5.            Black Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $21,000. The balance in Accounts Receivable was $420,000 at 1/1 and $504,000 at 12/31. At 12/31/20, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/20?

6.            David Company uses the gross method to record sales made on credit. On June 10, 2020, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2020, David received payment for 1/2 of the amount due from Charles Inc. David’s fiscal year end is on June 30, 2020. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.?

7.            Becky had net sales (all on account) in 2020 of $8,000,000. At December 31, 2020, before adjusting entries, the balances in accounts receivable was a $1,000,000 debit. Becky estimates that 3% of its accounts receivable will prove to be uncollectible. What is the net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020? (Net A/R)

8.            Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31. If the company estimates that 2% of its accounts receivable will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

Wrangler Company is a U.S. firm conducting a financial plan for the next year. It has no foreign subsidiaries, but more than half of its sales are from exports. Its foreign cash inflows to be received from exporting and cash outflows to be paid for imported supplies over the next year are shown in the following table:

The spot rates as of today are:

(a) Based on the information provided, determine the net transaction exposure of each foreign currency in dollars.

(b) Assume that the Canadian dollar net inflows may range from C$20,000,000 to C$60,000,000 over the next year. Explain the risk of hedging C$50,000,000 in net inflows. How can Wrangler Company avoid such a risk? Is there any tradeoff resulting from your strategy to avoid that risk?

Tamarisk Gas Inc., an oil and gas company had the following information on its financial statements for the fiscal years ended December 31. All figures are in millions of dollars.

A)

Calculate Tamarisk’s (Round answers to 1 decimal place, e.g. 52.7 or 52.7%.)

B)

Determine from the results obtained in part (a) if Tamarisk’s

company accounting question:

Violet Ltd owns all the share capital of Indigo Ltd. The following transactions are independent:

1. Indigo Ltd gives $55 000 as an interest-free loan to Violet Ltd on 1 July 2019. Violet Ltd made a $20 000 repayment by 30 June 2020.
2. Indigo Ltd rented a spare warehouse to Violet Ltd starting from 1 July 2019 for 1 year. The total charge for the rental was $3 500, and Violet Ltd paid half of this amount to Indigo Ltd on 1 January 2020 and the rest on 1 July 2020.
3. During March 2020, Indigo Ltd declared a $5000 dividend. The dividend was paid in August 2020.

Required

In relation to the above intragroup transactions:

1.      Prepare adjusting journal entries for the consolidation worksheet at 30 June 2020.

2.     Explain in detail why you made each adjusting journal entry.

subject: company accounting    

  Consolidation

Indigo Ltd gives $55 000 as an interest-free loan to Violet Ltd on 1 July 2019. Violet Ltd made a $20 000 repayment by 30 June 2020.Violet Ltd owns all the share capital of Indigo Ltd. The following transactions are independent:

1. Indigo Ltd rented a spare warehouse to Violet Ltd starting from 1 July 2019 for 1 year. The total charge for the rental was $3 500, and Violet Ltd paid half of this amount to Indigo Ltd on 1 January 2020 and the rest on 1 July 2020.
2. During March 2020, Indigo Ltd declared a $5000 dividend. The dividend was paid in August 2020.

Required

In relation to the above intragroup transactions:

1.      Prepare adjusting journal entries for the consolidation worksheet at 30 June 2020.

2.     Explain in detail why you made each adjusting journal entry.

Parker Corp. develops computer video games for sale. A new development project which began in 2018 reached technological feasibility at the end of Sept. 2019 and the project was available for release to customers early in 2020. Development costs incurred prior to Sept. 30 were $1,600,000 and costs incurred from Oct. 1 to product availability were $1,200,000. Revenues in 2020 from the sale of the new product were $4,000,000 and the company anticipates another $12,000,000 in revenues. The economic life of the software is 3 years.

(a) What amount should Parker capitalize as an intangible asset?

(b) What amount should be amortized in 2020?

(c) At the beginning of 2021, Parker estimates the net realizable value of the software to be $500,000. Prepare any entries required.

Palm Resorts acquired its 70 percent interest in Sun City on January 1, 2017, for $41,750,000. The fair value of the 30 percent noncontrolling interest at the date of acquisition was $14,750,000. Sun City’s date-of-acquisition reported net assets of $5,000,000 were carried at amounts approximating fair value, but it had unrecorded identifiable intangibles, capitalizable per ASC Topic 805, valued at $7,500,000. These intangibles are determined to have limited lives, amortized on a straight-line basis over five years. It is now December 31, 2020, and Sun City reports net income of $10,000,000.

Required

a. Calculate the amount of goodwill originally reported for this acquisition, and its allocation to the controlling and noncontrolling interests.

Enter answers in thousands (example, $41,750,000 equals $41,750 in thousands).

b. Calculate equity in net income and the noncontrolling interest in net income for 2020, assuming goodwill from this acquisition is impaired by $2,000,000 in 2020.

Enter answers in thousands (example, $3,000,000 equals $3,000 in thousands).

Use negative signs with answers that reduce net income amounts.

(b) Melbourne Ltd owns 100 per cent of the shares of Bendigo Ltd, acquired on 1 July, 2019 for $900,000 when the shareholders’ funds of Bendigo Ltd were: Share capital $450,000, Retained earnings $225,000 and Revaluation surplus $100,000. All assets of Bendigo Ltd are fairly stated at the acquisition date. The goodwill has been impaired by 10% in the year 2020. The following intra-group transactions took place during the 2020 financial year: Bendigo Ltd paid $60,000 dividend to Melbourne Ltd. Melbourne Ltd sells inventory to Bendigo Ltd at a sales price of $50,000. The inventory had previously cost Melbourne Ltd $40,000. Twenty five (25%) inventory is still on hand with Bendigo Ltd. Melbourne Ltd provided a management consultancy services to Bendigo during the year. Bendigo Ltd paid $7,500 in management fees to Melbourne Ltd. Melbourne Ltd sold plant costing $20,000 to Bendigo Ltd for $24,000. Melbourne Ltd had not charged any depreciation on the asset before the sale as it just purchased it from an external entity. Both entities depreciate items of plant at 20% p.a. on cost. The plant is still held by Bendigo Ltd. The tax rate is 30 per cent.

Required: Prepare the relevant consolidated journal entries for the year ended 30 June 2020 (including tax effects where relevant.

(b) Melbourne Ltd owns 100 per cent of the shares of Bendigo Ltd, acquired on 1 July, 2019 for $900,000 when the shareholders’ funds of Bendigo Ltd were: Share capital $450,000, Retained earnings $225,000 and Revaluation surplus $100,000. All assets of Bendigo Ltd are fairly stated at the acquisition date. The goodwill has been impaired by 10% in the year 2020. The following intra-group transactions took place during the 2020 financial year: Bendigo Ltd paid $60,000 dividend to Melbourne Ltd. Melbourne Ltd sells inventory to Bendigo Ltd at a sales price of $50,000. The inventory had previously cost Melbourne Ltd $40,000. Twenty five (25%) inventory is still on hand with Bendigo Ltd. Melbourne Ltd provided a management consultancy services to Bendigo during the year. Bendigo Ltd paid $7,500 in management fees to Melbourne Ltd. Melbourne Ltd sold plant costing $20,000 to Bendigo Ltd for $24,000. Melbourne Ltd had not charged any depreciation on the asset before the sale as it just purchased it from an external entity. Both entities depreciate items of plant at 20% p.a. on cost. The plant is still held by Bendigo Ltd. The tax rate is 30 per cent. Required: Prepare the relevant consolidated journal entries for the year ended 30 June 2020 (including tax effects where relevant.