

Q: Parson Industries purchased 80% of the common stock of Succo Company

Parson Industries purchased 80% of the common stock of Succo Company on January 1, 2013, for $300,000 when Succo Company’s capital consisted of common stock of $200,000, preferred stock of $100,000, o...

Q: What is the essential procedural difference between workpaper eliminating entries for unrealized

What is the essential procedural difference between workpaper eliminating entries for unrealized intercompany profit when the selling affiliate is a less than wholly owned subsidiary and such entries...

Q: What is the essential procedural difference between workpaper eliminating entries for unrealized

What is the essential procedural difference between workpaper eliminating entries for unrealized intercompany profit made when the selling affiliate is a less than wholly owned subsidiary and those ma...

Q: Why is the date of acquisition of subsidiary stock important under the

Why is the date of acquisition of subsidiary stock important under the purchase method?

Q: The company that you work for is a subsidiary of a larger

The company that you work for is a subsidiary of a larger company. At the beginning of each year, the subsidiary prepares a budget for the year that includes a forecast of revenues for the coming year...

Q: When a parent company has obtained control of a subsidiary through several

When a parent company has obtained control of a subsidiary through several purchases and subsequently sells a portion of its shares in the subsidiary, how is the carrying value of the shares sold dete...

Q: Explain how a parent company that owns less than 100% of

Explain how a parent company that owns less than 100% of a subsidiary can purchase an entire new issue of common stock directly from the subsidiary.

Q: When a subsidiary issues additional shares of stock to noncontrolling stockholders and

When a subsidiary issues additional shares of stock to noncontrolling stockholders and such issuance results in an increase in the book value of the parent’s share of the subsidiary’s equity, how shou...

Q: A subsidiary sold an old, abandoned plant to its parent and

A subsidiary sold an old, abandoned plant to its parent and incurred a loss of $10 million. Can this loss be reported on the subsidiary-only income statement as an extraordinary item?

Q: Pruitt Corporation owns 90% of the common stock of Sedbrook Company

Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $540,000 on January 1, 2012, when Sedbrook Company’s retained earnings were $100,000....

Q: Using the information in Problem 6-11, prepare a consolidated

Using the information in Problem 6-11, prepare a consolidated statements workpaper using the trial balance format. Data from Problem 6-11: Pruitt Corporation owns 90% of the common stock of Sedbrook...

Q: Paque Corporation owns 90% of the common stock of Segal Company

Paque Corporation owns 90% of the common stock of Segal Company. The stock was purchased for $810,000 on January 1, 2012, when Segal Company’s retained earnings were $150,000. Financ...

Q: On January 1, 2013, Perry Company purchased 80% of

On January 1, 2013, Perry Company purchased 80% of Selby Company for $960,000. At that time Selby had capital stock outstanding of $400,000 and retained earnings of $400,000. The fair value of Selby C...

Q: (Note: This is the same problem as Problem 6-

(Note: This is the same problem as Problem 6-11, but assuming the use of the complete equity method.) Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $...

Q: (Note: This is the same problem as Problem 6-

(Note: This is the same problem as Problem 6-7 and Problem 6-13, but assuming the use of the complete equity method.) Paque Corporation owns 90% of the common stock of Segal Company. The stock was pu...

Q: (Note: This is the same problem as Problem 6-

(Note: This is the same problem as Problem 6-14, but assuming the use of the complete equity method.) On January 1, 2013, Perry Company purchased 80% of Selby Company for $960,000. At that time Selby...

Q: Pearson Company owns 80% of the common stock of Sedbrook Company

Pearson Company owns 80% of the common stock of Sedbrook Company. Pearson Company sells merchandise to Sedbrook Company at 25% above its cost. During 2014 and 2015, such sales amounted to $265,000 and...

Q: On December 16, 2010, Medianet Group’s CFO and Company’s Board

On December 16, 2010, Medianet Group’s CFO and Company’s Board of Directors concluded that the previously issued financial statements contained in the Companyâ...

Q: On January 1, 2014, Sherwood Company, an 80%

On January 1, 2014, Sherwood Company, an 80% owned subsidiary of Paradise Company, sold to Paradise Company equipment with a book value of $600,000 for $840,000. The equipment had an estimated remai...

Q: Peat Company owns a 90% interest in Seaton Company. The

Peat Company owns a 90% interest in Seaton Company. The consolidated income statement drafted by the controller of Peat Company appeared as follows: During your audit you discover that intercompany...

Q: On January 1, 2014, Pace Company purchased 250,000

On January 1, 2014, Pace Company purchased 250,000 shares of common stock directly from its subsidiary, Sime Company, for $1.50 per share. Noncontrolling stockholders elected not to participate in the...

Q: Glassmaster Company is organized as two divisions and one subsidiary. One

Glassmaster Company is organized as two divisions and one subsidiary. One division focuses on the manufacture of filaments such as fishing line and sewing thread; the other division manufactures anten...

Q: Citigroup Inc. (Citi) is a leading global financial services

Citigroup Inc. (Citi) is a leading global financial services company with over 200 million customer accounts and operations in more than 140 countries. Its operating units Citicorp and Citi Holdings p...

Q: Henry Company is a marketer of branded foods to retail and foodservice

Henry Company is a marketer of branded foods to retail and foodservice channels. Exhibit 6.14 presents Henry’s income statements for Year 10, Year 11, and Year 12. Exhibit 6.14: N...

Q: Vulcan Materials Company, a member of the S&P 500

Vulcan Materials Company, a member of the S&P 500 Index, is the nation’s largest producer of construction aggregates, a major producer of asphalt mix and concrete, and a leading...

Q: Exhibit 8.26 presents the separate financial statements at December 31

Exhibit 8.26 presents the separate financial statements at December 31, 2018, of Prestige Resorts and its 80%-owned subsidiary Booking, Inc. Two years earlier on January 1, 2017, Prestige acquired 80%...

Q: Foreign Sub is a wholly owned subsidiary of U.S.

Foreign Sub is a wholly owned subsidiary of U.S. Domestic Corporation. U.S. Domestic Corporation acquired the subsidiary several years ago. The financial statements for Foreign Sub for 2017 in its own...

Q: Stebbins Corporation established a wholly owned Canadian subsidiary on January 1,

Stebbins Corporation established a wholly owned Canadian subsidiary on January 1, Year 1, by contributing US$500,000 for all of the subsidiary’s common stock. The exchange rate on th...

Q: Refer to Problem 8.25 for Stebbins Corporation for Year 1

Refer to Problem 8.25 for Stebbins Corporation for Year 1, its first year of operations. Exhibit 8.31 shows the amounts for the Canadian subsidiary for Year 2. The average exchange rate during Year 2...

Q: In auditing an international company, or a subsidiary of an international

In auditing an international company, or a subsidiary of an international company, you would more than likely need to follow the auditing standards of the International Auditing & Assurance Standards...

Q: A subsidiary of Corporation A, an electrical utility located in Springfield

A subsidiary of Corporation A, an electrical utility located in Springfield, and a subsidiary of Corporation B, a diversified manufacturer also located in Springfield, formed a joint venture under the...

Q: The Bootsie Holding Company has sales exceeding $10 billion and each

The Bootsie Holding Company has sales exceeding $10 billion and each of its three, wholly-owned subsidiaries has sales exceeding $2 billion. Three years ago, the subsidiaries had “complex” capital st...

Q: Horizons Inc. has agreed to sell an investment in a subsidiary

Horizons Inc. has agreed to sell an investment in a subsidiary that has been accounted for on the equity method of accounting to a minority stockholder in exchange for the stockholder’s share in Horiz...

Q: Hidetoshi was a world-renowned rock star from NewCountry. Sony

Hidetoshi was a world-renowned rock star from NewCountry. Sony-USA Records contracted with Hidetoshi to produce records. Sony-USA Records retained all intellectual property rights in the recordings. T...

Q: Xco an accrual basis taxpayer has various lines of businesses. One

Xco an accrual basis taxpayer has various lines of businesses. One business is a gas station. The land underneath the gas station was not contaminated when Xco purchased it. However, the land now has...

Q: The following diagram depicts the relationships among Mary Company, John Company

The following diagram depicts the relationships among Mary Company, John Company, and Joan Company on December 31, 2018: Mary Company purchases its interest in John Company on January 1, 2016, for...

Q: Shelby Corporation purchases 90% of the outstanding stock of Borner Company

Shelby Corporation purchases 90% of the outstanding stock of Borner Company on January 1, 2015, for $603,000 cash. At that time, Borner Company has the following stockholders’ equity...

Q: On January 1, 2017, Heckert Company purchases a controlling interest

On January 1, 2017, Heckert Company purchases a controlling interest in Aker Company. The following information is available: a. Heckert Company purchases 1,600 shares of Aker Company outstanding stoc...

Q: Use the preceding information for Purnell’s purchase of Sentinel common stock.

Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 19,000 shares of its own stock for 80% of the common stock of Sentinel. The st...

Q: Use the preceding information for Purnell’s purchase of Sentinel common stock.

Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 10,000 shares of its own stock for 80% of the common stock of Sentinel. The st...

Q: Use the preceding information for Palto’s purchase of Saleen common stock.

Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $400,000 cash. The shares of the noncontrolling i...

Q: Use the preceding information for Palto’s purchase of Saleen common stock.

Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 80% of the Saleen common stock for $300,000 cash. Palto has the following balance sh...

Q: Use the preceding information for Purnell’s purchase of Sentinel common stock.

Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 22,000 shares of its own stock for 100% of the common stock of Sentinel. The s...

Q: Use the preceding information for Purnell’s purchase of Sentinel common stock.

Use the preceding information for Purnell’s purchase of Sentinel common stock. Assume Purnell exchanges 16,000 shares of its own stock for 100% of the common stock of Sentinel. The s...

Q: On December 31, 2015, Aron Company purchases 100% of

On December 31, 2015, Aron Company purchases 100% of the common stock of Shield Company for $450,000 cash. On this date, any excess of cost over book value is attributed to accounts with fair values t...

Q: Using the data given in Problem 2-6, assume that

Using the data given in Problem 2-6, assume that Aron Company purchases 80% of the common stock of Shield Company for $320,000 cash. The following comparative balance sheets are prepared for the two c...

Q: Use the preceding information for Palto’s purchase of Saleen common stock.

Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 100% of the Saleen common stock for $500,000 cash. Palto has the following balance s...

Q: Use the preceding information for Palto’s purchase of Saleen common stock.

Use the preceding information for Palto’s purchase of Saleen common stock. Assume Palto purchases 100% of the Saleen common stock for $400,000 cash. Palto has the following balance s...

Q: Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock

Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $480,000 for 100% of Switzer common stock. Paul...

Q: Refer to the preceding common information for Paulcraft’s acquisition of Switzer’s common

Refer to the preceding common information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $440,000 for 80% of Switzer common stock...

Q: On January 1, 2015, Paro Company purchases 80% of

On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of...

Q: Parker Company acquires an 80% interest in Sargent Company for $

Parker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: The excess of the price paid over book value...

Q: Company S is an 80% owned subsidiary of Company P.

Company S is an 80% owned subsidiary of Company P. For 2015, Company P reports internally generated income before tax of $100,000. Company S reports an income before tax of $40,000. A 30% tax rate app...

Q: Company S is an 80% owned subsidiary of Company P.

Company S is an 80% owned subsidiary of Company P. On January 1, 2015, Company P sells equipment to Company S at a $50,000 profit. Assume a 30% corporate tax rate and an 80% dividend exclusion. The eq...

Q: Subsidiary Company S had the following stockholders’ equity on December 31,

Subsidiary Company S had the following stockholders’ equity on December 31, 2017, prior to distributing a 10% stock dividend: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . ....

Q: Subsidiary Company S had the following stockholders’ equity on January 1,

Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 20,000 additional new shares to noncontrolling shareholders: Common stock ($1 par), 100,000 shares is...

Q: The trial balances of Parker and Sargent companies of Exercise 3 for

The trial balances of Parker and Sargent companies of Exercise 3 for December 31, 2016, are presented as follows: Parker Company continues to use the simple equity method. 1. Prepare all the elimin...

Q: A parent company paid $500,000 for a 100%

A parent company paid $500,000 for a 100% interest in a subsidiary. At the end of the first year, the subsidiary reported net income of $40,000 and paid $5,000 in dividends. The price paid reflected u...

Q: Parker Company acquires an 80% interest in Sargent Company for $

Parker Company acquires an 80% interest in Sargent Company for $300,000 on January 1, 2015, when Sargent Company has the following balance sheet: The excess of the price paid over book value is attr...

Q: A parent company acquired an 80% interest in a subsidiary on

A parent company acquired an 80% interest in a subsidiary on July 1, 2015. The subsidiary closed its books on that date. The subsidiary reported net income of $60,000 for 2015, earned evenly during th...

Q: A parent company acquired an 80% interest in a subsidiary on

A parent company acquired an 80% interest in a subsidiary on January 1, 2015, at a price high enough to result in goodwill. Included in the assets of the subsidiary are inventory with a book value of...

