Module 2 exam 1 Question 1 (20 points) On January 2, 2013 Piron Corporation issued 100,000 new shares of its $5 par value common stock…

Module
2 exam 1

Question
1 (20 points)

On
January 2, 2013 Piron Corporation issued 100,000 new shares of its $5
par value common stock valued at $19 a share for all of Seana
Corporation’s outstanding common shares.Piron paid $15,000 to
register and issue shares. Piron also paid $20,000 for the
direct combination costs of the accountants. The fair value and
book value of Seana’s identifiable assets and liabilities
were the same. Summarized balance sheet information for both
companies just before the acquisition on January 2, 2013 is as
follows:

Piron
Seana

Cash
$150,000 $120,000

Inventories
320,000 400,000

Other
current assets 500,000 500,000

Land
350,000 250,000

Plant
assets-net 4,000,000 1,500,000

Total
assets $5,320,000 $2,770,000

Accounts
payable $1,000,000 $300,000

Notes
payable 1,300,000 660,000

Capital
stock, $5 par 2,000,000 500,000

Additional
paid-in capital 1,000,000 100,000

Retained
earnings 20,000 1,210,000

Total
liabilities & equities $5,320,000 $2,770,000

Part
1: Prepare Piron’s general journal entry for the acquisition
of Seana, assuming that Seana survives as a separate legal entity.

Part
2: Prepare Piron’s general journal entry for the acquisition
of Seana, assuming that Seana will dissolve as a separate legal
entity.

Question
1 options:

Question
2 (20 points) Question 2 Und

Pancake
Corporation saw the potential for vertical integration and purchased
a 15% interest in Syrup Corp. on January 1, 2013, for
$150,000. At that date, Syrup’s stockholders’
equity included $200,000 of $10 par value common stock, $300,000 of
additional paid in capital, and $500,000 retained earnings. The
companies began to work together and realized improved sales by both
parties. On December 31, 2014, Pancake paid $250,000 for an
additional 20% interest in Syrup Corp. Both of Pancake’s
investments were made when Syrup’s book values equaled their
fair values. Syrup’s net income and dividends for 2013
and 2014 were as follows:

2013
2014

Net
income $220,000 $330,000

Dividends
$20,000 $30,000

Part
1: Prepare journal entries for Pancake Corporation to account for its
investment in Syrup Corporation for 2013 and 2014.

Part
2: Calculate the balance of Pancake’s investment in Syrup at
December 31, 2014.

Question
2 options:

Question
3 (20 points) Question 3 Und

On
January 1, 2013, Pailor Inc. purchased 40% of the outstanding
stock of Saska Company for $300,000. At that time, Saska’s
stockholders’ equity consisted of $270,000 common stock and
$330,000 of retained earnings. Saska Corporation reported net
income of $360,000 for 2013. The allocation of the $60,000
excess of cost over book value acquired is shown below, along with
information relating to the useful lives of the items:

Overvalued
receivables (collected in 2013) $(5,000)

Undervalued
inventories (sold in 2013) 16,000

Undervalued
building (4 years’ useful life remaining at January 1, 2013)
24,000

Undervalued
land 8,000

Unrecorded
patent (6 years’ economic life remaining at January 1, 2013)
18,000

Undervalued
accounts payable (paid in 2013) (4,000)

Total
of excess allocated to identifiable assets and liabilities 57,000

Goodwill
3,000

Excess
cost over book value acquired $60,000

Determine
Pailor’s investment income from Saska for 2013.

Question
3 options:

Question
4 (20 points) Question 4 Und

On
July 1, 2014, Polliwog Incorporated paid cash for 21,000 shares of
Salamander Company’s $10 par value stock when it was trading
at $22 per share. At that time, Salamander’s total
stockholders’ equity was $597,000, and they had 30,000 shares
of stock outstanding, both before and after the purchase. The
book value of Salamander’s net assets is believed to
approximate the fair values.

Part
1: Prepare the journal entry that Polliwog would record at the date
of acquisition on their general ledger.

Part
2: Calculate the balance of the goodwill that would be recorded on
Polliwog’s general ledger, on Salamander’s general
ledger, and in the consolidated financial statements.

