On January 1, 2014, Paterson Company purchased 70% of the common stock of Smith Company for $420,000. At that time, Smith’s stockholders’ equity consisted of $80,000 of Common stock, $60,000 of Other contributed capital, and $240,000 of Retained earnings. Any difference between implied and book value relates to Smith’s land. Paterson uses the cost method to record its investment in Smith. Its fiscal year ends on December 31. Additional information for both companies for 2020 follows:

Required:

A)Prepare all the necessary eliminating entries on a consolidated statements workpaper on 12/31/2020.

B) Calculate the consolidated net income for 2020.

C) Calculate the non controlling interest in net income for 2020.

You manage a company located in the U.S. and the profits you report to your shareholders are in $US. Today your company signed a contract with a Canadian company to import computer parts from Canada with delivery 6 months from today and with the price of the parts in Canadian dollars. You will use these parts to build computers in the U.S. and sell the computers to a Japanese company. You have also signed a contract with the Japanese company today specifying the price per computer in Japanese yen for delivery in one year. There are future contracts in Canadian dollars and in Japanese yen, both priced in U.S. dollars per unit of foreign currency (e.g. $1.3 per Canadian dollar and $.01 per yen). Explain the exchange rate risks your company faces and how you would hedge these risks using futures contracts

Harrington Company was sued by an employee in late 2017. General counsel concluded that there was an 85 percent probability that the company would lose the lawsuit. The range of possible loss is estimated to be $18,000 to $61,000, with no amount in the range more likely than any other. The lawsuit was settled in 2018, with Harrington making a payment of $58,000.

Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.

Required:

1. Prepare journal entries for this lawsuit for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.

2. Prepare the entry(ies) that Harrington would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS.

For the year ended Dec 31, 2020, King Inc. reported pretax accounting income of $800,000.

Select information is listed below:

1) In 2019, the company purchased a piece of equipment with a cost of $500,000. For financial reporting purposes, the company used the straight-line method over a 5-year service life with no residual value expected. For tax purposes, the equipment was scheduled to be depreciated by $160,000, $140,000, $120,000, $50,000 and $30,000 in years 2019 through 2023, respectively.

2) During 2020 loss contingency accrued for financial reporting purpose was $45,000. The loss contingency was due to the pending patent lawsuit brought by its long-time competitor, Queen Inc. The payment for the lawsuit is expected to be paid in 2022.

3) In 2020, the company earned $10,000 interest income from municipal bonds. The interest earned on municipal bonds are exempted for tax purposes. King Inc.’s income tax rate is 30%. At January 1, 2020, the deferred tax asset balance was $0 and the deferred tax liability was $12,000.

Required:

What is taxable income for 2020?

What is the ending balance of DTA on 12/31/2020?

What is the ending balance of DTL on 12/31/2020?

Prepare journal entry to record income taxes for year 2020.

Crane Company had $290,600 of net income in 2019 when the selling price per unit was $154, the variable costs per unit were $94, and the fixed costs were $573,400. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Crane Company is under pressure from stockholders to increase net income by $57,600 in 2020.

A. Compute the number of units sold in 2019

B. Compute the number of units that would have to be sold in 2020 to reach the stockholders' desired profit level.

C. Assume that Crane Company sells the same number of units in 2020 as it did in 2019. What would the selling price have to be in order to reach the stockholders' desired profit level?

Ivanhoe Company had $177,900 of net income in 2019 when the selling price per unit was $154, the variable costs per unit were $98, and the fixed costs were $572,500. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Ivanhoe Company is under pressure from stockholders to increase net income by $93,800 in 2020.

Compute the number of units sold in 2019.

Compute the number of units that would have to be sold in 2020 to reach the stockholders’ desired profit level.

Assume that Ivanhoe Company sells the same number of units in 2020 as it did in 2019. What would the selling price have to be in order to reach the stockholders’ desired profit level?

Villa Corporation (VC) is a private company that follows ASPE. The company’s policy is to report all cash flows arising from interest and dividends as operating activities. The company’s activities for the year ended December 31, 2020 included the following:

1. VC reported income before income taxes of $400,000. Income tax expense was $50,000.

2. Retained earnings increased by $340,000 for the year; the dividends payable account increased by $5,000.

3. Income taxes payable increased by 2,000 during the year.

4. Interest expense for the year was $20,000; the interest payable account increased by $12,000.

5. Accounts receivable decreased by $18,000 and accounts payable increased by $40,000 during the year.

6. Inventory increased by $14,000 during the year.

7. VC sold equipment with a net book value of $40,000 for $42,000 cash.

8. VC sold a long-term investment for $12,000; the book value of the investment was $15,000.

1. Depreciation expense for the year totaled $22,000.

10. VC recorded a goodwill impairment loss of $15,000 during the year.

11. VC acquired $200,000 in equipment by way of a $20,000 cash down payment and a $180,000 loan from its local bank.

Required:

1. Prepare the cash flows from operating activities section of the Cash Flow Statement for Villa Corporation for the year ended December 31, 2020 using the indirect method.       

2. For each activity described in this question that is not classified as an operating activity, explain how the activity and the related cash flow would be reported in Villa Hospitality’s Cash Flow Statement.

Cash Flow Statement (Partial)

For the Year Ended December 31, 2020 (Indirect Method)

Respond to the following questions:

1. Does Thailand have a democracy?

2.  As CEO of a multinational that has already invested in and been successfully producing in Thailand (for both Thailand and overseas markets), when you heard the news about the 2006 and 2014 coup that toppled democratically elected governments, should you be concerned? Why or why not?

3. As CEO of a company that is ready to export to Thailand or that is ready to source from Thailand, would you be concerned about the political risk in Thailand? Would you proceed as planned or look for alternative export markets or alternative countries from which to source products?

Pensions Address the following elements in the form of a memo to your CEO: A. From AMAZON’s financial information, what type of pension plan does it have? Discuss the reasons why AMAZON has chosen this particular plan. B. What was the effect of the pension plan on AMAZON's financial statements? Defend your response. C. Your CEO has informed you—the controller of AMAZON—that the board of directors has made the decision to look at other options of types of retirement plans. Investigate what other alternatives would be available, and determine which would be appropriate for your particular company.