Q: During 2015, Company P sold $50,000 of goods

During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. What specific adjustments are needed on the consolidated...

Q: The trial balances of Parker and Sargent companies of Exercise 5 for

The trial balances of Parker and Sargent companies of Exercise 5 for December 31, 2016, are presented as follows: Parker Company continues to use the sophisticated equity method. 1. Prepare all the...

Q: On January 1, 2015, Paro Company purchases 80% of

On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of...

Q: Baker Enterprises purchases an 80% interest in Kohlenberg International for $

Baker Enterprises purchases an 80% interest in Kohlenberg International for $850,000 on January 1, 2015. The estimated fair value of the NCI is $190,000. On the purchase date, Kohlenberg International...

Q: Sandin Company prepares the following balance sheet on January 1, 2015

Sandin Company prepares the following balance sheet on January 1, 2015: On this date, Prescott Company purchases 8,000 shares of Sandin Company’s outstanding stock for a total pri...

Q: Sorel is an 80%-owned subsidiary of Pattern Company. The

Sorel is an 80%-owned subsidiary of Pattern Company. The two affiliates had the following separate income statements for 2015 and 2016. Sorel sells at the same gross profit percentage to all custo...

Q: Hide Corporation is a wholly owned subsidiary of Seek Company. During

Hide Corporation is a wholly owned subsidiary of Seek Company. During 2015, Hide sold all of its production to Seek Company for $400,000, a price that includes a 25% gross profit. 2015 was the first y...

Q: Norco Company is an 80%-owned subsidiary of Victory Corporation.

Norco Company is an 80%-owned subsidiary of Victory Corporation. The separate income statements of the two companies for 2016 are as follows: The following facts apply to 2016: a. Norco Company sold...

Q: On January 1, 2016, Jungle Company sold a machine to

On January 1, 2016, Jungle Company sold a machine to Safari Company for $30,000. The machine had an original cost of $24,000, and accumulated depreciation on the asset was $9,000 at the time of the sa...

Q: The separate income statements of Danner Company and its 90%-owned

The separate income statements of Danner Company and its 90%-owned subsidiary, Link Company, for the year ended December 31, 2016, are as follows: The following additional facts apply: a. On Janua...

Q: Jeter Corporation purchases 80% of the outstanding stock of Super Company

Jeter Corporation purchases 80% of the outstanding stock of Super Company for $275,000 on July 1, 2015. Super Company has the following stockholders’ equity on July 1, 2015: Common...

Q: Darcy Company is an 80%-owned subsidiary of Kraco Industries.

Darcy Company is an 80%-owned subsidiary of Kraco Industries. Darcy Company issued 10-year, 8% bonds in the amount of $1,000,000 on January 1, 2015. The bonds were issued at face value, and interest i...

Q: Cardinal Company is an 80%- owned subsidiary of Dove Corporation.

Cardinal Company is an 80%- owned subsidiary of Dove Corporation. Cardinal Company issued $100,000 of 8%, 10-year bonds for $96,000 on January 1, 2011. Annual interest is paid on January 1. Dove Corpo...

Q: On January 1, 2014, Dunbar Corporation, an 85%-

On January 1, 2014, Dunbar Corporation, an 85%-owned subsidiary of Garfield Industries, received $48,055 for $50,000 of 8%, 5-year bonds it issued when the market rate was 9%. When Garfield Industries...

Q: Carlton Company is an 80%- owned subsidiary of Mirage Company.

Carlton Company is an 80%- owned subsidiary of Mirage Company. On January 1, 2015, Carlton sold $100,000 of 10-year, 7% bonds for $101,000. Interest is paid annually on January 1. The market rate for...

Q: Linco Industries is a 90%- owned subsidiary of Sharp Incorporated.

Linco Industries is a 90%- owned subsidiary of Sharp Incorporated. On January 1, 2015, Linco issued $100,000 of 10- year, 6% bonds for $86,580, to yield 8% interest. Interest is paid annually on Janua...

Q: On January 1, 2015, Traylor Company, an 80%-

On January 1, 2015, Traylor Company, an 80%-owned subsidiary of Parker Electronics, Inc., signed a 4-year direct financing lease with its parent for the rental of electronic equipment. The lease agree...

Q: The Auto Clinic is a wholly owned subsidiary of Fast-Check

The Auto Clinic is a wholly owned subsidiary of Fast-Check Equipment Company. Fast-Check Equipment sells and leases 4-wheel alignment machines. The usual selling price of each machine is $35,000; it h...

Q: Born Company acquires an 80% interest in Roland Company for $

Born Company acquires an 80% interest in Roland Company for $660,000 cash on January 1, 2017. The NCI has a fair value of $165,000. Any excess of cost over book value is attributed to goodwill. To hel...

Q: On May 1, 2016, Tole Company acquires a 80%

On May 1, 2016, Tole Company acquires a 80% interest in Marco Company for $400,000. The fair value of the NCI is $100,000. The following determination and distribution of excess schedule is prepared:...

Q: The separate income statements of Coors Company and its 60% owned

The separate income statements of Coors Company and its 60% owned subsidiary, Vespa Company, for the year ended December 31, 2017, are as follows: The following additional information is availab...

Q: Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock

Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $420,000 for 100% of Switzer common stock. Paul...

Q: Baker Corporation purchases a 60% interest in Hardee Company on January

Baker Corporation purchases a 60% interest in Hardee Company on January 1, 2015, for $135,000. On that date, Hardee Company has the following stockholders’ equity: Common stock ($1...

Q: Center, Inc., purchases 24,000 shares of Bruce Corporation

Center, Inc., purchases 24,000 shares of Bruce Corporation, which equates to an 80% interest, on January 1, 2015. The following determination and distribution of excess schedule is prepared: Bruce...

Q: On January 1, 2015, 100% of the outstanding stock

On January 1, 2015, 100% of the outstanding stock of Solo Company was purchased by Plato Corporation for $3,300,000. At that time, the book value of Solo’s net assets equaled $3,000,...

Q: Myles Corporation and its subsidiary, Downer Corporation, have the following

Myles Corporation and its subsidiary, Downer Corporation, have the following trial balances as of December 31, 2017: Myles Corporation acquires its 60% interest in Downer Corporation for $348,000...

Q: You have secured the following information for Companies A, B,

You have secured the following information for Companies A, B, and C concerning their internally generated net incomes (excluding subsidiary income) and dividends paid: 1. Assume Company A acquire...

Q: On January 1, 2015, Peanut Company acquired 80% of

On January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On this date, Salt had total owners’ equity of $200,000 (including retained earnings...

Q: Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock

Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $400,000 for 80% of Switzer common stock. Paulc...

Q: Lucy Company issues securities with a fair value of $468,

Lucy Company issues securities with a fair value of $468,000 for a 90% interest in Diamond Company on January 1, 2015, at which time Diamond Company has the following balance sheet: It is believed t...

Q: On January 1, 2015, Peanut Company acquired 80% of

On January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On this date, Salt had total owners’ equity of $200,000, which included retained ear...

Q: Steven Truck Company has been an 80%-owned subsidiary of Paulz

Steven Truck Company has been an 80%-owned subsidiary of Paulz Heavy Equipment since January 1, 2013, when Paulz acquired 128,000 shares of Steven common stock for $832,000, an amount equal to the boo...

Q: The December 31, 2019, post-closing trial balances of

The December 31, 2019, post-closing trial balances of Marley Corporation and its subsidiary, Foster Corporation, are as follows: The following additional information is available: a. Marley initia...

Q: On January 1, 2015, Peanut Company acquired 80% of

On January 1, 2015, Peanut Company acquired 80% of the common stock of Salt Company for $200,000. On this date, Salt had total owners’ equity of $200,000. During 2015 and 2016, Peanu...

Q: Book, Inc., acquires all of the outstanding $25 par

Book, Inc., acquires all of the outstanding $25 par common stock of Cray, Inc., on June 30, 2014, in exchange for 40,000 shares of its $25 par common stock. On June 30, 2014, Book, Inc., common stock...

Q: Pannier Company is the parent company that owns an 80% interest

Pannier Company is the parent company that owns an 80% interest in Jodestar Company. The interest was acquired at book value, and the simple equity method is used to record the ownership interest. The...

Q: Magna Company is the parent company that owns an 80% interest

Magna Company is the parent company that owns an 80% interest in Metros Company. The interest was purchased at book value, and the simple equity method is used to record the ownership interest. The tr...

Q: Refer to the preceding facts for Purple’s acquisition of Salmon common stock

Refer to the preceding facts for Purple’s acquisition of Salmon common stock. On January 1, 2016, Salmon held merchandise sold to it by Purple for $14,000. This beginning inventory h...

Q: Refer to the preceding facts for Purple’s acquisition of Salmon common stock

Refer to the preceding facts for Purple’s acquisition of Salmon common stock. On January 1, 2017, Salmon held merchandise sold to it from Purple for $12,000. This beginning inventory...

Q: On April 1, 2015, Benton Corporation purchased 80% of

On April 1, 2015, Benton Corporation purchased 80% of the outstanding stock of Crandel Company for $425,000. A condensed balance sheet of Crandel Company at the purchase date is shown below. All boo...

Q: Refer to the preceding facts for Packard’s acquisition of Stude common stock

Refer to the preceding facts for Packard’s acquisition of Stude common stock. On January 1, 2016, Packard held merchandise acquired from Stude for $10,000. This beginning inventory had an applicable g...

Q: Refer to the preceding facts for Packard’s acquisition of Stude common stock

Refer to the preceding facts for Packard’s acquisition of Stude common stock. On January 1, 2016, Packard held merchandise acquired from Stude for $10,000. This beginning inventory had an applicable g...

Q: On January 1, 2015, Silvio Corporation exchanged on a 1

On January 1, 2015, Silvio Corporation exchanged on a 1-for-3 basis common stock it held in its treasury for 80% of the outstanding stock of Jenko Company. Silvio Corporation common stock had a market...

Q: On September 1, 2015, Parcel Corporation purchased 80% of

On September 1, 2015, Parcel Corporation purchased 80% of the outstanding common stock of Sack Corporation for $152,000. On that date, Sack’s net book values equaled fair values, and...

Q: Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock

Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $420,000 for 70% of Switzer common stock. Paulc...

Q: Refer to the preceding facts for Panther’s acquisition of Sandin common stock

Refer to the preceding facts for Panther’s acquisition of Sandin common stock. On January 1, 2016, Panther held merchandise sold to it from Sandin for $12,000. This beginning inventory had an applicab...

Q: Refer to the preceding facts for Panther’s acquisition of Sandin common stock

Refer to the preceding facts for Panther’s acquisition of Sandin common stock. On January 1, 2016, Sandin held merchandise sold to it from Panther for $20,000. During 2016, Panther sold merchandise to...

Q: The December 31, 2016, trial balances of Pettie Corporation and

The December 31, 2016, trial balances of Pettie Corporation and its 90%-owned subsidiary Sunco Corporation are as follows: Pettie’s investment in Sunco was purchased for $1,260,00...

Q: Sym Corporation, a wholly owned subsidiary of Paratec Corporation, leased

Sym Corporation, a wholly owned subsidiary of Paratec Corporation, leased equipment from its parent company on August 1, 2016. The terms of the agreement clearly do not require the lease to be account...

Q: Refer to the preceding facts for Press’s acquisition of Simon common stock

Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2016, Press held...

Q: Refer to the preceding facts for Press’s acquisition of Simon common stock

Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2017, Press held...

Q: Refer to the preceding facts for Press’s acquisition of Simon common stock

Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2016, Press held...

Q: Refer to the preceding facts for Press’s acquisition of Simon common stock

Refer to the preceding facts for Press’s acquisition of Simon common stock. Press uses the simple equity method to account for its investment in Simon. On January 1, 2017, Press held...

Q: Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s

Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 40,000 shares of its $20 fair value common stock...

Q: Plessor Industries acquired 80% of the outstanding common stock of Slammer

Plessor Industries acquired 80% of the outstanding common stock of Slammer Company on January 1, 2015, for $320,000. On that date, Slammer’s book values approximated fair values, and...

Q: Patter Inc. acquired an 80% interest in Swing Company for

Patter Inc. acquired an 80% interest in Swing Company for $480,000 on January 1, 2011, when Swing had the following stockholders’ equity: Common stock ($10 par). . . . . . . . . . ....

Q: On January 1, 2015, Parker Company acquired 90% of

On January 1, 2015, Parker Company acquired 90% of the common stock of Stride Company for $351,000. On this date, Stride had common stock, other paid-in capital in excess of par, and retained earnings...

Q: On January 1, 2013, Appliance Outlets had the following balances

On January 1, 2013, Appliance Outlets had the following balances in its stockholders’ equity accounts: Common Stock ($10 par), $800,000; Paid-In Capital in Excess of Par, $625,000; a...

Q: Refer to the preceding facts for Pontiac’s acquisition of 80% of

Refer to the preceding facts for Pontiac’s acquisition of 80% of Starks common stock and the bond transactions. Pontiac uses the simple equity method to account for its investment in...