Question
4 options:

Question
5 (20 points) Question 5 Und

On
January 1, 2014, Pinnead Incorporated paid $300,000 for an 80%
interest in Shalle Company. At that time, Shalle’s total
book value was $300,000. Patents were undervalued in the amount
of $10,000. Patents had a 5 year remaining useful life, and any
remaining excess value was attributed to goodwill. The income
statements for the year ended December 31, 2014 of Pinnead and Shalle
are summarized below:

Pinnead
Shalle

Sales
$800,000 $300,000

Income
from Shalle 78,400

Cost
of sales (100,000) (100,000)

Depreciation
(70,000) (30,000)

Other
expenses

(130,000)
(70,000)

Net
income

$578,400
$100,000

Part
1: Calculate the goodwill that will appear in the consolidated
balance sheet of Pinnead and Subsidiary at December 31, 2014.

Part
2: Calculate consolidated net income for 2014.

Part
3: Calculate the noncontrolling interest share for 2014.

Module
4 exam 2

Question
1 (20 points) Question 1 Unsaved

On
December 31, 2014, Paladium International purchased 70% of the
outstanding common stock of Sennex Chemical. Paladium paid
$140,000 for the shares and determined that the fair value of all
recorded Sennex assets and liabilities approximated their book
values, with the exception of a customer list that was not recorded
and had a fair value of $10,000 and an expected remaining useful life
of 5 years. At the time of purchase, Sennex had
stockholders’ equity consisting of capital stock amounting to
$20,000 and retained earnings amounting to $80,000. Any
remaining excess fair value was attributed to goodwill. The
separate financial statements at December 31, 2015 appear in the
first two columns of the consolidation workpapers shown below.

Complete
the consolidation working papers for Paladium and Sennex for the year
2015.

Paladium

Sennex

Eliminations

Consolidated

Debit

Credit

INCOME
STATEMENT

Sales

$

331,900

48,000

Income
of Sennex

9,100

Cost
of Sales

(148,000)

(25,000)

Other
Expenses

(72,000)

(8,000)

Noncontrolling
Interest Share

Net
Income

121,000

15,000

Retained
Earnings 1/1

846,000

80,000

Add:

Net
Income

121,000

15,000

Less:

Dividends

(9,000)

(4,000)

Retained
Earnings 12/31

$

958,000

91,000

BALANCE
SHEET

Cash

135,000

64,000

Accounts
Receivable-net

227,000

160,000

Inventories

316,000

86,000

Land

80,000

40,000

Equipment
and Buildings-net

469,000

230,000

Investment
in Sennex

146,300

Customer
List

Goodwill

TOTAL
ASSETS

$

1,373,300

580,000

LIAB. &
EQUITY

Accounts
Payable

$

305,300

469,000

Capital
Stock

110,000

20,000

Retained
earnings

958,000

91,000

1/1
Noncontrol. Interest

12/31
Noncontrol. Int.

TOTAL
LIAB. & EQUITY

$

1,373,300

580,000

Question
1 options:

Spell
check

Save

Question
2 (20 points) Question 2 Unsaved

Packo
Company acquired all the voting stock of Sennett Corporation on
January 1, 2014 for $90,000 when Sennett had Capital Stock of $50,000
and Retained Earnings of $8,000. The excess of fair value over
book value was allocated as follows: (1) $5,000 to inventories (sold
in 2014), (2) $16,000 to equipment with a 4-year remaining useful
life (straight-line method of depreciation) and (3) the remainder to
goodwill.

Financial
statements for Packo and Sennett at the end of the fiscal year ended
December 31, 2015 (two years after acquisition) appear in the first
two columns of the partially completed consolidation working
papers. Packo has accounted for its investment in Sennett using
the equity method of accounting.

Complete
the consolidation working papers for Packo Company and Subsidiary for
the year ending December 31, 2015.

Packo

Sennett

Eliminations

Consolidated

Debit

Credit

INCOME
STATEMENT

Sales

$

206,000

60,000

Income
from Sennett

8,000

Cost
of Sales

(150,000)

(30,000)

Other
Expenses

(38,000)

(18,000)

Net
Income

26,000

12,000

Packo
Retained Earnings 1/1

24,000

Sennett
Retained Earnings 1/1

10,000

Add:

Net
Income

26,000

12,000

Less:

Dividends

(20,000)

(4,000)

Retained
Earnings 12/31

$

30,000

18,000

BALANCE
SHEET

Other
Current Assets

10,000

7,000

Inventories

21,000

15,000

Land

11,000

6,000

Equipment
and Buildings-net

64,000

55,000

Investment
in Sennett Corp.

