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:
|
Currency |
Total Inflow |
Total Outflow |
|
Canadian dollars (C$) |
C$ 72,000,000 |
C$ 32,000,000 |
|
New Zealand dollars (NZ$) |
NZ$ 25,000,000 |
NZ$ 14,000,000 |
|
Mexican pesos (MXP) |
MXP 111,000,000 |
MXP 10,000,000 |
|
Singapore dollars (S$) |
S$ 39,000,000 |
S$ 68,000,000 |
The spot rates as of today are:
Currency |
Spot Rate |
|
C$ |
1.25 Canadian Dollars per US Dollar |
|
NZ$ |
$ .50 US Dollars per New Zealand Dollar |
|
MXP |
8.33 Mexican Pesos per US Dollar |
|
S$ |
1.82 Singapore Dollars per US Dollar |
(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?
In: Finance
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.
| 2021 | 2020 | 2019 | 2018 | ||||||
| Total assets | $9,510 | $6,380 | $2,997 | $2,763 | |||||
| Total liabilities | 5,842 | 2,697 | 2,169 | 1,684 | |||||
| Profit | 1,390 | 461 | 35 | 285 | |||||
| Interest expense | 109 | 74 | 58 | 50 | |||||
| Income tax expense (recovery) | 603 | 222 | (25) | 178 | |||||
A)
Calculate Tamarisk’s (Round answers to 1 decimal place, e.g. 52.7 or 52.7%.)
| (1) | Debt to total assets ratio for 2018 through 2021 | |
| (2) | Interest coverage ratio for 2018 through 2021 |
| 2021 | 2020 | 2019 | 2018 | |||||||||||||||
| (1) | Debt to total assets ratio | % | % | % | % | |||||||||||||
| (2) | Interest coverage ratio | times | times | times | times | |||||||||||||
B)
Determine from the results obtained in part (a) if Tamarisk’s
| (1) | Debt to total assets improved or deteriorated from 2020 to 2021 | Deteriorated or Improved | ||
| (2) | Debt to total assets improved or deteriorated from 2018 to 2019 | Improved or Deteriorated | ||
| (3) | Interest coverage ratio improved or deteriorated from 2020 to 2021 | Deteriorated or Improved | ||
| (4) | Interest coverage ratio improved or deteriorated from 2019 to 2020 | Improved or Deteriorated | ||
| (5) | Interest coverage ratio improved or deteriorated from 2018 to 2019 | Deteriorated or Improved |
In: Accounting
company accounting question:
Violet Ltd owns all the share capital of Indigo Ltd. The following transactions are independent:
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.
In: Accounting
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:
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.
In: Accounting
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.
In: Accounting
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).
| Total goodwill | $Answer |
| Allocation to controlling interests | $Answer |
| Allocation to noncontrolling interests | $Answer |
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.
| Total | Equity in NI | Noncontrolling Interest in NI |
||
|---|---|---|---|---|
| Sun City’s reported net income | $Answer | $Answer | $Answer | |
| Revaluation write-offs: | ||||
| Identifiable intangibles | Answer | Answer | Answer | |
| Goodwill impairment loss | Answer | Answer | Answer | |
| $Answer | $Answer | $Answer |
In: Accounting
(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.
In: Accounting
(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.
In: Accounting
In: Economics
On March 1, 2020, Reed hired a contractor to construct a new office building. The construction work commenced on April 1, 2020, and it is expected to continue through July 31, 2022, the estimated completion date. Reed made progress payments to the contractor in 2020 as follows:
|
Date |
Amount |
|
April 1 |
$ 48,000 |
|
June 1 |
195,000 |
|
September 1 |
322,000 |
|
November 1 |
67,000 |
|
$632,000 |
As stated in A5 above, Reed took a 1-year, 9%, $225,000 construction loan to help fund the work on this project. The company also has a 6-year, 5%, $559,165 loan that is not related to the construction project. Give the adjusting entry needed at December 31, 2020 to record the capitalization of interest for this project.
(A5)The Notes Payable balance of $784,165 results from two loans the company has taken. On September 1, 2019, Reed took a 6-year, 5%, $559,165 loan. The interest on this loan is payable annually, on each August 31. Also, on April 1, 2020, Reed took a 1-year, 9%, $225,000 construction loan (see A7 below). The interest on the construction loan is payable on the loan’s maturity date, March 31, 2021. (Note – Reed already recorded the interest paid on these loans in 2020. For this adjustment, consider any accrued interest on the loans at the December 31, 2020 reporting date.)
In: Accounting