Q: Refer to the preceding facts for Pontiac’s acquisition of 80% of

Refer to the preceding facts for Pontiac’s acquisition of 80% of Stark’s common stock and the bond transactions. Pontiac uses the simple equity method to account fo...

Q: Refer to the preceding facts for Postman’s acquisition of 80% of

Refer to the preceding facts for Postman’s acquisition of 80% of Spartan’s common stock and the bond transactions. Postman uses the simple equity method to account...

Q: Refer to the preceding facts for Postman’s acquisition of 80% of

Refer to the preceding facts for Postman’s acquisition of 80% of Spartan’s common stock and the bond transactions. Postman uses the simple equity method to account...

Q: The problem below is an example of a question of the CPA

The problem below is an example of a question of the CPA ‘‘Other Objective Format’’ type as it was applied to the consolidations...

Q: Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s

Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 40,000 shares of its $20 fair value common stock...

Q: Princess Company acquired a 90% interest in Sundown Company on January

Princess Company acquired a 90% interest in Sundown Company on January 1, 2011, for $675,000. Any excess of cost over book value was due to goodwill. Capital balances of Sundown Company on January 1,...

Q: Marion Company is an 80% owned subsidiary of Lange Company.

Marion Company is an 80% owned subsidiary of Lange Company. The interest in Marion is purchased on January 1, 2015, for $680,000 cash. The fair value of the NCI was $170,000. At that date, Marion has...

Q: On January, 1, 2015, Perko Company acquires 70%

On January, 1, 2015, Perko Company acquires 70% of the common stock of Solan Company for $385,000 in a taxable combination. On this date, Solan has total owners’ equity of $422,000,...

Q: Refer to the preceding facts for Penske’s acquisition of Stock common stock

Refer to the preceding facts for Penske’s acquisition of Stock common stock. Penske uses the simple equity method to account for its investment in Stock. During 2016, Stock sells $30...

Q: Refer to the preceding facts for Penske’s acquisition of Stock common stock

Refer to the preceding facts for Penske’s acquisition of Stock common stock. Penske accounts for its investment in Stock using the simple equity method, including income tax effects....

Q: On January 1, 2015, Pepper Company purchases 80% of

On January 1, 2015, Pepper Company purchases 80% of the common stock of Salty Company for $270,000. On this date, Salty has total owners’ equity of $300,000. The excess of cost over...

Q: Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s

Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 25,000 shares of its $20 fair value common stock...

Q: On January 1, 2015, Pillar Company purchases an 80%

On January 1, 2015, Pillar Company purchases an 80% interest in Stark Company for $890,000. On the date of acquisition, Stark has total owners’ equity of $800,000. Buildings, which h...

Q: Refer to the preceding facts for Parson’s acquisition of Solar common stock

Refer to the preceding facts for Parson’s acquisition of Solar common stock. Parson uses the simple equity method to account for its investment in Solar. During 2016, Solar sells $30...

Q: Refer to the preceding facts for Parson’s acquisition of Solar common stock

Refer to the preceding facts for Parson’s acquisition of Solar common stock. Parson uses the simple equity method to account for its investment in Solar. During 2017, Solar sells $40...

Q: The following determination and distribution of excess schedule is prepared on January

The following determination and distribution of excess schedule is prepared on January 1, 2012, the date on which Palmer Company purchases a 60% interest in Sharon Company: On December 31, 2013, P...

Q: On January 1, 2015, James Company purchases 70% of

On January 1, 2015, James Company purchases 70% of the common stock of Craft Company for $245,000. On this date, Craft has common stock, other paid-in capital in excess of par, and retained earnings o...

Q: During 2017, Away Company acquires a controlling interest in Stallward,

During 2017, Away Company acquires a controlling interest in Stallward, Inc. Trial balances of the companies at December 31, 2017, are as follows: The following information is available regarding...

Q: Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s

Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 35,000 shares of its $20 fair value common stock...

Q: Marsha Corporation purchases an 80% interest in the common stock of

Marsha Corporation purchases an 80% interest in the common stock of Transam Corporation on December 31, 2013, for $720,000, when Transam has the following condensed balance sheet: On the December...

Q: The following information pertains to Titan Corporation and its two subsidiaries,

The following information pertains to Titan Corporation and its two subsidiaries, Boat Corporation and Engine Corporation: a. The three corporations are all in the same industry and their operations a...

Q: On January 1, 2017, Black Jack Corporation purchases all of

On January 1, 2017, Black Jack Corporation purchases all of the preferred stock and 60% of the common stock of Zeppo Company for $56,000 and $111,000, respectively. Immediately prior to the purchases,...

Q: On January 1, 2015, Bear Corporation acquires a 60%

On January 1, 2015, Bear Corporation acquires a 60% interest in Kelly Company and an 80% interest in Samco Company. The purchase prices are $225,000 and $250,000, respectively. The excess of cost over...

Q: On January 1, 2016, Palo Company acquires 80% of

On January 1, 2016, Palo Company acquires 80% of the outstanding common stock of Sheila Company for $700,000. On January 1, 2018, Sheila Company sells 25,000 shares of common stock to the public at $1...

Q: On January 1, 2016, Mitta Corporation acquires a 60%

On January 1, 2016, Mitta Corporation acquires a 60% interest (12,000 shares) in Train Company for $156,000. Train stockholders’ equity on the purchase date is as follows: Common s...

Q: Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s

Refer to the preceding information for Fast Cool’s acquisition of Fast Air’s common stock. Assume Fast Cool issues 35,000 shares of its $20 fair value common stock...

Q: During 2015, Company P sold $50,000 of goods

During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. If no adjustments were made on the consolidated workshee...

Q: On January 1, 2015, Paro Company purchases 80% of

On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. Solar has common stock, other paid-in capital in excess of par, and retained earnings of $50,000, $100...

Q: Company S is an 80%-owned subsidiary of Company P.

Company S is an 80%-owned subsidiary of Company P. Company S needed to borrow $500,000 on January 1, 2015. The best interest rate it could secure was 10% annual. Company P has a better credit rating a...

Q: Subsidiary Company S has $1,000,000 of bonds

Subsidiary Company S has $1,000,000 of bonds outstanding. The bonds have 10 years to maturity and pay interest at 8% annually. The parent has an average annual borrowing cost of 6% and wishes to reduc...

Q: Company P purchased $100,000 of subsidiary Company S’s bonds

Company P purchased $100,000 of subsidiary Company S’s bonds for $96,000 on January 1, 2015, when the bonds had five years to maturity. The bonds had been issued at face value and pay interest at 8% a...

Q: Your friend is a noncontrolling interest shareholder in a large company.

Your friend is a noncontrolling interest shareholder in a large company. He knows that the subsidiary company leases most of its assets from the parent company under operating leases. He further belie...

Q: A parent company is a producer of production equipment, some of

A parent company is a producer of production equipment, some of which is acquired and used by the parent’s subsidiary companies. The parent offers a discount to the subsidiaries but still earns a sign...

Q: P Company acquires 80% of the common stock of S Company

P Company acquires 80% of the common stock of S Company for an agreed-upon price of $640,000. The fair value of the NCI is $160,000. The book value of the net assets is $600,000, which includes $50,00...

Q: Company P has internally generated net income of $200,000

Company P has internally generated net income of $200,000 (excludes share of subsidiary income). Company P has 100,000 shares of outstanding common stock. Subsidiary Company S has a net income of $60,...

Q: Par Company acquires 100% of the common stock of Sub Company

Par Company acquires 100% of the common stock of Sub Company for an agreedupon price of $900,000. The book value of the net assets is $700,000, which includes $50,000 of subsidiary cash equivalents. E...

Q: Company P has internally generated net income of $250,000

Company P has internally generated net income of $250,000 (excludes share of subsidiary income). Company P has 100,000 shares of outstanding common stock. Subsidiary Company S has a net income of $60,...

Q: Late in 2009, Canyon Power Company (CPC) management was

Late in 2009, Canyon Power Company (CPC) management was considering expansion of the company’s international business activities. CPC is an Arizona-based manufacturer of specialist e...

Q: Refer to Exhibit 13.6. Required:

Refer to Exhibit 13.6. Required: Briefly explain the operating environment of a developing country of your choice using the framework that identifies the social, political, economic, and...

Q: Sedona Electronics of Arizona exports 25,000 Disc Drive Controllers (

Sedona Electronics of Arizona exports 25,000 Disc Drive Controllers (DDCs) per year to China under an agreement that covers the period 2009–2013. In China, the DDCs are sold for the RMB (Chinese curre...

Q: What are the nonfinancial measures available to MNCs for evaluating foreign subsidiary

What are the nonfinancial measures available to MNCs for evaluating foreign subsidiary performance?

Q: What are the factors that influence the decision regarding the manner in

What are the factors that influence the decision regarding the manner in which a particular subsidiary should be treated for purposes of performance evaluation (e.g., as a cost center or a profit cent...

Q: Do you think it is important to separate the evaluation of the

Do you think it is important to separate the evaluation of the performance of a subsidiary from that of its manager? Why?

Q: It is impossible to separate the performance of a foreign subsidiary from

It is impossible to separate the performance of a foreign subsidiary from that of its managers, and there is no need for it. Required: Critically comment on the preceding statement.

Q: In order to demonstrate the use of the re measurement process,

In order to demonstrate the use of the re measurement process, assume that at the beginning of the year a U.S. parent company invested 100,000 foreign currency B (FCB) to form a 100% owned subsidiary....

Q: Due to increasing pressures to expand globally, Pueblo Corporation acquired a

Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorensonâ&#...

Q: On October 1, 2013, Kemper International acquired a 90%

On October 1, 2013, Kemper International acquired a 90% interest in the equity of Spruco Manufacturing when the subsidiary’s equity was 8,000,000 foreign currency (FC), including ret...

Q: Prospect International, a U.S. company, acquired an

Prospect International, a U.S. company, acquired an 80% controlling interest in the equity of a foreign corporation, Aspic Developments. At the time of the acquisition, January 1, 2014, Prospect paid...

Q: Balfour Corporation acquired 100% of Tobac, Inc., a foreign

Balfour Corporation acquired 100% of Tobac, Inc., a foreign corporation, for 33,000,000 FC. The acquisition, which was accounted for as a purchase, occurred on July 1, 2015, when Tobacâ€
...

Q: Select the best answer for each of the following multiple-choice

Select the best answer for each of the following multiple-choice questions. (Nos. 1, 5, and 7–10 are AICPA adapted.) 1. The encumbrances control account of a governmental unit is inc...

Q: Assume that a U.S. company has a French subsidiary

Assume that a U.S. company has a French subsidiary whose functional currency is the euro. Explain why the translation adjustment is not included as a component of net income on the consolidated income...

Q: Baxter Industries, Inc., is a U.S. company

Baxter Industries, Inc., is a U.S. company that has a wholly owned subsidiary. The subsidiary maintains its book and records in a foreign currency (FC) and the majority of its local expenses such as p...

Q: Assume that a U.S. company has a foreign subsidiary

Assume that a U.S. company has a foreign subsidiary whose functional currency is the U.S. dollar. Explain how exchange rates between the foreign currency and the dollar would have to change in order t...

Q: Techno Builders has acquired a 70% interest in the equity of

Techno Builders has acquired a 70% interest in the equity of a foreign company, Pre fabco, whose functional currency is the FC. Although Pre fabco began operations in June 2012 when 1 FC equaled $1.95...

Q: You are maintaining a subsidiary ledger account for Firefighter-Training Expenditures

You are maintaining a subsidiary ledger account for Firefighter-Training Expenditures for 2018. The following columns are used: Inventory purchases are initially recorded as expenditures (purchases...

Q: Super Senior Agency is a VHWO. The following events occurred during

Super Senior Agency is a VHWO. The following events occurred during the year. The agency uses one control account for its fixed assets, with supporting subsidiary records. 1. Property was purchased fo...

Q: Palisade Creek Co. is a retail business that uses the perpetual

Palisade Creek Co. is a retail business that uses the perpetual inventory system. The account balances for Palisade Creek as of May 1, 20Y6 (unless otherwise indicated), are as follows: During May,...

Q: Comparative income statements for Thesaurus Inc. are as follows:

Comparative income statements for Thesaurus Inc. are as follows: Required: The president and management believe that the company performed better in 2017 than it did in 2016. Write the president&aci...

Q: Comparative income statements for Grammar Inc. are as follows:

Comparative income statements for Grammar Inc. are as follows: Required: The president and management believe that the company performed better in 2017 than it did in 2016. Write the presidentâ...

Q: A recent balance sheet for Pittards, PLC, a British company

A recent balance sheet for Pittards, PLC, a British company, follows. The company’s principal activities are the design, production, and procurement of technically advanced leather....

Q: Regulated utilities such as Duke Power Co. (a subsidiary of

Regulated utilities such as Duke Power Co. (a subsidiary of Duke Energy Corporation) are authorized to earn a specific rate of return on their capital investments. Energy regulators set a rate the uti...

