Accounting for Consolidation

Carina Ltd has acquired all the shares of Finn Ltd on 1 July 2019 for $ 225 000. The accountant for Carina Ltd, having studied the requirements of AASB 3 Business Combinations, realises that all the identifiable assets and liabilities of Finn Ltd must be recognised in the consolidated financial statements at fair value. Although he is happy about the valuation of these items, he is unsure of a number of other matters including pre-acquisition entries and business combination valuation reserves associated with accounting for these assets and liabilities. He has approached you and asked for your advice.

The financial statements of Finn Ltd showed the equity of Finn Ltd at acquisition date to be:

Share capital — 20 000 $5.10 shares $102 000
General reserve     40 000
Retained earnings     60 000

All the assets and liabilities of Finn Ltd were recorded at amounts equal to their fair values at that date.

During the year ending 30 June 2020, Finn Ltd undertook the following actions:
• On 10 September 2019, paid a dividend of $20 000 from the profits earned prior to 1 July 2019.
• On 28 June 2020, declared a dividend of $20 000 to be paid on 15 August 2020.
• On 1 January 2020, transferred $15 000 from the general reserve existing at 1 July 2019 to retained earnings.

Required
Write a report for the accountant at Carina Ltd advising on the following issues:

1. Should the adjustments to fair value be made in the consolidation worksheet or in the accounts of Finn Ltd?     


2.     What is the purpose of the pre-acquisition entries in the preparation of consolidated financial statements? Explain.     


3.      How to prepare the pre-acquisition entries at 1 July 2019.   


4.      How to prepare the pre-acquisition entries at 30 June 2020.     

1. Journalize the listed transactions for the years 2020 and 2023. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)

2. Assume that the fair value of the bonds at December 31, 2020, was $1,709,400. These bonds are classified as available-for-sale securities. Prepare the adjusting entry to record these bonds at fair value. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

3. Based on your analysis in part (b), show the balance sheet presentation of the bonds and interest receivable at December 31, 2020. Assume the investments are considered long-term. Indicate where any unrealized gain or loss is reported in the financial statements.

Brief Exercise 9-7 Elbert Company classifies its selling and administrative expense budget into variable and fixed components. Variable expenses are expected to be $26,770 in the first quarter, and $5,240 increments are expected in the remaining quarters of 2020. Fixed expenses are expected to be $41,680 in each quarter. Prepare the selling and administrative expense budget by quarters and in total for 2020. ELBERT COMPANY Selling and Administrative Expense Budget Quarter 1 2 3 4 Year $ $ $ $ $ $ $ $ $ $

MBA 5009 Managerial Environment Business Organization Question What is the advantages and disadvantages of the following 1. Sole propretorship? 2. General partnerships? 3. Corporations (C, non-profits and S)? and Franchies? If you had to pick one for your business which one would most pick? why?

The following information was taken from the accounting
records of JBD Company as of December 31, 2020:

Inventory .................   $17,000
Accounts Payable ..........   $36,000
Common Stock ..............   $78,000
Accounts Receivable .......   $11,000
Retained Earnings .........   $24,000 (at January 1, 2020)
Copyright .................   $20,000
Salaries Expense ..........   $28,000
Supplies ..................   $12,000
Mortgage payable ..........   $80,000 (due March 1, 2040)
Land ......................   $93,000
Notes Payable .............   $17,000 (due November 1, 2022) 
Trademark .................   $37,000
Sales Revenue .............   $97,000
Equipment .................   $85,000
Income Tax Expense ........   $10,000
Cost of Goods Sold ........   $45,000
Salaries Payable ..........      ?
Cash ......................      ?
Accumulated Depreciation ..      ?
Dividends .................      ?
Interest revenue ..........      ?

Additional information:
1)  Total current assets at December 31, 2020 are equal to
    30% of the total assets at December 31, 2020.

2)  20% of JBD’s 2020 net income was paid to stockholders
    as dividends.

