On January 1, 2016, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of 52,000,000 British pounds (£), which was equal to fair value. The excess of fair value over book value is attributable to land (part of property, plant, and equipment) and is not subject to depreciation. Parker accounts for its investment in Suffolk at cost. On January 1, 2016, Suffolk reported the following balance sheet:

1. Suffolk’s 2016 income was recorded at £2,000,000. It declared and paid no dividends in 2016.

   On December 31, 2017, two years after the date of acquisition, Suffolk submitted the following trial balance to Parker for consolidation:

1. Page 530Other than paying dividends, no intra-entity transactions occurred between the two companies. Relevant exchange rates for the British pound follow:

1. The December 31, 2017, financial statements (before consolidation with Suffolk) follow. Dividend income is the U.S. dollar amount of dividends received from Suffolk translated at the $1.65/$ exchange rate at January 30, 2017. The amounts listed for dividend income and all affected accounts (i.e., net income, December 31 retained earnings, and cash) reflect the $1.65/$ exchange rate at January 30, 2017. Credit balances are in parentheses.

1. Parker’s chief financial officer (CFO) wishes to determine the effect that a change in the value of the British pound would have on consolidated net income and consolidated stockholders’ equity. To help assess the foreign currency exposure associated with the investment in Suffolk, the CFO requests assistance in comparing consolidated results under actual exchange rate fluctuations with results that would have occurred had the dollar value of the pound remained constant or declined during the first two years of Parker’s ownership.

   Required

   Use an electronic spreadsheet to complete the following four parts:

   Part I. Given the relevant exchange rates presented,

   1. Translate Suffolk’s December 31, 2017, trial balance from British pounds to U.S. dollars. The British pound is Suffolk’s functional currency.

   2. Prepare a schedule that details the change in Suffolk’s cumulative translation adjustment (beginning net assets, income, dividends, etc.) for 2016 and 2017.

   3. Prepare the December 31, 2017, consolidation worksheet for Parker and Suffolk.

   4. Prepare the 2017 consolidated income statement and the December 31, 2017, consolidated balance sheet.

On January 1, 2016, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of 52,000,000 British pounds (£), which was equal to fair value. The excess of fair value over book value is attributable to land (part of property, plant, and equipment) and is not subject to depreciation. Parker accounts for its investment in Suffolk at cost. On January 1, 2016, Suffolk reported the following balance sheet:

1. Suffolk’s 2016 income was recorded at £2,000,000. It declared and paid no dividends in 2016.

   On December 31, 2017, two years after the date of acquisition, Suffolk submitted the following trial balance to Parker for consolidation:

1. Page 530Other than paying dividends, no intra-entity transactions occurred between the two companies. Relevant exchange rates for the British pound follow:

1. The December 31, 2017, financial statements (before consolidation with Suffolk) follow. Dividend income is the U.S. dollar amount of dividends received from Suffolk translated at the $1.65/$ exchange rate at January 30, 2017. The amounts listed for dividend income and all affected accounts (i.e., net income, December 31 retained earnings, and cash) reflect the $1.65/$ exchange rate at January 30, 2017. Credit balances are in parentheses.

1. Parker’s chief financial officer (CFO) wishes to determine the effect that a change in the value of the British pound would have on consolidated net income and consolidated stockholders’ equity. To help assess the foreign currency exposure associated with the investment in Suffolk, the CFO requests assistance in comparing consolidated results under actual exchange rate fluctuations with results that would have occurred had the dollar value of the pound remained constant or declined during the first two years of Parker’s ownership.

   Required

   Use an electronic spreadsheet to complete the following four parts:

   Part I. Given the relevant exchange rates presented,

   1. Translate Suffolk’s December 31, 2017, trial balance from British pounds to U.S. dollars. The British pound is Suffolk’s functional currency.

   2. Prepare a schedule that details the change in Suffolk’s cumulative translation adjustment (beginning net assets, income, dividends, etc.) for 2016 and 2017.

