Case 18-1 Coffee Co.

Coffee Co. (the “Company”) is a global distributor of organic coffee beans and teas that is registered with the SEC in the United States. The Company’s operations are primarily located in the United States, Canada, and South America. In March 20X8, Coffee Co., looking to refocus efforts to only produce coffee products, entered into an agreement (the “Agreement”) with Nature’s Beverage, a food distributor in the United States looking to expand its international footprint (the “Transaction”). Nature’s Beverage is registered with the SEC in the United States.

Pursuant to the Agreement, Coffee Co. provided a sublicense to Nature’s Beverage for the distribution rights of Coffee Co.’s South American local tea brand, Herbal T, whereby Nature’s Beverage will distribute Herbal T in South America. Under the Agreement, Coffee Co. transferred the existing customer contracts in South America to Nature’s Beverage and an at-market supply contract with the producer of Herbal T. Coffee Co. retained all of its employees and distribution capabilities.

The Transaction closed on March 1, 20X8 (the “Closing”).

Additional Facts:

• Nature’s Beverage incurred certain costs to acquire the sublicense of the distribution rights and a license to use the Herbal T brand. The costs included legal, accounting, and other professional or consulting fees totaling $50,000.

• Nature’s Beverage agreed to transfer to Coffee Co. $3 million for the sublicense of the distribution rights of Herbal T.

• Assume both companies have adopted FASB Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business.

  Required:

1. Does the acquisition of the sublicense by Nature’s Beverage to distribute Herbal T meet the definition of a business?

2. How should Nature’s Beverage account for the acquisition, including the treatment of the transaction costs? (Note that the response will be dependent on the response to Question 1.)

I only need the answer to question #1. I already asked this question before and I received an answer that was already on the internet. Please in your own words, answer question #1 using pronouncement ASC 805-10-55.

5. Exchange rates and the demand for domestic goods

Piano Palace Co. produces electronic keyboards in the United States. Its most popular keyboard sells for $1,400. KeySharp Co., Piano Palace's primary competitor, is based in Germany and sells keyboards to US customers online. KeySharp sells its keyboards for 825 euros.

Suppose that initially, the exchange rate was $1.60 per euro.

This means that the price of KeySharp’s keyboards to US consumers was 825 euros ×$1.60 per euro =$1,320.

This means that the price of KeySharp’s keyboards to US consumers was _____?

. Because this dollar price of keyboards from KeySharp is(lower or higher)______________ than the dollar price of keyboards from Piano Palace, demand for Piano Palace keyboards is likely(high, low , higher)______ relative to KeySharp’s keyboards in the United States.

Now suppose that the euro weakens relative to the dollar, and the exchange rate changes to $2.00

After this change, the price of KeySharp’s keyboards to US consumers is _______?

. Because this dollar price of keyboards from KeySharp is now (lower or higher
) _________ than the dollar price of keyboards from Piano Palace, demand for Piano Palace keyboards is likely(rise or fall)_______ relative to KeySharp’s keyboards in the United States, due to the change in the exchange rate.

Suppose that Piano Palace not only sells keyboards in the United States but also exports and sells them to France (another country in the eurozone).

When the euro was $1.60, consumers in France paid _______?

euros for keyboards from Piano Palace. At this exchange rate, the euro price of Piano Palace keyboards was (lower or higher)_______ than that of KeySharp keyboards. However, at the newer exchange rate, the euro price of Piano Palace keyboards is now_____?

. This would cause French consumers to increase demand for (KeySharp keyboards, relative to Piano Palace keyboards OR Piano Palace keyboards, relative to KeySharp keyboards)

.

Generalizing from the results of this fictionalized scenario, when other currencies are weak against the dollar, US imports should be relatively (high or low)_____ , while US exports should be relatively (low or high)_____ , leading to a(more or less)_____ favorable position in terms of the balance of trade.

12. Which of the following statements is (are) correct?
(x) The local oak table producer has an increase in inventory of 25 tables in 2012. In 2013 it sells all 25 tables to consumers. The value of increased inventory will be counted as part of GDP in 2012 and the value of the tables sold in 2013 will not increase GDP in 2013.
(y) A wheat farmer in Montana buys a new tractor made during the current period that was produced by a German company in the U.S. state of Iowa. As a result, U.S. investment and U.S. GDP increase, but German GDP is unaffected.
(z) A U.S. firm produces sweatshirts in the first quarter of 2010 and adds them to its inventory. In the second quarter of 2010 the firm sells the sweatshirts to consumers. If the firm does not add additional sweatshirts to inventory in the second quarter then investment, for the firm, decreases in the second quarter.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

13. Michigan Tea Company sold $18 million worth of tea it produced. In producing this tea it purchased $6 million worth of ingredients from foreign countries and paid $1 million to workers who reside in Canada but commute to the United States. How much did these transactions add to GDP of the United States?
A. $24 million
B. $18 million
C. $17 million
D. $12 million