3)  Total long-term liabilities at December 31, 2020 are
    equal to total current liabilities at December 31, 2020.

4)  Total equity at December 31, 2020 is equal to 35% of the
    total liabilities at December 31, 2020.

Calculate the balance in the accumulated depreciation account
at December 31, 2020.

A prospective MBA student earns $50,000 per year in her current job and expects that amount to increase by 12% per year. She is considering leaving her job to attend business school for two years at a cost of $45,000 per year. She has been told that her starting salary after business school is likely to be $85,000 and that amount will increase by 15% per year. Consider a time horizon of 10 years, use a discount rate of 11%, and ignore all considerations not explicitly mentioned here. Assume all cash flows occur at the start of each year (i.e., immediate, one year from now, two years from now,..., nine years from now). Also assume that the choice can be implemented immediately so that for the MBA alternative the current year is the first year of business school. What is the net present value of the more attractive choice?

1. X-bar is an unbiased estimator of µ because

a. standard error of X-bar equals sigma/ square root of n

b. expected value of X-bar equals µ

c. shape of distribution of X-bar is normal.

d. Expected value of X-bar is greater than 1.

2. Suppose professor finds that for 16 randomly selected students the time needed to complete an assignment had a sample mean of 65 minutes and a sample standard deviation of 40 minutes. The 98% confidence interval estimate for the population mean is:

3. The starting salaries of individuals with an MBA degree are normally distributed with a mean of $90,000 and a standard deviation of $20,000. Suppose we randomly select 16 of these individuals with an MBA degree. What is the probability that the average starting salary for these individuals is at least $85,800? 0.7995 0.9131 0.2005 -0.2611

4. The probability P(0 <= Z <= 1.63) is:

a. 0.4265

b. 0.9484

c. 0.5071

d. 0.4484

1) A prospective MBA student earns $50,000 per year in her current job and expects that amount to increase by 9% per year. She is considering leaving her job to attend business school for two years at a cost of $50,000 per year. She has been told that her starting salary after business school is likely to be $105,000 and that amount will increase by 10% per year. Consider a time horizon of 10 years, use a discount rate of 10%, and ignore all considerations not explicitly mentioned here. Assume all cash flows occur at the start of each year (i.e., immediate, one year from now, two years from now,..., nine years from now). Also assume that the choice can be implemented immediately so that for the MBA alternative the current year is the first year of business school. What is the net present value of the more attractive choice?

1a.An eight-year corporate bond with a face value of $1000 has a 7 percent coupon rate. What should be the bond's price if the required return is 5 percent and the bond pays interest semiannually?

A. $1,062.81 B. $1,062.10 C. $1,053.45 D. $1,052.99 E. $1,130.55

1b. Upon graduating from college this year, you expect to earn $50,000 per year. If you get your MBA, in one year you can expect to start at $70,000 per year. Over the year, inflation is expected to be 5 percent. In today's dollars, how much additional (less) money will you make from getting your MBA (to the nearest dollar) in your first year?

A. -$2,462 B. $8,333 C. $8,750. D. $16,667 E. $20,000

1c. The duration of a 270-day T-Bill is (in years)

A. 0.493.

B. 0.246.

C. 1.

D. 0.7397

E. indeterminate.

Anna has just completed her undergraduate degree and is already planning to enter an MBA program one year from today. The MBA tuition will be $7,000 per year for 2 years, paid at the beginning of each year. In addition, Anna would like to retire 20 years from today and spend $50,000 every year for 10 years (years 20-29, withdrawn at the beginning of each year). To fund her expenditures, Anna will save money at the end of year 0 and at the end of years 3-19. At the end of year 29, she wants to have nothing in her bank account. Do not enter a comma or dollar sign.

Assuming that the interest rate is 5%, calculate the constant annual dollar amount that she must save at the end of each of these years to cover all of her expenditures (tuition and retirement).

If the retirement spending increases to $60,000, what is the constant annual dollar amount that she must save?