87,000

Goodwill

TOTAL
ASSETS

$

193,000

83,000

LIAB. &
EQUITY

Liabilities

$

63,000

15,000

Capital
Stock

100,000

50,000

Retained
earnings

30,000

18,000

TOTAL
LIAB. & EQUITY

$

193,000

83,000

Question
3 Question 3 Unsaved

Pommu
Corporation paid $78,000 for a 60% interest in Schtick Inc. on
January 1, 2014, when Schtick’s Capital Stock was $80,000 and
its Retained Earnings $20,000. The fair values of Schtick’s
identifiable assets and liabilities were the same as the recorded
book values on the acquisition date. Trial balances at the end
of the year on December 31, 2014 are given below:

Pommu
Schtick

Cash
$4,500 $20,000

Accounts
Receivable 24,000 30,000

Inventory
100,000 70,000

Investment
in Schtick 78,000

Cost
of Goods Sold 71,500 50,000

Operating
Expenses 22,000 37,000

Dividends
15,000 10,000

$315,000
$217,000

Liabilities
$47,000 $27,000

Capital
stock, $10 par value 100,000 80,000

Additional
Paid-in Capital 11,000

Retained
Earnings 31,000 20,000

Sales
Revenue 120,000 90,000

Dividend
Income 6,000

$315,000
$217,000

During
2014, Pommu made only two journal entries with respect to its
investment in Schtick. On January 1, 2014, it debited the
Investment in Schtick account for $78,000 and on November 1, 2014, it
credited Dividend Income for $6,000.

Part
1: Prepare a consolidated income statement and a statement of
retained earnings for Pommu and Subsidiary for the year ended
December 31, 2014.

Part
2: Prepare a consolidated balance sheet for Pommu and Subsidiary as
of December 31, 2014.

Question
4 (20 points) Question 4 Unsaved

Salli
Corporation regularly purchases merchandise from their 90% owner,
Playtime Corporation. Playtime purchased the 90% interest at a
cost equal to 90% of the book value of Salli’s net assets. At
the time of acquisition, the book values and fair values of
Salli’s assets and liabilities were equal. Playtime
makes their sales to Salli at 120% of cost. In 2014, Salli
reported net income of $460,000, and made purchases totaling $172,000
from Playtime. Although Salli had no inventory on hand at the
beginning of 2014 that they had purchased from Playtime, at year end,
they had $51,600 of this merchandise in inventory.

Part
1: Determine the unrealized profit in Salli’s inventory at
December 31, 2014.

Part
2: Compute Playtime’s income from Salli for 2014.

Question
5 (20 points) Question 5 Unsaved

Perry
Instruments International purchased 75% of the outstanding common
stock of Standard Systems in 1997 when the book values and fair
values of Standard’s assets and liabilities were equal. The
cost of Perry’s investment was equal to 75% of the book value
of Standard’s net assets. Separate company income
statements for Perry and Standard for the year ended December 31,
2014 are summarized as follows:

Perry
Standard

Sales
Revenue $2,400,000 $800,000

Investment
income from Standard 142,000

Cost
of Goods Sold (1,600,000) (400,000)

Expenses
(450,000) (200,000)

Net
Income $492,000 $200,000

During
2014, the companies began to manage their inventory differently and
worked together to keep their inventories low at each location. In
doing so, they agreed to sell inventory to each other as needed at a
markup of 10% of cost. Perry sold merchandise that cost $100,000
to Standard for $110,000, and Standard sold inventory that cost
$80,000 to Perry for $88,000. Half of this merchandise remained
in each company’s inventory at December 31, 2014.

Prepare
a consolidated income statement for Perry Corporation and Subsidiary
for 2014.

Module
6 exam 3

Question
1 (16 points)

Question
1 Unsaved

On
September 1, 2014, Bylin Company purchased merchandise from Himeji
Company of Japan for 20,000,000 yen payable on October 1, 2014. The
spot rate for yen was $0.0079 on September 1, and the spot rate was
$0.0077 on October 1. The purchase was paid on October 1, 2014.

Part
1: Did the U.S. dollar strengthen or weaken from September to
October and what are the implications for Bylin’s business?

Part
2: What journal entry did Bylin record on September 1, 2014?

Part
3: What journal entry did Bylin record on October 1, 2014

Question
2

Tank
Corporation, a U.S. manufacturer, has a June 30 fiscal year
end. Tank sold goods to their customer in Columbia on May 27,
2014 for 18,000,000 Columbian pesos. The customer agreed to pay
pesos in 60 days. When the customer wired the funds to Tank on
July 26, Tank held them in their bank account until July 31 before
selling them and converting them to U.S.dollars. The following
exchange rates apply:

May
27 $0.00055

June
30 $0.00052

July
26 $0.00058

July
31 $0.00056

Record
the journal entries related to the dates listed above. If no
entry is required, state “no entry.”