Q: Phillips Petroleum is an integrated oil and gas company with headquarters in

Phillips Petroleum is an integrated oil and gas company with headquarters in Bartlesville, Oklahoma, where it was founded in 1917. The company engages in petroleum exploration and production worldwide...

Q: For your job as the business reporter for a local newspaper,

For your job as the business reporter for a local newspaper, you are asked to put together a series of articles on multinational finance and the international currency markets for your readers. Much r...

Q: The following excerpts are from the financial statement note on Derivative Instruments

The following excerpts are from the financial statement note on Derivative Instruments and Hedging Activities in Molson Coors Brewing Company’s 2009 annual report: Simultaneous with the September 22,...

Q: Bryan Trucking Corporation began business on January 1, 2017, and

Bryan Trucking Corporation began business on January 1, 2017, and consists of the parent entity, domiciled and operating in Country X, and a subsidiary operating in Country Y. Bryan is required, as a...

Q: On January 1, 2017, Pitt Company acquired an 80%

On January 1, 2017, Pitt Company acquired an 80% investment in Saxe Company. The acquisition cost was equal to Pitt’s equity in Saxe’s recorded net assets at that date. On January 1, 2017, Pitt and Sa...

Q: Several years ago, RJR Nabisco Holdings Corporation (Holdings) offered

Several years ago, RJR Nabisco Holdings Corporation (Holdings) offered for sale 93 million shares of its subsidiary RN-Nabisco Group. According to the prospectus, the estimated initial public offering...

Q: A wholly owned subsidiary of Ward Inc. has certain expense accounts

A wholly owned subsidiary of Ward Inc. has certain expense accounts for the year ended December 31, 2017, stated in local currency units (LCU) as follows: The exchange rates at various dates are as...

Q: On December 31, 2009, Internet Capital Group (ICG)

On December 31, 2009, Internet Capital Group (ICG) acquired 89% of the equity of GovDelivery for $19,670,000. This acquisition was accounted for under the acquisition method. In its 10-K filing with t...

Q: AutoParts Heaven is a U.S. company whose operations include

AutoParts Heaven is a U.S. company whose operations include a large, 100% owned foreign subsidiary. The subsidiary’s functional currency is the U.S. dollar. The local currency in the country where the...

Q: Grout Inc. is a wholly owned subsidiary of Slait Co.

Grout Inc. is a wholly owned subsidiary of Slait Co. The philosophy of Slait’s management is to allow the subsidiaries to operate as independent units. Corporate control is exercised...

Q: Tablon Inc. is a wholly owned subsidiary of Marbel Co.

Tablon Inc. is a wholly owned subsidiary of Marbel Co. The philosophy of Marbel’s management is to allow the subsidiaries to operate as independent units. Corporate control is exerci...

Q: Categorize each of the following as one‐to-one,

Categorize each of the following as one‐to-one, one‐to‐many, or many‐to‐many: • Subsidiary ledgers and general ledgers • Transactions and special journal • General ledgers and trial balances

Q: At Kingston Industries, the revenue processes are conducted by five employees

At Kingston Industries, the revenue processes are conducted by five employees. The five employees are the sales clerk, warehouse clerk, accountant 1, accountant 2, and the collection clerk. A descript...

Q: Katrupi, Inc., has five departments that handle all sales,

Katrupi, Inc., has five departments that handle all sales, billing, and collection processes. The five departments are sales, billing, accounts receivable, warehouse, and general ledger. These process...

Q: Inner Artist is a retailer of arts and craft supplies in the

Inner Artist is a retailer of arts and craft supplies in the suburban Chicago area. It operates a single retail store and also has extensive catalog sales on account to area schools, churches, and oth...

Q: Krandolph Metals, Inc., is a manufacturer of aluminum cans for

Krandolph Metals, Inc., is a manufacturer of aluminum cans for the beverage industry. Krandolph purchases aluminum and other raw materials from several vendors. The purchasing process at Krandolph occ...

Q: Rossi Industries has payroll processes as described in the following paragraphs:

Rossi Industries has payroll processes as described in the following paragraphs: When a new employee is hired, the human resources department completes a personnel action form and forwards it to the...

Q: Wilson Enterprises is a midsize manufacturing company with 120 employees and approximately

Wilson Enterprises is a midsize manufacturing company with 120 employees and approximately $45 million in sales. Management has established a set of processes to purchase fixed assets, described in th...

Q: Bloomington Enterprises is a manufacturer of model trains that sell under the

Bloomington Enterprises is a manufacturer of model trains that sell under the name Bloomington Toy Trains in toy stores and hobby shops throughout the United States and Europe. The company employs 160...

Q: Putnam Sound, Inc. (PSI) is a manufacturer of

Putnam Sound, Inc. (PSI) is a manufacturer of stereo speaker systems. The company prepares special journals and subsidiary ledgers for its revenue, expenditures, payroll, and conversion processes. For...

Q: How is a subsidiary ledger different from a general ledger?

How is a subsidiary ledger different from a general ledger?

Q: In what way are subsidiary ledgers and special journals replicated in accounting

In what way are subsidiary ledgers and special journals replicated in accounting software?

Q: The following list presents statements regarding the expenditures processes. Each statement

The following list presents statements regarding the expenditures processes. Each statement is separate and should be considered to be from a separate company. Determine whether each statement is an i...

Q: Describe the purpose of each of the following parts of a manual

Describe the purpose of each of the following parts of a manual system: a. Source document b. Turnaround document c. General ledger d. General journal e. Special journal f. Subsidiary ledger

Q: Luna Company is a printing company and a subsidiary of a large

Luna Company is a printing company and a subsidiary of a large publishing company. Luna is in its fourth year of a 5-year, quality improvement program. The program began in 20X1 as a result of a repor...

Q: What requirements must be satisfied if a foreign subsidiary is to be

What requirements must be satisfied if a foreign subsidiary is to be consolidated?

Q: The __________ is the functional currency of a foreign subsidiary with operations

The __________ is the functional currency of a foreign subsidiary with operations that are relatively self-contained and integrated within the country in which it is located. In such cases, the ______...

Q: Which method of translation is used to convert the financial statements when

Which method of translation is used to convert the financial statements when a foreign subsidiary operates in a highly inflationary economy?

Q: The __________ is the functional currency of a foreign subsidiary that is

The __________ is the functional currency of a foreign subsidiary that is a direct and integral component or extension of a U.S. parent company. In such cases, the __________ method of translation is...

Q: A translation adjustment results from the process of translating financial statements of

A translation adjustment results from the process of translating financial statements of a foreign subsidiary from its functional currency into dollars. Where is the translation adjustment reported in...

Q: What columns would you suggest for a subsidiary ledger account in order

What columns would you suggest for a subsidiary ledger account in order that it might be a subsidiary not only to the “appropriations” control account but also the “encumbrances” and the “expenditures...

Q: Accounts are listed below for a foreign subsidiary that maintains its books

Accounts are listed below for a foreign subsidiary that maintains its books in its local currency. The equity interest in the subsidiary was acquired in a purchase transaction. In the space provided,...

Q: A U.S. company owns an 80% interest in

A U.S. company owns an 80% interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $24,000 to the subsidia...

Q: Select the best answer for each of the following items:

Select the best answer for each of the following items: 1. Golf Company acquired 80% of the outstanding stock of Ping Company, a foreign company, in an acquisition accounted for as a purchase transact...

Q: Select the best answer choice for each of the following items.

Select the best answer choice for each of the following items. 1. Perez Company’s operations are unrelated to the operations of its subsidiary. Certain balance sheet accounts of the...

Q: On January 1, 2014, Trenten Systems, a U.

On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase tr...

Q: Dorsey Corporation purchased 90% of the common stock of Lansing Company

Dorsey Corporation purchased 90% of the common stock of Lansing Company on January 1, 2008. The cost of the investment was equal to the book value interest acquired. Lansing Company operates two retai...

Q: Refer to the data provided in Exercise 13-7 for Dorsey

Refer to the data provided in Exercise 13-7 for Dorsey Corporation and Lansing Company. Exercise 13-7: Dorsey Corporation purchased 90% of the common stock of Lansing Company on January 1, 2008. The...

Q: Slocome Travel owns a travel agency that operates in London. Account

Slocome Travel owns a travel agency that operates in London. Account balances in pounds for the subsidiary are summarized below: Exchange rates for 2014 were as follows: January 1 â€&brvb...

Q: On January 1, 2014, a U.S. company

On January 1, 2014, a U.S. company purchased 100% of the outstanding stock of Ventana Grains, a company located in Latz City, New Zealand. Ventana Grains was organized on January 1, 2000. All the prop...

Q: Use the information provided in Problem 13-9 for P Company

Use the information provided in Problem 13-9 for P Company and SFr Company. Problem 13-9: On January 2, 2014, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Co...

Q: For this problem, refer to the information provided in Problem 13

For this problem, refer to the information provided in Problem 13-9 for P Company and SFr Company. Ignore deferred income taxes in the allocation of the difference between implied and book value. Pro...

Q: P Company holds an 80% interest in SFr Company, a

P Company holds an 80% interest in SFr Company, a Swiss company. A trial balance for P Company and SFr Company at December 31, 2015, and other data are given in Problems 13-9 and 13-10. The following...

Q: On January 2, 2014, P Company, a U.

On January 2, 2014, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Company, a Swiss company. On January 2, 2014, SFr Company reported a retained earnings balance...

Q: Use the information provided in Problem 13-3 for P Company

Use the information provided in Problem 13-3 for P Company and SFr Company. Problem 13-3: On January 2, 2014, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Co...

Q: For this problem, refer to the information provided in Problem 13

For this problem, refer to the information provided in Problem 13-3 for P Company and SFr Company. Ignore deferred income taxes in the assignment of the difference between implied and book value. Req...

Q: P Company holds an 80% interest in SFr Company, a

P Company holds an 80% interest in SFr Company, a Swiss company. A trial balance for P Company and SFr Company at December 31, 2015, and other data are given in Problems 13-3 and 13-4. Ignore deferred...

Q: Babbit, Inc., a multinational corporation based in the United States

Babbit, Inc., a multinational corporation based in the United States, owns an 80% interest in Nakima Company, which is located in Sydney, Australia. The acquisition occurred on January 1, 2014. The di...

Q: On January 2, 2014, P Company, a U.

On January 2, 2014, P Company, a U.S.-based company, acquired for 2,000,000 francs an 80% interest in SFr Company. On January 2, 2014, SFr Company reported a retained earnings balance of 480,000 franc...

Q: Use the information provided in Exercise 13-4.

Use the information provided in Exercise 13-4. Exercise 13-4: On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Z...

Q: A Section 20 subsidiary of a major U.S. bank

A Section 20 subsidiary of a major U.S. bank is planning to underwrite corporate securities and expects to generate $5 million in revenues. It currently underwrites U.S. Treasury securities and genera...

Q: You are managing director of your U.S. firm’s subsidiary

You are managing director of your U.S. firm’s subsidiary in southern France. The social welfare states of Western Europe were founded in the Second World War with specific ethical considerations in mi...

Q: 1. What is the name of a specific type of investment

1. What is the name of a specific type of investment entry mode? 2. A wholly owned subsidiary is a facility owned and controlled by what? 3. What is the name of a specific type of joint venture? 4. A...

Q: Portobello Co., a retailer, is in its 10th year of

Portobello Co., a retailer, is in its 10th year of operation. On December 28, Year 18, three days before the close of its fiscal year, a flash flood devastated the company’s administ...

Q: The Berridge Company is a discount tire dealer that operates 25 retail

The Berridge Company is a discount tire dealer that operates 25 retail stores in a metropolitan area. The company maintains a centralized purchasing and warehousing facility and employs a perpetual in...

Q: Exhibit 16.13 presents the comparative balance sheets for Plainview Corporation

Exhibit 16.13 presents the comparative balance sheets for Plainview Corporation for 2013 and 2014. The following additional information relates to 2014 activities: (1) The Retained Earnings account ch...

Q: Vogel Company is a subsidiary of Joyce Company. Joyce Company accounts

Vogel Company is a subsidiary of Joyce Company. Joyce Company accounts for its investment in Vogel Company using the equity method on its single- company books. Present journal entries for the followi...

Q: Exhibit 17.13 presents a consolidated statement of income and retained

Exhibit 17.13 presents a consolidated statement of income and retained earnings for 2013, and Exhibit 17.14 presents a consolidated balance sheet for Tuck Corporation as of December 31, 2012 and 2013....

Q: Distinguish between the non controlling, or minority, interest in net

Distinguish between the non controlling, or minority, interest in net income of a consolidated subsidiary and the non controlling, or minority, interest in net assets of a consolidated subsidiary.

Q: Accounting for an investment in a subsidiary using the equity method and

Accounting for an investment in a subsidiary using the equity method and not consolidating it yields the same net income as consolidating the subsidiary. Total assets will differ depending on whether...

Q: The Investment in Subsidiary account is an asset. Why must an

The Investment in Subsidiary account is an asset. Why must an investor eliminate this account when preparing consolidated financial statements with the subsidiary?