14. Which of the following statements about nominal GDP is (are) correct?
(x) Betsy works at her home to produce goods and services for her family. Unpaid production of goods and services, by Betsy at her home, is not included in the calculation of gross domestic product (GDP).
(y) The value of illegally produced goods are included in GDP because the goods are traded in a market.
(z) Ross, a United States citizen, works only in Canada. The value added to production from his employment is included in Canadian GDP but not the GDP of the United States.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

E. $11 million

(b) On 1 July 2018, Maxwell Chemical Ltd acquired a plant at a cost of $1,000,000. Maxwell depreciated the assets on a straight line basis. As at 30 June 2020, the machinery had accumulated depreciation of $200,000 and an expected remaining useful life of four years. On 30 June 2020, Maxwell Chemical Ltd conducted an impairment test on asset. It was assessed that the plant could be sold to other entities for $600,000 with costs of disposal of $25,000. The management expect to use the plant for another four years and it is expected that net cash flow to be generated by the plant would be $195,000 over each of the next four years. The rate of return by the market on this plant is 8% as at 30 June 2020.

Note: The present value of an annuity of $1 for four years discounted at 8 per cent is $3.3121

Required: (a) Determine whether the plant is impaired. If so, provide appropriate journal entry at 30 June 2020.

(b) Provide the journal entry to account for the depreciation in 2021.

On 1 July 2018, Maxwell Chemical Ltd acquired a plant at a cost of $1,000,000. Maxwell depreciated the assets on a straight line basis. As at 30 June 2020, the machinery had accumulated depreciation of $200,000 and an expected remaining useful life of four years. On 30 June 2020, Maxwell Chemical Ltd conducted an impairment test on asset. It was assessed that the plant could be sold to other entities for $600,000 with costs of disposal of $25,000. The management expect to use the plant for another four years and it is expected that net cash flow to be generated by the plant would be $195,000 over each of the next four years.

The rate of return by the market on this plant is 8% as at 30 June 2020.

Note: The present value of an annuity of $1 for four years discounted at 8 per cent is $3.3121

Required:

(a)  Determine whether the plant is impaired. If so, provide appropriate journal entry at 30 June 2020.                                                                                                         

(b) Provide the journal entry to account for the depreciation in 2021.   

Why do last year finance university students decide to do their internships at a fintech startup?

provide several reasons

How big a startup company need to get before they become attractive to sell: revenues, number of employees, accounts, other?

On March 31, 2020, Wolfson Corporation acquired all of the outstanding common stocks of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:

Required:

1. Calculate the amount of goodwill (2 points).

Acquisition price =

Fair value of net assets acquired =

Goodwill =

2. Prepare Wolfson Corporation’s journal entry to record the acquisition (3 points).

Alpha Company acquired 40% interest in an associate, VV Company, for P2,500,000 on January 1, 2019. At the acquisition date, there were no differences between fair value and carrying amount of identifiable assets and liabilities. VV reported net income of P1,000,000 for 2019 and P1,500,000 for 2020. Also, VV paid cash dividend of P400,000 and P500,000 for 2019 and 2020, respectively. The following additional events occurred during 2019 and 2020:

• On January 1, 2019, VV sold an equipment costing P250,000 to HH Company for P400,000. The remaining useful life of the equipment is 10 years.

• On December 2019, VV sold inventory to HH Company for P450,000. The cost of the inventory was P300,000. This inventory remained unsold by HH Company on December 31, 2019.

• On July 1, 2020, VV sold a vehicle for P450,000 to HH Company. The carrying amount of the vehicle is P250,000 at the time of sale. The remaining life of the vehicle is 5 years.

• On December 2020, HH sold the inventory from VV Company.

a) Determine the investor’s share in profit for 2019. __________________________

b) Determine the investor’s share in profit for 2020. __________________________

c) Determine the carrying amount of the investment in associate on December 31, 2019. __________________________

d) Determine the carrying amount of the investment in associate on December 31, 2020. __________________________

1. On January 1, 2020, Pantop Corporation acquired 85% of the outstanding common stock of Sunny Company for $527,000. There was no control premium.

The following information about Sunny Company on January 1, 2020 was available:

Pantop uses the complete equity method to account for its investment in Sunny. During 2020, Sunny had a net income of $80,000. The remaining useful life of the building was five years with no salvage value. Sunny uses straight line depreciation. Sunny’s cost of goods sold (FIFO) was $70,000 in 2020. On December 23, 2020, Sunny declared and paid $48,000 cash dividend to its shareholders. Goodwill was unimpaired as of December 31, 2020.

(i) Prepare journal entries for Pantop to record under the complete equity method of accounting the operating results of Sunny in 2020.

(ii) Prepare the working paper eliminating entries C, E, R, O and N (in journal entry format) for Pantop Corporation and subsidiary for the year ended December 31, 2020.