Question
3 (16 points)

Charin
Corporation, a U.S. corporation, imports and exports small
electronics. On December 1, 2014, Charin purchased components
from an Egyptian manufacturer amounting to 500,000 Egyptian
pounds. The purchase is payable in Egyptian pounds. At
December 30, Charin wanted to take advantage of favorable exchange
rates but did not have the full amount required to pay off the entire
amount. Charin wired the funds to pay off half of the balance
owed and expected to pay the remaining balance on January 3,
2015. Charin paid the remaining balance on January 3, 2015.

The
respective exchange rates were as follows:

December
1, 2014 1 pound = $.170

December
30, 2014 1 pound = $.165

December
31, 2014 1 pound = $.175

January
3, 2015 1 pound = $.180

Document
the journal entries related to these transactions for the four dates
shown. If no entry is required, record “no entry.

Question
4

Question
4 Unsaved

On
June 1, 2014, Dapple Industries purchases an option contract for
$5,000 on 10,000 gallons of aviation gas to minimize its purchasing
cost price exposure. At the time, the market price is $2.50 per
gallon and the option price of $2 per gallon will expire 6 months
later. Dapple can exercise the option at its discretion. When
Dapple prepares quarterly reports on June 30, Dapple is still holding
the option. On June 30, the market price of aviation gas is
$4.50 per gallon. The option is to be settled net.

On
August 1, Dapple exercises the option when the gas market price is
$5.00 per gallon and purchases 40,000 gallons of gas. On August
15, Dapple uses all of the gas on a charter flight.

What
are Dapple’s journal entries with regard to the aviation gas
option? Assume this is a cash flow hedge. Ignore the time value
of money.

Question
5 (16 points)

On
November 1, 2013, Mayberry Corporation, a U.S. corporation,
purchased from Cantata Corporation, a Mexican company, some machinery
that cost 1,000,000 pesos. The invoice was payable in pesos on
January 30, 2014. To hedge against rapid changes in the peso,
Mayberry entered into a forward contract on November 1, 2013 with AB
Trader & Company, a US brokerage and investment firm. The
contract specified that Mayberry would buy 1,000,000 pesos from AB
Trader at $0.084 per peso for settlement on January 30, 2014.

Assume
that all three companies are subject to the same accounting standards
and have December 31st year-ends. The spot rates for pesos on
November 1, December 31, and January 30, are $0.082, $0.080, and
$0.089, respectively. The 30-day forward rate for pesos on
December 31, 2013 is $0.083. The forward contract is not settled
net.

Record
General Journal entries for Mayberry Corporation on November 1,
December 31, and January 30. If no entry is required on a
particular date, indicate “no entry” in the General
Journal. This is a fair value hedge.

Module
8 exam 4

Question
1 Dan and Ellie share partnership profits and losses at 70% and 30%,
respectively. The partners agree to admit Fran into the
partnership for a 50% interest in capital and earnings. Capital
accounts immediately before the admission of Fran are:

Dan
(70%) $ 800,000

Ellie
(30%) 400,000

Total
$ 1,200,000

Part
1: Prepare the journal entry(s) for the admission of Fran to the
partnership, assuming Fran invested $800,000 for the ownership
interest and that this is a fair price for that share of the
partnership to be acquired. Fran paid the money directly to Dan
and to Ellie for 50% of each of their respective capital
interests. The partnership records goodwill.

Part
2: Prepare the journal entry(s) for the admission of Fran to the
partnership, assuming Fran invested $1,000,000 for the ownership
interest. Fran paid the money to the partnership for a 50%
interest in capital and earnings. Assume the valuation is based
on the capital of the current partnership, which is fairly
valued. The partnership records goodwill.

Part
3: Prepare the journal entry(s) for the admission of Fran to the
partnership, assuming Fran invested $1,400,000 for the ownership
interest and that this is a fair price for that share of the
partnership to be acquired. Fran paid the money to the
partnership for a 50% interest in capital and earnings. The
partnership records goodwill.

Question
2

Adam,
Bella, and Chris operate a partnership with a complex profit and loss
sharing agreement. The average capital balance for Adam, Bella
and Chris on December 31, 2014 is $120,000, $270,000, and $340,000,
respectively. A 6% interest allocation is provided to each
partner based on the average capital balance on December 31,
2014. Adam and Bella receive salary allocations of $40,000 and
$50,000, respectively. If partnership net income is above
$160,000 after the salary allocations are considered (but before the
interest allocations are considered), Chris will receive a bonus of
10% of the income (pre-salary and interest, but net of the
bonus). All residual income is allocated in the ratios of 2:2:6
to Adam, Bella, and Chris, respectively.