Q: Dealco Corporation published a consolidated income statement for the year, shown

Dealco Corporation published a consolidated income statement for the year, shown in Exhibit 14.10. The unconsolidated affiliate retained 25% of its earnings of $140 million during the year, having pai...

Q: Lakonishok Equipment has an investment opportunity in Europe. The project

Lakonishok Equipment has an investment opportunity in Europe. The project costs €14 million and is expected to produce cash flows of €2.1 million in year 1, €3.4 million in year 2, and €4.3 million in...

Q: You are evaluating a proposed expansion of an existing subsidiary

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 24 million. The cash flows from the project would be SF 6.6 million per...

Q: In 2012, Duke Energy, a large utility company with its

In 2012, Duke Energy, a large utility company with its headquarters in North Carolina, completed its $32 billion acquisition of Progress Energy. To get an idea of the size of this deal, in 2011 Duke E...

Q: Production Company produces gadgets for the coveted small appliance market. The

Production Company produces gadgets for the coveted small appliance market. The following data reflect activity for the most recent year, 2015: Costs incurred Purchases of direct materials (net) on a...

Q: Chemtech Chemicals, a multinational company, has a subsidiary located in

Chemtech Chemicals, a multinational company, has a subsidiary located in a small Eastern European country. The country has only a few environmental protection laws, and even those that exist are not s...

Q: The Sherriton Hotels chain embarked on a new customer loyalty program in

The Sherriton Hotels chain embarked on a new customer loyalty program in 2015. The 2015 year-end data have been collected, and it is now time for you to determine whether the loyalty program should be...

Q: Enyart Company has a noncontrolling interest in a subsidiary. Enyart’s controller

Enyart Company has a noncontrolling interest in a subsidiary. Enyart’s controller is unsure how to report losses in the subsidiary that exceed the value of Enyart’s interest in the subsidiary. Advise...

Q: Wade Corp. has 150,000 shares of common stock outstanding

Wade Corp. has 150,000 shares of common stock outstanding. In 2017, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in the...

Q: The following is the balance sheet of Sameed Brothers Corporation (000s

The following is the balance sheet of Sameed Brothers Corporation (000s omitted). Instructions Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized.

Q: Marvin Company is a subsidiary of Hughes Corp. The controller believes

Marvin Company is a subsidiary of Hughes Corp. The controller believes that the yearly allowance for doubtful accounts for Marvin should be 8% of gross accounts receivable. Given the recession and the...

Q: Presented below are a number of independent situations. Instructions

Presented below are a number of independent situations. Instructions For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, exp...

Q: Jim Carrie Company shows a balance of $181,140 in

Jim Carrie Company shows a balance of $181,140 in the Accounts Receivable account on December 31, 2017. The balance consists of the following. Installment accounts due in 2018……………………………. $23,000 Ins...

Q: Norberto Garcia, general manager of the Argentinean subsidiary of Innovation Inc

Norberto Garcia, general manager of the Argentinean subsidiary of Innovation Inc., is considering the purchase of new industrial equipment to improve efficiency at its Cordoba plant. The equipment has...

Q: Polska Corporation, in preparation of its December 31, 2017,

Polska Corporation, in preparation of its December 31, 2017, financial statements, is attempting to determine the proper accounting treatment for each of the following situations. 1. As a result of u...

Q: Thinken Technology recently merged with College Electronix (CE), a computer

Thinken Technology recently merged with College Electronix (CE), a computer graphics company. In performing a comprehensive audit of CE’s accounting system, Gerald Ott, internal audit manager for Thin...

Q: You have completed the field work in connection with your audit of

You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown...

Q: You are auditing the December 31, 2017, financial statements of

You are auditing the December 31, 2017, financial statements of Hockney, Inc., manufacturer of novelties and party favors. During your inspection of the company garage, you discovered that a used auto...

Q: 1. A Saudi Arabian government-run hospital hired American Scott

1. A Saudi Arabian government-run hospital hired American Scott Nelson to be an engineer. The parties signed the employment agreement in the United States. On the job, Nelson reported that the hospita...

Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. 1. Popper Company established a subsidiary and transferred equipment with a fair value of $72,000 to the subsidiary. Popper had purchased...

Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. 1. A 70 percent owned subsidiary company declares and pays a cash dividend. What effect does the dividend have on the retained earnings a...

Q: Server Corporation is a majority-owned subsidiary of Proxy Corporation.

Server Corporation is a majority-owned subsidiary of Proxy Corporation. Proxy acquired 75 percent ownership on January 1, 20X3, for $133,500. At that date, Server reported common stock outstanding of...

Q: The December 31, 20X8, balance sheets for Pint Corporation and

The December 31, 20X8, balance sheets for Pint Corporation and its 70 percent-owned subsidiary Saloon Company contained the following summarized amounts: Pint acquired the shares of Saloon Company o...

Q: For each question, select the single best answer. 1

For each question, select the single best answer. 1. Water Company owns 80 percent of Fire Company’s outstanding common stock. On December 31, 20X9, Fire sold equipment to Water at a...

Q: Passport Manufacturing purchased an ultrasound drilling machine with a remaining 10-

Passport Manufacturing purchased an ultrasound drilling machine with a remaining 10-year economic life from a 70 percent-owned subsidiary for $360,000 on January 1, 20X6. Both companies use straight-l...

Q: On January 1, 20X5, Potter Corporation started using a wholly

On January 1, 20X5, Potter Corporation started using a wholly owned subsidiary to deliver all its sales overnight to its customers. During 20X5, Potter recorded delivery service expense of $76,000 and...

Q: Proctor Corporation purchased bonds of its subsidiary from a non affiliate during

Proctor Corporation purchased bonds of its subsidiary from a non affiliate during 20X6. Although Proctor purchased the bonds at par value, a loss on bond retirement is reported in the 20X6 consolidate...

Q: Potter Corporation and its subsidiary reported consolidated net income of $164

Potter Corporation and its subsidiary reported consolidated net income of $164,300 for 20X2. Potter owns 60 percent of the common shares of its subsidiary, acquired at book value. Non controlling inte...

Q: Pab Corporation decided to establish Sollon Company as a wholly owned subsidiary

Pab Corporation decided to establish Sollon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Sollon issued Pab 30,000 sh...

Q: Pagle Corporation established a subsidiary to enter into a new line of

Pagle Corporation established a subsidiary to enter into a new line of business considered to be substantially more risky than Pagle’s current business. Pagle transferred the followi...

Q: Plumb Company created Stew Company as a wholly owned subsidiary by transferring

Plumb Company created Stew Company as a wholly owned subsidiary by transferring assets and accounts payable to Stew in exchange for its common stock. Stew recorded the following entry when it received...

Q: Pretzel Corporation acquired 100 percent of Stick Company’s outstanding shares on January

Pretzel Corporation acquired 100 percent of Stick Company’s outstanding shares on January 1, 20X7. Balance sheet data for the two companies immediately after the purchase follow: A...

Q: On January 2, 20X8, Primary Corporation acquired 100 percent of

On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company’s outstanding common stock. In exchange for Secondary’s stock, Primary issued bond...

Q: Permott Corporation has been in the midst of a major expansion program

Permott Corporation has been in the midst of a major expansion program. Much of its growth had been internal, but in 20X1 Permott decided to continue its expansion through the acquisition of other com...

Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. 1. In the preparation of a consolidated income statement: a. Income assigned to non controlling shareholders always is computed as a pro...

Q: In its 20X7 consolidated income statement, Plate Development Company reported consolidated

In its 20X7 consolidated income statement, Plate Development Company reported consolidated net income of $961,000 and $39,000 of income assigned to the 30 percent non controlling interest in its only...

Q: How does carrying securities at fair value differ from the equity method

How does carrying securities at fair value differ from the equity method in reporting income from non subsidiary investments?

Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. 1. Growth in the complexity of the U.S. business environment a. Has led to increased use of partnerships to avoid legal liability. b. Has...

Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. 1. When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept...

Q: The trial balance data presented in P8-24 can be converted

The trial balance data presented in P8-24 can be converted to reflect use of the cost method by inserting the following amounts in place of those presented for Patio Corporation: Investment in Stone...

Q: Stick Corporation is a wholly owned subsidiary of Point Corporation. Point

Stick Corporation is a wholly owned subsidiary of Point Corporation. Point acquired ownership of Stick on January 1, 20X3, for $28,000 above Stick’s reported net assets. At that date, Stick reported c...

Q: Pop Company acquired all of Soda Corporation’s common shares on January 2

Pop Company acquired all of Soda Corporation’s common shares on January 2, 20X3, for $789,000. At the date of combination, Soda’s balance sheet appeared as follows:...

Q: Select the most appropriate answer for each of the following questions.

Select the most appropriate answer for each of the following questions. 1. If A Company acquires 80 percent of the stock of B Company on January 1, 20X2, immediately after the acquisition, which of th...

Q: Following are the consolidated balance sheet accounts of Primer Inc. and

Following are the consolidated balance sheet accounts of Primer Inc. and its subsidiary, Sore Corporation, as of December 31, 20X6 and 20X5. Additional Information: 1. On January 20, 20X6, Primer is...

Q: Protecto Corporation purchased 60 percent of Strand Company’s outstanding shares on January

Protecto Corporation purchased 60 percent of Strand Company’s outstanding shares on January 1, 20X1, for $24,000 more than book value. At that date, the fair value of the noncontroll...

Q: Select the correct completion of each of the following items.

Select the correct completion of each of the following items. 1. Which of the following steps in the acquisition of goods and services occurs first? a. Appropriation b. Encumbrance c. Budget d. Expen...

Q: On January 1, 20X5, Pirate Company acquired all of the

On January 1, 20X5, Pirate Company acquired all of the outstanding stock of Ship Inc., a Norwegian company, at a cost of $151,200. Ship’s net assets on the date of acquisition were 7...

Q: Refer to the information in P12-17. Assume the U

Refer to the information in P12-17. Assume the U.S. dollar is the functional currency, not the krone. Required: a. Prepare a schedule re measuring the trial balance from Norwegian kroner into U.S. do...

Q: Refer to the information presented in P12-17 and your answer

Refer to the information presented in P12-17 and your answer to part a of P12-17. Required: Prepare a schedule providing a proof of the translation adjustment. Data from P12-17: On January 1, 20X5,...

Q: Refer to the information given in P12-17 and your answer

Refer to the information given in P12-17 and your answer to part a of P12-18. Required: Prepare a schedule providing a proof of the re measurement gain or loss. For this part of the problem, assume t...

Q: Refer to the information given in P12-23 and P12-

Refer to the information given in P12-23 and P12-24 for Palermo and its subsidiary, Salina Ranching. Assume that the Australian dollar (A$) is the functional currency and that Palermo uses the fully a...

Q: Solo Co. Ltd. located in Mexico City is a wholly

Solo Co. Ltd. located in Mexico City is a wholly owned subsidiary of Partner Inc., a U.S. company. At the beginning of the year, Solo’s condensed balance sheet was reported in Mexica...

Q: Following are descriptions of several independent situations. 1. Rockford

Following are descriptions of several independent situations. 1. Rockford Company has a subsidiary in Argentina. The subsidiary does not have much debt because of the high interest costs resulting fro...

Q: The following 20X2 consolidated statement of cash flows is presented for Printing

The following 20X2 consolidated statement of cash flows is presented for Printing Company and its subsidiary, Sons Delivery: Printing acquired 60 percent of the voting shares of Sons Delivery in 20X...

Q: For each of the following seven cases, work the case twice

For each of the following seven cases, work the case twice and select the best answer. First assume that the foreign currency is the functional currency; then assume that the U.S. dollar is the functi...

Q: Refer to the data in Exercise E12-5, but now

Refer to the data in Exercise E12-5, but now assume that the exchange rates were as follows: SFr $ January 1 ………â&#...

Q: On December 31, 20X2, your company’s Mexican subsidiary sold land

On December 31, 20X2, your company’s Mexican subsidiary sold land at a selling price of 3,000,000 pesos. The land had been purchased for 2 million pesos on January 1, 20X1, when the exchange rate was...

Q: The following information should be used for questions 1, 2,

The following information should be used for questions 1, 2, and 3. Select the best answers under each of two alternative assumptions: (a) the LCU is the functional currency and the translation method...

Q: Match the items in the left-hand column with the descriptions

Match the items in the left-hand column with the descriptions/explanations in the right-hand column.

Q: Use the following information for questions 1, 2, and 3

Use the following information for questions 1, 2, and 3. Bartell Inc., a U.S. company, acquired 90 percent of the common stock of a Malaysian company on January 1, 20X5, for $160,000. The net assets o...

Q: On January 1, 20X1, Popular Creek Corporation organized SunTime Company

On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 60,000. SunTime’s Decembe...

Q: Refer to the data in Exercise E12-5.

Refer to the data in Exercise E12-5. Required: a. Prepare a proof of the translation adjustment computed in Exercise E12-5. b. Where is the translation adjustment reported on Popular Creekâ...

Q: Refer to the data in Exercise E12-5, but assume

Refer to the data in Exercise E12-5, but assume that the dollar is the functional currency for the foreign subsidiary. Required: Prepare a schedule re measuring the December 31, 20X1, trial balance f...

