Bogart is a listed company that reports using IFRS and has a reporting date of 30 September 2020. Bogart purchased 18% of Lupin’s 100 million $1 ordinary shares for $43 million cash on 1 October 2018, gaining significant influence. Lupin had retained earnings of $85 million and no other components of equity, on the date of purchase.

The investment in Lupin was accounted for correctly in Bogart’s individual financial statements for the year ended 30 September 2019, when Lupin had retained earnings of $150 million and no other components of equity.

Bogart acquired control over Lupin on 1 October 2019, purchasing a further 67% of its ordinary shares. Cash consideration of $160 million was correctly included in calculating goodwill. Purchase consideration included 3 million of Bogart’s own $1 ordinary shares, with a fair value of $1.40 each. No accounting entries were posted for this share consideration.

Bogart derecognised the carrying amount of the existing 18% holding in Lupin and included it in calculating the goodwill of the business combination. The carrying amount of the net assets of Lupin was also used in calculating goodwill. The fair value of the existing 18% holding was $73 million at 1 October 2019 and the fair value of the identifiable net assets of Lupin was $285 million. The excess of the fair value of net assets over the carrying amount was due to equipment with a remaining useful life of ten years. The fair value of the non-controlling interest in Lupin on 1 October 2019 was $63.8 million and was included in calculating goodwill.

On 30 September 2020, Bogart purchased an additional 5% of the ordinary shares of Lupin. The consideration transferred for these additional shares was $19 million cash, which was expensed to the consolidated statement of profit or loss. On 30 September 2020, Lupin had retained earnings of $185 million and no other components of equity

Required:

Discuss the correct recognition and measurement of this business combination in the consolidated financial statements of Bogart, showing calculations. Explain any accounting errors made and show the accounting entries required to correct those errors.

Rainier Corporation, a U.S. corporation, manufactures and sells quidgets in the United States, Europe and the Middle East. Rainier conducts its operations in Europe and the Middle East through a German GmbH, which the company elects to treat as a branch, i.e. DRE, for U.S. tax purposes. Rainier also licenses the rights to manufacture quidgets to an unrelated company in China. During the current year, Rainier paid the following foreign taxes, translated into U.S. dollars at the appropriate exchange rate:

National income taxes in Germany                                                                                 $1,500,000

City of Munich income taxes                                                                                          $   200,000

Value added tax to German government                                                              $   400,000

Payroll tax to the German government (employer’s share of

     social insurance contributions)                                                                                  $   300,000

Withholding tax on royalties received from China                                     $   100,000
Saudi Arabian tax on what is actually a royalty                                                    $     75,000

Yemen income tax                                                                                                                    $     50,000

What amount of creditable foreign taxes does Rainier incur?  

Using the direct method, and the information in the exhibits, prepare the financing activities section of the statement of cash flows for Alaskan Travels, Inc., as of December 31, Year 2. In the first column, from the option list provided, select the description for cash flows that are clearly from financing activities. In the second column, enter the amounts that will be reported in the financing activities section of the statement of cash flows. Indicate negative numbers by using a leading minus (-) sign.

Meeting - Board of Directors

Alaskan Travels, Inc.

Seattle, WA

A meeting of the Board of Directors of Alaskan Travels, Inc., was held on May 11, Year 2, at 2:00 p.m. at the company offices in Seattle, Washington.

Those present were:

Carson Mitchel, Chairman of the Board, Wallace Shepard, President and CEO, Jeremy Cox, Suzanne Richardson, Tabitha Gillespie, and John Dillon (secretary).

Proceedings:

Mr. Carson Mitchel, Chairman of the Board, presided.

On motion and unanimously approved, the following resolutions were adopted:

BE IT RESOLVED, Alaskan Travels, Inc., will proceed with the purchase of the 20-acre parcel of land located at Jones Field for $150,000.

BE IT RESOLVED, Alaskan Travels, Inc., will reacquire common stock from Walter Morrison, to be held as treasury stock, for $100,000 cash.

BE IT RESOLVED, Conroy Aviation has agreed to accept common stock for settlement of our $1,000,000 bond payable.