Part
1: Prepare a schedule to allocate income to the partners, assuming
that the partnership net income for 2014 is $330,000.

Part
2: Prepare a journal entry to distribute the partnership’s
income to the partners (assume that an Income Summary account is used
by the partnership).

Question
3

The
balance sheet of the Addy, Bess, and Clara partnership on January 1,
2014 (the date of partnership dissolution) was as follows:

Cash
$ 4,000 Liabilities $ 8,000

Other
assets 26,000 Loan from Addy 1,000

Loan
to Clara 2,000 Addy, capital (20%) 2,000

Bess,
capital (40%) 9,000

Clara,
capital (40%) 12,000

Total
assets $ 32,000 Total liab./equity $ 32,000

In
January, other assets with a book value of $16,000 were sold for
$10,000 in cash.

Determine
how the available cash on January 31, 2014 will be distributed. (Use
a safe payments schedule.)

Question
4

Alitech
Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The
accounts of Alitech at the time of filing are summarized as follows:

Estimated

Realizable

Book
Value Value

Cash
$ 10,000 $ 10,000

Accounts
receivable-net 60,000 50,000

Inventory
110,000 65,000

Land
20,000 35,000

Building
200,000 126,000

Goodwill
22,000

$
422,000

Accounts
payable $ 120,000

Wages
and salaries 30,000

Taxes
payable 80,000

Accrued
mortgage interest payable 22,000

Mortgage
payable 100,000

Capital
stock 90,000

Deficit
(20,000)

$
422,000

The
land and building are pledged as security for the mortgage payable as
well as any accrued interest on the mortgage. Wages and salaries
were earned within 90 days of filing the petition for bankruptcy and
do not exceed $10,000 per employee. Liquidation expenses are
expected to be $30,000.

Part
1: Prepare a schedule showing the priority rankings of the creditors
and the expected payouts.

Part
2: Billing Corporation was a supplier to Alitech Corporation, and at
the time of Alitech’s bankruptcy filing, Billing’s
account receivable from Alitech was $40,000. On the basis of the
estimates, how much can Billing expect to receive?

Question
5 Kline Corporation incurred major losses in 2014 and entered into
voluntary Chapter 7 bankruptcy in the early part of 2015. By
July 1, all assets were converted into cash, the secured creditors
were paid, and $122,700 in cash was left to pay the remaining claims
as follows:

Accounts
payable $ 37,000

Claims
incurred between the date of filing an involuntary 5,000

petition
and the date an interim trustee is appointed

Property
taxes payable 8,000

Wages
payable (all under $10,000 per employee; 74,000

earned
within 90 days of filing bankruptcy petition)

Unsecured
note payable 19,000

Accrued
interest on the note payable 2,000

Administrative
expenses of the trustee 12,180

Total
$ 157,180

Classify
the claims by their Chapter 7 priority ranking, and analyze which
amounts will be paid and which amounts will be written off.

Question
6

Hilfmir
Corporation filed for Chapter 11 bankruptcy on January 1, 2014. A
summary of their financial status is shown below on June 30, 2014, at
the date of the approved reorganization, along with the fair value of
their assets.

Per
Books Fair Value

Cash
$ 134,000 $ 134,000

A/R
– net 20,000 20,000

Inventory
32,000 40,000

Plant
Assets – net 114,000 106,000

Patent
80,000 0

$
380,000

A/P
$ 60,000

Wages
Payable 20,000

Prepetition
liab. 250,000

Common
Stock 140,000

Deficit
(90,000)

$
380,000

Under
the reorganization plan, the reorganization value has been set at
$320,000. Prepetition liabilities include $30,000 of trade
Accounts Payable and a $220,000 Note Payable to Bigg Bank. The
reorganization plan calls for the Prepetition accounts payable to be
paid at 80% at a later date, and the Note Payable for $220,000 to be
replaced by a Note Payable for $76,000 and the issuance of common
stock of the new entity for $100,000. The former stockholders
will receive $40,000 in common stock of the new entity, Hilfmir, in
exchange for their shares.

Show
the calculations to determine if Hilfmir is eligible for fresh-start
accounting, and prepare a fresh-start balance sheet for the new
entity, Hilfmir, as of July 1, 2014.
Let’s block ads! (Why?)

Do you need any assistance with this question?
Send us your paper details now
We’ll find the best professional writer for you!

 



error: Content is protected !!