Question

7.  An intercompany sale took place whereby the book value exceeded the transfer price of a depreciable asset. Which statement is true for the year following the sale?

a A worksheet entry is made with a debit to retained earnings for an upstream transfer.

b A worksheet entry is made with a debit to retained earnings for a downstream transfer.

c A worksheet entry is made with a debit to investment in the subsidiary for a downstream transfer.

d A worksheet entry is made with a credit to retained earnings for an upstream transfer.

e No worksheet entry is necessary.

8. A net asset balance sheet exposure exists, and the foreign currency depreciates. Which of the following statements is true?

a There is no translation adjustment.

b There is a negative translation adjustment.

c There is a positive translation adjustment.

d There is a transaction loss.

e There is a transaction gain.

9. Cline, Watters, and Nettles formed a partnership on January 1, 20X1, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to

(1) an interest of 10% of the beginning capital balance each year;
(2) an annual compensation of $10,000 to Watter; and
(3) sharing the remainder of the income or loss in a ratio of 20% for Cline and 40% each for Watters and Nettles.

Net income was $150,000 in 20X1 and $180,000 in 20X2. Each partner withdrew $1,000 for personal use every month during 20X1 and 20X2.

What was Watters's capital balance at the end of 20X1?

a $150,000

b $160,000

c $165,000

d $201,000

e $213,000

Answer 1