Adjournment:

There being no further business to come before the meeting, it was on motion adjourned at 3:30 p.m.

Respectfully submitted:

John Dillon, Secretary

Press Release

Alaskan Travels, Inc., Declares Dividend

Seattle, WA, December 1, Year 2 - Alaskan Travels, Inc., a charter travel company, today announced that its Board of Directors declared a cash dividend of $1.25 per share of the company’s common stock. Alaskan Travels, Inc., currently has 64,000 shares of common stock outstanding.

The dividend will be paid on December 27, Year 2, to all common shareholders of record as of the close of business on December 15, Year 2.

About Alaskan Travels, Inc.

Founded in Year 1, Alaskan Travels, Inc., is a charter travel company located in Seattle, WA. The company provides chartered air and ground tours throughout Alaska.

From: Tom Pearson ([email protected])

To: Hannah Goodwin ([email protected])

Date: January 5, Year 3

Subject: Year 2 Securities Transactions

Hi Hannah,

I recorded the following securities transactions in Year 2:

1) Sold trading securities for $139,000
2) Purchased available-for-sale securities for $75,000

Additionally, there was a $22,000 cash purchase of inventory in November, Year 2.

Please let me know if you need any additional information.

Sincerely,

Tom Pearson, CFO

Alaskan Travels, Inc.

Resolution of the Board of Directors of

Alaskan Travels, Inc.

Seattle, WA

Declaration of Preferred Stock Dividends and Issuance of Preferred Stock

BE IT RESOLVED THAT:

1. The company declares, on this day, November 20, Year 2, the required annual cash dividend for preferred stock.

2. The dividend of $640,000 is to be set aside and distributed on March 15, Year 3.

3. The directors of Alaskan Travels, Inc., hereby certify that the preferred shareholders of record with the company will be provided with a copy of this notice.

4. On November 20, Year 2, Alaskan Travels, Inc., issued 10,000 shares of $3 par-value, 5% preferred stock for $55 per share.

The undersigned, being The Chairman of the Board for Alaskan Travels, Inc., hereby approves the foregoing resolution in accordance with the provisions of the company’s bylaws.

DATED the 20th day of November, Year 2.

Palmer Aircraft Finance

Used Aircraft Purchase and Finance Agreement

December 31, Year 2

Executed, this day of December 31, Year 2, this Used Aircraft Purchase and Finance Agreement is made between Alaskan Travels, Inc., of Seattle, Washington, and Palmer Aircraft Finance Company of Dallas, Texas.

Alaskan Travels, Inc., agrees to purchase from Queen Airway, one used multi-engine prop aircraft, VIN 74-811, for the sum of U.S. $275,000.

The lender, Palmer Aircraft Finance Company, agrees to finance 90%, or U.S. $247,500, of the purchase price of this aircraft.

The seller, Queen Airway, agrees to deliver aircraft upon (1) receipt of a cashier’s check from the buyer for 10% of the purchase price, or U.S. $27,500, and (2) execution of this finance agreement.

The borrower, Alaskan Travels, Inc., for value received, and prior to the delivery of said aircraft, promises to pay (1) to the seller, U.S. $27,500, in the form of a cashier’s check, and (2) to the lender, the principal sum of U.S. $247,500, with interest, at the annual rate of 12%. Payment of principal and interest will be made in 10 equal annual installments beginning December 31, Year 3.At any time while not in default under this Note, the borrower may pay the outstanding balance then owing under this Note to the lender without further bonus or penalty. Notwithstanding anything to the contrary in this Note, if the borrower defaults in the performance of any obligation under this Note, then the lender may declare the principal amount owing and interest due under this Note at that time to be immediately due and payable.

This note will be construed in accordance with and governed by the laws of the State.