Q: Refer to the data in Exercises E12-5 and E12-

Refer to the data in Exercises E12-5 and E12-7. Required: a. Prepare a proof of the re measurement gain or loss computed in Exercise E12-7. b. How should this re measurement gain or loss be reported...

Q: Refer to the data in Exercise E12-5, but now

Refer to the data in Exercise E12-5, but now assume that the exchange rates were as follows: SFr $ January 1 ………â&#...

Q: Select the correct answer for each of the following questions.

Select the correct answer for each of the following questions. 1. Form 10-K is filed with the SEC to update the information a company supplied when filing a registration statement under the Securitie...

Q: Presley Pools Inc. acquired 60 percent of the common stock of

Presley Pools Inc. acquired 60 percent of the common stock of Sammy Swim Company on December 31, 20X6, for $1,800,000. At that date, the fair value of the noncontrolling interest was $1,200,000. The f...

Q: During your examination of the accounts receivable of Hope Ranch, a

During your examination of the accounts receivable of Hope Ranch, a new client, you notice that one account is much larger than the rest, and you therefore decide to examine the evidence supporting th...

Q: Dale Boucher, the owner of a small electronics firm, asked

Dale Boucher, the owner of a small electronics firm, asked Sally Jones, CPA, to conduct an audit of the company’s records. Boucher told Jones that the audit was to be completed in time to submit audit...

Q: For each of the following specific audit procedures, indicate the type

For each of the following specific audit procedures, indicate the type of audit procedure it represents: (1) inspection of records or documents, (2) inspection of tangible assets, (3) observation, (4)...

Q: For each of the audit procedures listed in Problem 5-32

For each of the audit procedures listed in Problem 5-32, identify the category (assertions about classes of transactions and events or assertions about account balances) and the primary assertion bein...

Q: Evidence comes in various types and has different degrees of reliability.

Evidence comes in various types and has different degrees of reliability. Following are some statements that compare various types of evidence. a. A bank confirmation versus observation of the segrega...

Q: Following are three examples of controls for accounts that you have determined

Following are three examples of controls for accounts that you have determined are significant for the audit of ICFR. For each control, determine the nature, timing, and extent of testing of the contr...

Q: Following are examples of control deficiencies that may represent significant deficiencies or

Following are examples of control deficiencies that may represent significant deficiencies or material weaknesses. For each of the following scenarios, indicate whether the deficiency is a significant...

Q: For the control activities to be effective, employees maintaining the accounts

For the control activities to be effective, employees maintaining the accounts receivable subsidiary ledger should not also approve a. Employee overtime wages. b. Credit granted to customers. c. Write...

Q: Which of the following controls is most likely to help ensure that

Which of the following controls is most likely to help ensure that all credit revenue transactions of an entity are recorded? a. The billing department supervisor sends a copy of each approved sales o...

Q: Cash receipts from sales on account have been misappropriated. Which of

Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor? a. Understating the sales jo...

Q: When using confirmations to provide evidence about the completeness assertion for accounts

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be a. Vendors with whom the entity has previously done...

Q: Which of the following control activities would be most likely to assist

Which of the following control activities would be most likely to assist in reducing the control risk related to the occurrence of inventory transactions? a. Inventory manager does not have ability to...

Q: Which of the following internal control activities is most likely to address

Which of the following internal control activities is most likely to address the completeness assertion for inventory? a. The work-in-process account is periodically reconciled with subsidiary records...

Q: Assertions are expressed or implied representations by management that are reflected in

Assertions are expressed or implied representations by management that are reflected in the financial statement components. The auditor performs audit procedures to gather evidence to test those asser...

Q: Assume that scenario (a) in Problem 7-36 is

Assume that scenario (a) in Problem 7-36 is a material weakness. Prepare a draft of the auditor’s report for an audit of ICFR. Assume that Lorenz’s auditor is issuing a separate report on internal con...

Q: In auditing ICFR for a public company, Emily finds that the

In auditing ICFR for a public company, Emily finds that the entity has a significant subsidiary located in a foreign country. Emily’s accounting firm has no offices in that country, and the entity has...

Q: Assume that scenario (b) in Problem 7-36 is

Assume that scenario (b) in Problem 7-36 is a material weakness. Prepare a draft of the auditor’s report for an audit of ICFR. Assume that First Coast’s auditor is issuing a combined report for the fi...

Q: The “Accounts Receivable—Confirmation Statistics” working paper shown on

The “Accounts Receivable—Confirmation Statistics” working paper shown on the next page was prepared by an audit assistant for the 2018 audit of Le...

Q: Coltrane, CPA, is auditing Jang Wholesaling Company’s financial statements and

Coltrane, CPA, is auditing Jang Wholesaling Company’s financial statements and is about to perform substantive audit procedures on Jang’s trade accounts payable balances. After obtaining an understand...

Q: A U.S. firm owns a subsidiary in Belgium.

A U.S. firm owns a subsidiary in Belgium. What kind of foreign exchange risk does the U.S. firm face?

Q: Select the best answer for each of the following. Explain the

Select the best answer for each of the following. Explain the reasons for your selection. a. In planning and performing an audit, auditors are concerned about risk factors for two distinct types of fr...

Q: Listed below are several of the auditors’ general objectives in performing substantive

Listed below are several of the auditors’ general objectives in performing substantive procedures on an asset account: 1. Establish the existence of assets. 2. Establish that the company has rights to...

Q: In every audit engagement, the auditors should identify fraud risks that

In every audit engagement, the auditors should identify fraud risks that may require an audit response. Described below are four circumstances or factors that may create an increased risk of material...

Q: In the following first list are 10 examples of the items described

In the following first list are 10 examples of the items described in the second list. Match the two lists by placing the capital letter from the first list on the blank line preceding the description...

Q: Due to a weakness observed in an entity’s control over recording retirement

Due to a weakness observed in an entity’s control over recording retirement of equipment, the auditor may decide to a. Trace additions to the “other assets” account to search for equipment that is sti...

Q: An audit program for long-term debt would most likely include

An audit program for long-term debt would most likely include steps that require a. Comparing the carrying amount of the debt to its year-end market value. b. Correlating the interest expense recorded...

Q: The primary responsibility of a bank acting as a registrar of capital

The primary responsibility of a bank acting as a registrar of capital stock is to a. Ascertain that dividends declared do not exceed the statutory amount allowable in the state of incorporation. b. Ac...

Q: Which of the following controls would most effectively ensure that the proper

Which of the following controls would most effectively ensure that the proper custody of assets in the investing process is maintained? a. Direct access to securities in the safe-deposit box is limite...

Q: Which of the following events occurring after the issuance of a set

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Oregon Steel Mills, Inc. was a publicly-traded company whose financial statements were audited by Coopers & Lybrand, LLP for many years. When Oregon sold the stock in one of its subsidiaries, Coopers...

Q: Discuss whether the following items would meet the definition of an asset

Discuss whether the following items would meet the definition of an asset using the IFRS definitions currently in place. If so, explain with reference to the appropriate criteria. (a) MBI Ltd. owns a...

Q: Canadian Tire Corporation, Limited is one of Canada’s best-known

Canadian Tire Corporation, Limited is one of Canada’s best-known retailers. The company operates 493 “hard-goods” retail stores through associate dealers, 383 corporate and franchise stores under its...

Q: Beckett Corp. is facing a decision as to whether to purchase

Beckett Corp. is facing a decision as to whether to purchase 40% of Kyla Corp.’s shares for $1.6 million cash, giving Beckett significant influence over the investee company, or 60% of Kyla’s shares f...

Q: TrueNorth Investment Properties Inc. and its subsidiaries have provided you with

TrueNorth Investment Properties Inc. and its subsidiaries have provided you with a list of the properties they own: (a) Land held by TrueNorth for undetermined future use (b) A vacant building owned b...

Q: Berrie Electric Inc. has the following amounts included in its general

Berrie Electric Inc. has the following amounts included in its general ledger at December 31, 2017: Instructions: (a) Based on the information provided, calculate the total amount for Berrie to repo...

Q: Towers Inc. (TI) is a leader in delivering communications

Towers Inc. (TI) is a leader in delivering communications technology that powers global commerce and secures the world’s most critical information. Its shares trade on the Canadian and U.S. national s...

Q: Refer to the annual financial statements of Brookfield Asset Management Inc.

Refer to the annual financial statements of Brookfield Asset Management Inc. for its fiscal year ended December 31, 2014, found at the end of the book. Instructions: (a) Review Brookfield Asset Manag...

Q: Rudolph Corp. is a subsidiary of Huntley Corp. and follows

Rudolph Corp. is a subsidiary of Huntley Corp. and follows IFRS. The ethical accountant, working as Rudolph’s controller, believes that the yearly charge for doubtful accounts for Rudolph should be 2%...

Q: Assume that Elrond Inc. decided to sell Demand TV Ltd.,

Assume that Elrond Inc. decided to sell Demand TV Ltd., a subsidiary, on September 30, 2017. There is a formal plan to dispose of the business component, and the sale qualifies for discontinued operat...

Q: LeBlanc Inc. shows a balance of $519,289 in

LeBlanc Inc. shows a balance of $519,289 in the Accounts Receivable account on December 31, 2017. The balance consists of the following: Installment accounts due in 2018……………………………………………..$ 91,000 In...

Q: The following are two independent situations. Situation 1: Lauren

The following are two independent situations. Situation 1: Lauren Inc. received dividends from its common share investments during the year ended December 31, 2017, as follows: • A cash dividend of $1...

Q: Six examples of purchased intangible assets follow. They are reported on

Six examples of purchased intangible assets follow. They are reported on the consolidated statement of financial position of Powers Enterprises Limited and include information about their useful and l...

Q: The statement of financial position of Manion Corporation follows (in thousands

The statement of financial position of Manion Corporation follows (in thousands)L: Instructions: Evaluate the statement of financial position. Briefly describe the proper treatment of any item that...

Q: Faldo Corp. is a public company and has 100,000

Faldo Corp. is a public company and has 100,000 common shares outstanding. In 2017, the company reported income from continuing operations before income tax of $2,710,000. Additional transactions not...

Q: An incomplete subsidiary ledger of materials inventory for May is as follows

An incomplete subsidiary ledger of materials inventory for May is as follows: A. Complete the materials issuances and balances for the materials subsidiary ledger under FIFO. B. Determine the materi...

Q: Palisade Creek Co. is a merchandising business that uses the perpetual

Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek as of May 1, 2018 (unless otherwise indicated), are as follows: Durin...

Q: Tailor Johnson, the menswear company with a subsidiary in Ethiopia described

Tailor Johnson, the menswear company with a subsidiary in Ethiopia described in Problem 9, is considering the tax benefits resulting from deferring repatriation of the earnings from the subsidiary. Un...

Q: Plaintiff Moseley is an employee of Defendant Pepco Energy Services, Inc

Plaintiff Moseley is an employee of Defendant Pepco Energy Services, Inc. (“PES”). He has been employed by PES or its corporate predecessors for over twenty-five years. PES, a subsidiary of Defendant...

Q: Wyeth, LLC—a subsidiary of Pfizer, Inc.—is

Wyeth, LLC—a subsidiary of Pfizer, Inc.—is an international pharmaceutical and health-care company with its corporate headquarters in Madison, New Jersey. Wyeth develops, makes, and markets medical th...

Q: Actor Robert Wagner entered into an agreement with Spelling-Goldberg Productions

Actor Robert Wagner entered into an agreement with Spelling-Goldberg Productions (SGP) “relating to Charlie’s Angels (herein called the ‘series’).” The contract entitled Wagner Charlie’s Angels to 50...

Q: NYKCool A.B., based in Stockholm, Sweden, provides

NYKCool A.B., based in Stockholm, Sweden, provides maritime transportation for hire. It is a subsidiary of NYK Reefers Limited, which operates as a subsidiary of Nippon Yusen Kabushiki Kaisha, one of...

Q: Barbara Bauman and twenty-one other residents of Argentina filed a

Barbara Bauman and twenty-one other residents of Argentina filed a suit in a federal district court in California against Daimler AG, a German company. They alleged that Mercedes-Benz (MB) Argentina,...

Q: Tusa Office Solutions, Inc., a subsidiary of Tusa–Expo

Tusa Office Solutions, Inc., a subsidiary of Tusa–Expo Holdings, Inc., was the largest retail dealer in new furniture made by Knoll, Inc. A customer ordered Knoll furniture from Tusa Office, which order...

Q: Dolan Company specializes in professional services and business information from its base

Dolan Company specializes in professional services and business information from its base in Minneapolis, Minnesota. Discover Ready—a subsidiary of Dolan Company—performed litigation support [discover...

Q: After the fall of the Soviet Union, the new government of

After the fall of the Soviet Union, the new government of Azerbaijan began converting certain state-controlled industries to private ownership. Ownership in these companies could be purchased through...