   3. Prepare the December 31, 2017, consolidation worksheet for Parker and Suffolk.

   4. Prepare the 2017 consolidated income statement and the December 31, 2017, consolidated balance sheet.

   Note:Worksheets should possess the following qualities:

   • Each spreadsheet should be programmed so that all relevant amounts adjust appropriately when different values of exchange rates (subsequent to January 1, 2016) are entered into it.

   • Be sure to program Parker’s dividend income, cash, and retained earnings to reflect the dollar value of alternative January 30, 2017, exchange rates.

You have just been appointed as an innovation manager in an ambitious medium-sized company designing and producing power tools (such as drills and saws). The company wants to promote breakthrough innovation. One of your first tasks is to think about innovation performance metrics to use. What advice will you give to the CEO regarding the metrics?

The following information relates to the 2020 debt and equity investment transactions of Pina Colada Ltd., a publicly accountable Canadian corporation. All of the investments were acquired for trading purposes and accounted for using the FV-NI model, with all transaction costs being expensed. No investments were held at December 31, 2019, and the company prepares financial statements only annually, each December 31, following IFRS.

Some companies give their CEOs golden parachutes—large bonuses if the company is sold to an acquirer and the CEO loses his or her job. Does this practice sound like a sensible incentive scheme to you? Why or why not?What are the issues?

Find an example of a publicly-traded company that lists two risk factors in their 10-K that you think will become greater liabilities for them in the near future. If you were the CEO, how would you mitigate those risks?

The new CEO of Everton Sdn Berhad, a company in the furniture sector would like to know the usefulness of key financial ratios that would be crucial for his management team to consider and analyse for the purpose of acquiring another entity in a similar industry.

Pharoah Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2020.

The service cost component of pension expense for employee services rendered in the current year amounted to $78,000 and the amortization of prior service cost was $117,800. The company’s actual funding (contributions) of the plan in 2020 amounted to $254,000. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,178,000 on January 1, 2020. Assume no benefits paid in 2020.

- Determine the amounts of the components of pension expense that should be recognized by the company in 2020. (Enter amounts that reduce pension expense with either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).

- Prepare the journal entry to record pension expense and the employer’s contribution to the pension plan in 2020

- Indicate the pension-related amounts that would be reported on the income statement partial, comprehensive income statement, and the balance sheet partial for Pharoah Company for the year 2020.

Brown Company paid cash to purchase the assets of Coffee Company on January 1, 2019. Information is as follows: Total cash paid $4,500,000 Assets acquired: Land $800,000 Building $700,000 Machinery $800,000 Patents $700,000 The building is depreciated using the double-declining balance method. Other information is: Salvage value $70,000 Estimated useful life in years 20 The machinery is depreciated using the units-of-production method. Other information is: Salvage value, percentage of cost 10% Estimated total production output in units 100,000 Actual production in units was as follows: 2019: 20,000 2020: 20,000 2021: 30,000 The patents are amortized on a straight-line basis. They have no salvage value. Estimated useful life of patents in years 40 On December 31, 2020, the value of the patents was estimated to be $100,000 Where applicable, the company uses the ½ year rule to calculate depreciation and amortization expense in the years of acquisition and disposal. Its fiscal year-end is December 31. The machinery was traded on December 2, 2021 for new machinery. Other information is: Fair value of old machinery $400,000 Trade-in allowance $600,000 List price for new machinery $840,000 Estimated useful life of new machinery in years 10 Estimated salvage value of new machinery $8400 The new machinery if depreciated using the stright-line method and ½ year rule. On August 14, 2023, an addition was made. This amount was material. Other relevant information is as follows: Amount of addition, paid in cash $400,000 Number of years of useful life from 2023 (original machinery and addition): 20 Salvage value, percentage of addition 10% Required: Prepare journal entries to record: 1 The purchase of the assets of Coffee. 2 Depreciation and amortization expense on the purchased assets for 2019. 3 The decline (if any) in value of the patents at December 31, 2020. 4 The trade-in of the old machinery and purchase of the new machinery. 5 Depreciation on the new machinery for 2021. 6 Cost of the addition to the machinery on August 14, 2023. 7 Depreciation on the new machinery for 2023.