ALASKAN TRAVELS INC CANCELED CHECK

Paid to the order of Hidden City Bank

123 Main St

Seattle Washington

Check amount $325,000

Check date 08/2/Year 2

Memo: Settlement of note payable - Tom Pearson

PAYMENT RECORD

Loan No.: 548761-21

Payment date: 08/2/Year 2

Principal: $310,000

Interest $15,000

Amount paid $325,000

Assume that Brown Company owns 100% of Schroeder Corporation. Schroeder reports Stockholders’ Equity of $500,000. The Equity investment was acquired at book value (i.e., no AAP). Schroeder sells a 10% interest to outsiders for $115,000. The entry made by Brown as a result of the sale of stock by Schroeder includes:

Closter, Inc., has a bond issue with a face value of $1,000 that is coming due in one year. The value of the company’s assets is currently $1,180. Ashok Vora, the CEO, believes that the assets in the company will be worth either $970 or $1,470 in a year. The going rate on one-year T-bills is 6 percent.

1.What type of foreign exchange exposure does Airbus face? How can Airbus protect itself from its exposure to changing exchange rates? How does the company’s switch to more U.S. suppliers help the company?

2.Airbus has asked its European based suppliers to start pricing in U.S. Dollars. What does Airbus hope to gain by this request? What does it mean for suppliers?

On February 1, 2018, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $95 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $95,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the price of the bonds issued on February 1, 2018.
2-a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.
2-b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest period during the term to maturity.
3. Prepare the journal entries to record the issuance of the bonds by Cromley and Barnwell’s investment on February 1, 2018.
4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020.

(Req-3 JE's: FEB 1, 2018: Record the issuance of the bonds by Cromley. FEB 1 2018: Record the Bond investment by Barnwell.)

(Req-4(Cromley): 1 Record the payment of interest for Cromley Company. 2 Record the accrued interest for Cromley Company. 3 Record the payment of interest for Cromley Company. 4 Record the payment of interest for Cromley Company. 5 Record the accrued interest for Cromley Company. 6 Record the payment of interest for Cromley Company.)

(Req-4(Barnwell): 1 Record the receipt of interest for Barnwell Company. 2 Record the accrued interest for Barnwell Company. 3 Record the receipt of interest for Barnwell Company. 4 Record the receipt of interest for Barnwell Company. 5 Record the accrued interest for Barnwell Company. 6 Record the receipt of interest for Barnwell Company.)

Lamarck, in part, based his erroneous theory of evolution on the passing of acquired characteristics from one generation to the next. Darwin’s theory is based on the passing of inherited genetic characteristics from one generation to the next. Determine which of the characteristics listed below are acquired, inherited or involve both acquired and inherited

Explain your choices.

1. Increased proficiency in playing the clarinet: acquired or inherited or both

2. Thick subcutaneous fat layer in arctic seals: acquired or inherited or both

3. Attaining a height of two meters in humans: acquired or inherited or both

4. Grizzly bears hibernating during the winter: acquired or inherited or both

Identified a U.S. company that had a change in accounting principles within the past five years, discuss the accounting principles that the identified company changed and explain the major reasons why the company changed accounting principles. Give your opinion on whether you believe the change in accounting principles was to benefit the corporation or investors and creditors

1. In 2017, GREEN CORPORATION acquired a silver mine in Benguet. Because the mine is located deep in the Benguet mountains, Green was able to acquire the mine for the low price of P50,000.

In 2018, Green constructed a road to the silver mine costing P5,000,000. Improvements to the mine made in 2018 cost P750,000. Because of the improvements to the mine and the surrounding land, it is estimated that the mine can be sold for P600,000 when the mining activities are complete.

During 2019, five buildings were constructed near the mine site to house the mine workers and their families. The total cost of the five buildings was P1,500,000. Estimated residual value is P250,000. In 2017, geologists estimated 4 million tons of silver ore could be removed from the mine for refining.

During 2020, the first year of operations, only 5,000 tons of silver ore were removed from the mine. However, in 2021, workers mined 1 million tons of silver. During that same year, geologists discovered that the mine contained 3 million tons of silver ore in addition to the original 4 million tons. Improvements of P275,000 were made to the mine early in 2021 to facilitate the removal of the additional silver.

Early in 2022, an additional building was constructed at a cost of P225,000 to house the additional workers needed to excavate the added silver. This building is not expected to have any residual value.

In 2022, 2.5 million tons of silver were mined and costs of P1,100,000 were incurred at the beginning of the year for improvements to the mine.

Requirements:

1. Depletion from 2020 to 2022.
2. Depreciation from 2020 to 2022.