Q: A parent company rents a sales office to its wholly owned subsidiary

A parent company rents a sales office to its wholly owned subsidiary under an operating lease requiring rent of $2,000 a month. What adjustments to consolidated income tax expense should accompany the...

Q: The shareholders' equity of a subsidiary company contains preferred and common shares

The shareholders' equity of a subsidiary company contains preferred and common shares. The parent company owns 100% of the subsidiary's common shares. Will the consolidated financial statements show n...

Q: Explain how the non-controlling interest in the net assets and

Explain how the non-controlling interest in the net assets and net income of a subsidiary is calculated and reported when the parent owns 90% of the subsidiary's common shares and 30% of the subsidiar...

Q: Explain the difference in the calculation of consolidated net income attributable to

Explain the difference in the calculation of consolidated net income attributable to shareholders of parent and consolidated retained earnings depending on whether the preferred shares of a subsidiary...

Q: A parent company acquired a 75% interest in a subsidiary company

A parent company acquired a 75% interest in a subsidiary company in Year 4. The acquisition price was $1,000,000, made up of cash of $700,000 and the parent's common shares with a current market value...

Q: When a parent increases its investment in a subsidiary from 60 to

When a parent increases its investment in a subsidiary from 60 to 75%, should the acquisition differential from the 60% purchase be re measured at fair value? Explain.

Q: When a parent decreases its investment in a subsidiary from 76 to

When a parent decreases its investment in a subsidiary from 76 to 60%, should the non controlling interest be re measured at fair value? Explain.

Q: A parent company will realize a loss or a gain when its

A parent company will realize a loss or a gain when its subsidiary issues common shares at a price per share that differs from the carrying amount per share of the parent's investment, and the parent'...

Q: Explain the similarities and differences between a subsidiary and a controlled special

Explain the similarities and differences between a subsidiary and a controlled special purpose entity and between a majority shareholder for a subsidiary and a sponsor for a controlled special-purpose...

Q: Y Company has a 62% interest in Z Company. Are

Y Company has a 62% interest in Z Company. Are there circumstances where this would not result in Z Company being a subsidiary of Y Company? Explain.

Q: The treatment of an unrealized intercompany inventory profit differs between a parent

The treatment of an unrealized intercompany inventory profit differs between a parent subsidiary affiliation and a venture-joint venture affiliation. Explain where the differences lie.

Q: A parent company has recently acquired a subsidiary. On the date

A parent company has recently acquired a subsidiary. On the date of acquisition, both the parent and the subsidiary had unused income tax losses that were unrecognized in their financial statements. H...

Q: The amount of the accumulated foreign exchange adjustments appearing in the translated

The amount of the accumulated foreign exchange adjustments appearing in the translated financial statements of a subsidiary could be different from the amount appearing in the consolidated financial s...

Q: When translating the financial statements of the subsidiary at the date of

When translating the financial statements of the subsidiary at the date of acquisition by the parent, the exchange rate on the date of acquisition is used to translate plant assets rather than the exc...

Q: If the sales of a foreign subsidiary all occurred on one day

If the sales of a foreign subsidiary all occurred on one day during the year, would the sales be translated at the average rate for the year or the rate on the date of the sales? Explain.

Q: What translation method should be used for a subsidiary that operates in

What translation method should be used for a subsidiary that operates in a highly inflationary environment? Why?

Q: You, the controller, recently had the following discussion with the

You, the controller, recently had the following discussion with the president: President: I just don't understand why we can't recognize the revenue from the intercompany sale of inventory on the con...

Q: Stephanie Baker is an audit senior with the public accounting firm of

Stephanie Baker is an audit senior with the public accounting firm of Wilson & Lang. It is February Year 9, and the audit of Canadian Development Limited (CDL) for the year ended December 31, Year 8,...

Q: On December 31, Year 7, Pepper Company, a public

On December 31, Year 7, Pepper Company, a public company, agreed to a business combination with Salt Limited, an unrelated private company. Pepper issued 72 of its common shares for all (50) of the ou...

Q: Traveller Bus Lines Inc. (TBL) is a wholly owned

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Q: Enviro Facilities Inc. (EFl) is a large, diversified

Enviro Facilities Inc. (EFl) is a large, diversified Canadian-controlled private company with several Canadian and U.S. subsidiaries, operating mainly in the waste management and disposal industry. EF...

Q: The Rider Corporation operates throughout Canada buying and selling widgets. In

The Rider Corporation operates throughout Canada buying and selling widgets. In hopes of expanding into more profitable markets, the company recently decided to open a small subsidiary in California....

Q: Vulcan Manufacturing Limited (VML) is a Canadian-based multinational

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Q: Foreign Infants Adoption Inc. (FIA) is a consulting company

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Q: G Company is considering the takeover of K Company whereby it will

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Q: On January 1, Year 5, FLA Company issued 6,

On January 1, Year 5, FLA Company issued 6,300 ordinary shares to purchase 9,000 ordinary shares of MES Company. Prior to the acquisition, FLA had 180,000 and MES had 10,000 ordinary shares outstandin...

Q: Foxx Corp. purchased 75% of the outstanding shares of Rabb

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Q: Summarized balance sheets of Comer Company and its subsidiary Brook Corporation on

Summarized balance sheets of Comer Company and its subsidiary Brook Corporation on December 31, Year 4, were as follows: On the date that Comer acquired its interest in Brook, there was no acquisiti...

Q: Paper Corp. purchased 70% of the outstanding shares of Sand

Paper Corp. purchased 70% of the outstanding shares of Sand Ltd. on January 1, Year 2, at a cost of $84,000. Paper has always used the equity method to account for its investments. On January 1, Year...

Q: The consolidated income statement of a parent and its 90%-owned

The consolidated income statement of a parent and its 90%-owned subsidiary appears below. It was prepared by an accounting student before reading this chapter. The following items were overlooked wh...

Q: Shown below are selected ledger accounts from the trial balance of a

Shown below are selected ledger accounts from the trial balance of a parent and its subsidiary as of December 31, Year 10. Additional Information • P Company purchased its 90% inte...

Q: Financial statements of Champlain Ltd. and its 80%. owned subsidiary

Financial statements of Champlain Ltd. and its 80%. owned subsidiary Samuel Ltd. as at December 31, Year 8, are presented below. Additional Information • Champlain acquired 8,000...

Q: The comparative consolidated income statements of a parent and its 75%-

The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the following table. The following items were overl...

Q: Income statements of M Cop. and K Co. for the

Income statements of M Cop. and K Co. for the year ended December 31, Year 9, are presented below: Additional Information • M Co. uses the equity method to account for its investme...

Q: Financial statements of Par Corp. and its subsidiary Star Inc.

Financial statements of Par Corp. and its subsidiary Star Inc. on December 31, Year 12, are shown below: Other Information • On January 1, Year 5, the balance sheet of Star showed...

Q: The comparative consolidated statement of financial position at December 31, Year

The comparative consolidated statement of financial position at December 31, Year 2, and the consolidated income statement for Year 2, of Parent Ltd. and its 70% owned subsidiary are shown below. A...

Q: Assume that all of the facts in Problem 3 remain unchanged except

Assume that all of the facts in Problem 3 remain unchanged except that Green paid $211,800 for 60% of the voting shares of Mansford. Required: (a) Prepare a consolidated balance sheet at January 1,...

Q: The financial statements of Malkin Inc., of Russia, as at

The financial statements of Malkin Inc., of Russia, as at December 31, Year 11, follow: Additional Information • On January 1, Year 11, Crichton Corporation of Toronto acquired 40...

Q: Athena Ltd. is a subsidiary located in Greece. It uses

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Q: What criteria must be met for a subsidiary to be consolidated?

What criteria must be met for a subsidiary to be consolidated? Explain.

Q: How is the net income earned by a subsidiary in the year

How is the net income earned by a subsidiary in the year of acquisition incorporated in the consolidated income statement?

Q: How would the consolidation of a parent-founded subsidiary differ from

How would the consolidation of a parent-founded subsidiary differ from the consolidation of a purchased subsidiary?

Q: In the preparation of a consolidated balance sheet, the differences between

In the preparation of a consolidated balance sheet, the differences between the fair value and the carrying amount of the subsidiary's net assets are used. Would these differences be used if the subsi...

Q: How is the goodwill appearing on the statement of financial position of

How is the goodwill appearing on the statement of financial position of a subsidiary prior to a business combination treated in the subsequent preparation of consolidated statements? Explain.

Q: Why does adding the parent's share of the increase in retained earnings

Why does adding the parent's share of the increase in retained earnings of the subsidiary and the parent's retained earnings under the cost method result in consolidated retained earnings? Assume that...

Q: A subsidiary was acquired in the middle of the fiscal year of

A subsidiary was acquired in the middle of the fiscal year of the parent. Describe the preparation of the consolidated income statement for the year.

Q: A parent company's 75%-owned subsidiary declared and paid a dividend

A parent company's 75%-owned subsidiary declared and paid a dividend totaling $10,000. How would the parent company record this dividend under the equity method? Under the cost method?

Q: "An acquisition differential allocated to revalue the land of a subsidiary

"An acquisition differential allocated to revalue the land of a subsidiary on acquisition date will always appear on subsequent consolidated balance sheets." Do you agree? Explain.

Q: At the end of the year, the parent's investment account had

At the end of the year, the parent's investment account had an equity method balance of $120,000. At this time, its 75%-owned subsidiary had shareholders' equity totaling $125,000. How much was the un...

Q: A subsidiary periodically revalues its land to fair value under the revaluation

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Q: Refer to the year-end financial statements and accompanying notes of

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Q: Refer to the financial statements of Brookfield Asset Management Inc. for

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Q: During the past year, your company has discovered three major frauds

During the past year, your company has discovered three major frauds. The first was a $3.9 million theft of inventory that had been going on for six years. The second was a $2.8 million kickback schem...

Q: Gus Jackson was hired away from a "Big Four" public

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Q: You are the audit committee chair for a large construction company.

You are the audit committee chair for a large construction company. A year ago you purchased a development company in Europe for approximately $100 million. This company has already lined up a number...

Q: Fraud investigators found that 70 percent of the nearly $!60 million

Fraud investigators found that 70 percent of the nearly $!60 million in sales booked by an Asian subsidiary of a European company between September 2006 and June 2007 were fictitious. In an effort to...

Q: A manufacturing company has provided you with the following data, which

A manufacturing company has provided you with the following data, which relate to component RYX for the period which has just ended: Overheads are absorbed at a rate per standard labour hour. Requi...

Q: Garrett Automative Ltd (GAL) is a UK subsidiary of a Garrett Automative Ltd (GAL) is a UK subsidiary of a

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Q: In November 2012, a consultant was employed to review and document

In November 2012, a consultant was employed to review and document the planning and control systems of Integrated Technology Services (UK) Ltd (ITS-UK), to ensure that these were effectively meeting t...

Q: The following questions deal with internal control and audit evidence in the

The following questions deal with internal control and audit evidence in the sales and collection cycle. Choose the best response. a. Tracing shipping documents to sales invoices provides evidence tha...

Q: For each engagement described below, indicate whether the engagement is likely

For each engagement described below, indicate whether the engagement is likely to be conducted under international auditing standards, AICPA audit in standards, or PCAOB auditing standards. a. An audi...

Q: For each of the following types of misstatements (parts a.

For each of the following types of misstatements (parts a. through c.), select the control that should have prevented the misstatement: a. Which of the following controls most likely will be effective...

Q: The following questions concern the characteristics of IT systems and their impact

The following questions concern the characteristics of IT systems and their impact on internal controls. Choose the best response. a. Which of the following is an advantage of a computer-based system...

Q: The following are examples of documentation typically obtained by auditors:

The following are examples of documentation typically obtained by auditors: 1. Duplicate sales invoices 2. Receiving reports 3. Minutes of the board of directors 4. Signed W-4s 5. Subsidiary accounts...

Q: Following are descriptions of 10 internal controls. 1. The

Following are descriptions of 10 internal controls. 1. The company has an organizational chart that establishes the formal lines of reporting and authorization protocols. 2. Before a cash disbursement...

Q: Internal controls 1 through 5 were tested in prior audits. Evaluate

Internal controls 1 through 5 were tested in prior audits. Evaluate each internal control independently and determine which controls must be tested in the current year’s audit of the December 31, 2019...

Q: The following questions concern auditing year-end cash and financial instruments

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Q: The following questions concern internal controls and tests for property, plant

The following questions concern internal controls and tests for property, plant, and equipment. Choose the best response. a. An audit firm performs a preliminary review of the client’s internal contro...

Q: The following are various changes in audit circumstances. Audit Circumstance

The following are various changes in audit circumstances. Audit Circumstance 1. The client began experiencing an increase in returns due to product changes that resulted in increased defects. 2. You...

Q: The following questions concern audit objectives and management assertions for accounts receivable

The following questions concern audit objectives and management assertions for accounts receivable. Choose the best response. a. Which of the following will likely provide the most assurance concernin...

Q: The product manager at a subsidiary of Kraft Foods, Inc.,

The product manager at a subsidiary of Kraft Foods, Inc., is interested in learning how sensitive sales are to changes in the unit price of a frozen pizza in Dallas, Denver, Baltimore, and Chicago. Th...

Q: Hanover Inc. spent £11.5 million building a factory

Hanover Inc. spent £11.5 million building a factory in England several years ago when the British Pound cost $1.5500. The plant operation was set up as a British subsidiary to manufacture Hanover’s pr...

Q: Brookfield Asset Management Inc. Access the financial statements and accompanying notes

Brookfield Asset Management Inc. Access the financial statements and accompanying notes of Brookfield Asset Management Inc. for the year ended December 31, 2017, through SEDAR (www.sedar.com) or on th...

Q: You are a senior auditor auditing the December 31, 2020 financial

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Q: You have completed your audit of Khim Inc. and its consolidated

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Q: You are the auditor of Beaton and Gunter Inc., the Canadian

You are the auditor of Beaton and Gunter Inc., the Canadian subsidiary of a public multinational engineering company that offers a defined benefit pension plan to its eligible employees. Employees are...

Q: Indicate whether each of the following would make good consolidated return partners

Indicate whether each of the following would make good consolidated return partners in computing the affiliated group's Federal income tax. Explain why or why not. a. ParentCo would like to file on a...

Q: Determine whether the following transactions are taxable. If a transaction is

Determine whether the following transactions are taxable. If a transaction is not taxable, indicate what type of reorganization is effected, if any. a. AlphaPsi Corporation owns two lines of business...

Q: EarthTones, Inc., was a wholly owned subsidiary of Cutlinger Communications

EarthTones, Inc., was a wholly owned subsidiary of Cutlinger Communications Corporation. Several years ago EarthTones acquired numerous oil leases and began exploration activities to determine their s...

Q: The consolidated tax liability for most affiliated groups is assigned among die

The consolidated tax liability for most affiliated groups is assigned among die parent and its subsidiaries-each entity is responsible for "its share" of the tax. The Regulations allow several methods...

Q: Between 2009 and 2015, Volkswagen manufactured and marketed clean diesel automobiles

Between 2009 and 2015, Volkswagen manufactured and marketed clean diesel automobiles that were designed to provide high performance without the polluting emissions commonly associated with diesel engi...

Q: Southwest Airlines One night over dinner early in 1967 in San

Southwest Airlines One night over dinner early in 1967 in San Antonio, Rollin King presented his idea for a new airline to Herb Kelleher by drawing a triangle on a napkin and labeling the three corner...

Q: Scott Mills was originally a producer of fabrics, but several years

Scott Mills was originally a producer of fabrics, but several years ago intense foreign competition led management to restructure the entity as a vertically integrated cotton garment manufacturer. Sco...

Q: A biofuel subsidiary of Petrofac, Inc. is planning to borrow

A biofuel subsidiary of Petrofac, Inc. is planning to borrow $12 million to acquire a small technology- based company. The rate on a 5-year loan is highly variable; it could be as low as 7%, as high a...

Q: Williams Inc. is a U.S. corporation that manufacturers

Williams Inc. is a U.S. corporation that manufacturers toys in a factory located near Milwaukee, Wisconsin. Williams sells the toys to its foreign subsidiary, which is incorporated in Carnema, a Carib...

Q: For many years, Bertrand Inc. owned a foreign subsidiary with

For many years, Bertrand Inc. owned a foreign subsidiary with over $8 million accumulated foreign source income (on which Bertrand has never paid U.S. tax). Immediately prior to December 31, 2017, Ber...

Q: Hastings Corporation has a foreign subsidiary conducting a manufacturing business in Country

Hastings Corporation has a foreign subsidiary conducting a manufacturing business in Country Z, which has a 15 percent corporate income tax. The IRS recently challenged the transfer price at which Has...

Q: You are the CFO of a U.S. firm whose

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Q: You are the international manager of a U.S. business

You are the international manager of a U.S. business that has just developed a revolutionary new personal computer that can perform the same functions as existing PCs but costs only half as much to ma...

Q: You are the CFO of a U.S. firm whose

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Q: From a global branding standpoint, why do you think Marvel Studios

From a global branding standpoint, why do you think Marvel Studios is a wholly owned subsidiary of the Walt Disney Company instead of just a part of Disney?

Q: A visiting American executive finds that a foreign subsidiary in a poor

A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-year-old girl to work on a factory floor, in violation of the company’s child labor prohibition. He tells...

Q: A small Canadian firm that has developed valuable new medical products using

A small Canadian firm that has developed valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union market. Its choices are given be...

Q: Lakonishok Equipment has an investment opportunity in Europe. The project costs

Lakonishok Equipment has an investment opportunity in Europe. The project costs €9.5 million and is expected to produce cash flows of €1.6 million in Year 1, €2.1 million in Year 2, and €3.2 million i...

Q: You are evaluating a proposed expansion of an existing subsidiary located in

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Q: Crain Company has a manufacturing subsidiary in Singapore that produces high-

Crain Company has a manufacturing subsidiary in Singapore that produces high-end exercise equipment for U.S. consumers. The manufacturing subsidiary has total manufacturing costs of $1,500,000, plus g...

Q: A factory owner in Bangladesh, Tipu Munshi, manufactures clothing for

A factory owner in Bangladesh, Tipu Munshi, manufactures clothing for Walmart and other retailers around the world. One of Tipu’s products is a pair of jeans sold to Asda, a Walmart subsidiary in Brit...

Q: A subsidiary company located in country A purchases $100 worth of

A subsidiary company located in country A purchases $100 worth of goods. It then repackages, exports, and sells those goods to the parent company, located in country B, for $200. The parent company se...

Q: As indicated in the chapter, determining the appropriate transfer price in

As indicated in the chapter, determining the appropriate transfer price in a multinational setting is a very complex problem, with multiple strategic considerations. Consider as an example a U.S. comp...

Q: Building Services Co. (BSC) was started a number of

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Q: Holiday Entertainment Corporation (HEC), a subsidiary of New Age Industries

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Q: Frito-Lay, the massive Dallas-based subsidiary of PepsiCo

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Q: Frito-Lay, the multi-billion-dollar subsidiary of

Frito-Lay, the multi-billion-dollar subsidiary of food and beverage giant PepsiCo, maintains 36 plants in the U.S. and Canada. These facilities produce dozens of snacks, including the well-known Lay’s...

Q: Your client, Midwest Products Inc. (MPI), is a

Your client, Midwest Products Inc. (MPI), is a closely held, calendar-year, accrual-method corporation located in Fowlerville, Michigan. MPI has two operating divisions. One division manufactures lawn...

Q: Wixi Co. has the following equity investments in FSN, DELL

Wixi Co. has the following equity investments in FSN, DELL, and ATI. (1) Which of these companies are subsidiaries of Wixi? (2) How are individual assets and liabilities of a parent and its subsidiary...

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Vail Company recorded the following transactions during November. 1. Open a general ledger having T-accounts for Accounts Receivable, Sales, and Sales Returns and Allowances. Also open an accounts rec...

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Toll Processing Services, LLC v. Kastalon, Inc. United States Court of Appeals, Seventh Circuit, 880 F.3d 820 (2018). Background and Facts; Toll Processing Services, LLC, a subsidiary of International...

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The following are two independent situations. Situation 1: Lauren Inc. received dividends from its common share investments during the year ended December 31, 2020, as follows: • A cash dividend of $1...

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Transactions related to revenue and cash receipts completed by Affiliate Engineering Services during the period June 2–30 are as follows: June 2. Issued Invoice No. 717 to Yee Co., $...

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...

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Q: On January 1, 2020, McIlroy, Inc., acquired a

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Earlier this year, Alltime Company (headquartered in Kansas City, Missouri) acquired a small watch manufacturer in Berlin, Germany, that keeps its books in euros. (This is the first foreign direct inv...

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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...

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Q: Lancer, Inc. (a U.S.-based company

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On January 1, 2021, Jay Company acquired all the outstanding ownership shares of Zee Company. In assessing Zee’s acquisition-date fair values, Jay concluded that the carrying value o...

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A subsidiary that has a net operating loss carry-forward is acquired. The related deferred income tax asset is $230,000. Because the parent believes that a portion of this carry-forward likely will ne...

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Q: Download a recent copy of Pfizer’s annual report (search Pfizer Investor

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Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $600,000 cash. Greenburg’s accounting records showed net assets on th...

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On January 3, 2019, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Inc., in exchange for $6,000,000 in cash. Persoff elected to exercise control over Sea Cliff as a who...

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On January 1, 2020, Pinnacle Corporation exchanged $3,200,000 cash for 100 percent of the out- standing voting stock of Strata Corporation. On the acquisition date, Strata had the following balance sh...

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Branson paid $465,000 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $340,000 (common stock of $200,000 and retain...

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Allen Company acquired 100 percent of Bradford Company’s voting stock on January 1, 2017, by issuing 10,000 shares of its $10 par value common stock (having a fair value of $14 per s...

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Tyler Company acquired all of Jasmine Company’s outstanding stock on January 1, 2019, for $206,000 in cash. Jasmine had a book value of only $140,000 on that date. However, equipment...

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Angela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2021, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Techâ...

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On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison...

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Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2021, in exchange for $900,000 cash. At the acquisition date, Stanford’s total...

Q: On January 1, 2019, Telconnect acquires 70 percent of Bandmor

On January 1, 2019, Telconnect acquires 70 percent of Bandmor for $490,000 cash. The remaining 30 percent of Bandmor’s shares continued to trade at a total value of $210,000. The new...

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The headquarters of a major creative agency offered a service to all its global subsidiaries, which included the preparation of a budget estimate that was submitted to potential clients when making a...

Q: Consider the following independent situations: 1. John Smith is

Consider the following independent situations: 1. John Smith is the petty-cash custodian. John approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At...

Q: Consolidation accounting a. eliminates all liabilities. b.

Consolidation accounting a. eliminates all liabilities. b. reports the receivables and payables of the parent company only. c. combines the accounts of the parent company and its subsidiary compani...

Q: Recently, Air Liquide signed a long-term contract with Yan’an

Recently, Air Liquide signed a long-term contract with Yan’an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group—one of China’s largest firms engaged in oil and natural gas exploration...

Q: Refer to the chapter’s opening feature about Aaron, Dylan, Jeff

Refer to the chapter’s opening feature about Aaron, Dylan, Jeff, and Sam and their company, Box. Their company deals with the cloud storage needs of numerous suppliers and customers...

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A company that records credit purchases in a purchases journal and records purchases returns in a general journal made the following errors. Enter A, B, or C indicating when each error should be disco...

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At the end of May, the sales journal of Mountain View appears as follows. Mountain View also recorded an allowance (price reduction) given to Anna Page with the following entry. Required 1. Open an ac...

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Following is a cash receipts journal and a partial chart of accounts for a company. For each posting reference a through k, enter (1) an x for an amount not individually posted, (2) a âœ
...

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Church Company completes these transactions and events during March of the current year (terms for all its credit sales are 2/10, n/30). Mar. 1 purchased $43,600 of merchandise from Van Industries, te...

Q: Wised Company completes these transactions during April of the current year (

Wised Company completes these transactions during April of the current year (the terms of all its credit sales are 2/10, n/30). Apr. 2 purchased $14,300 of merchandise on credit from North Company, te...

Q: The April transactions of Wised Company are described in Problem 7-

The April transactions of Wised Company are described in Problem 7-2A. Required 1. Prepare a general journal, purchases journal, and cash payments journal. Number all journal pages as page 3. Enter t...

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This Comprehensive Problem requires account balances from the April month-end, which are available in Connect or in the Working Papers. Assume it is Monday, May 1, the first business day of the month,...

Q: Grassley Company completes these transactions during November of the current year (

Grassley Company completes these transactions during November of the current year (terms for all its credit sales are 2/10, n/30). Nov. 1 purchased $5,058 of office equipment on credit from Burn Suppl...

Q: Acorn Industries completes these transactions during July of the current year (

Acorn Industries completes these transactions during July of the current year (the terms of all its credit sales are 2/10, n/30). July 1 purchased $6,500 of merchandise on credit from Teton Company, t...

Q: The July transactions of Acorn Industries are described in Problem 7-

The July transactions of Acorn Industries are described in Problem 7-2B. Required 1. Prepare a general journal, purchases journal, and cash payments journal. Number all journal pages as page 3. Enter...

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Wharton Company posts individual sales to the accounts receivable subsidiary ledger immediately. At the end of each month, Wharton posts the end-of-month totals to the general ledger 1. Open an accoun...

Q: For each account, indicate whether it appears in the general ledger

For each account, indicate whether it appears in the general ledger or the subsidiary ledger.

Q: Following are (1) two transactions involving a customer as reported

Following are (1) two transactions involving a customer as reported in the accounts receivable subsidiary ledger and (2) two transactions involving a supplier as reported in the accounts payable subsi...

Q: Each member of the team is to assume responsibility for one of

Each member of the team is to assume responsibility for one of the following tasks. a. Journalizing in the purchases journal. b. Journalizing in the cash payments journal. c. Maintaining and verifying...