2.8 Measurement Period Adjustment with Income Effects

On November 1, 2019, Placer Corporation acquired all of the assets and liabilities of Sonata Company. The acquisition generated goodwill of $50,000,000. At the date of acquisition, Sonata’s equipment had an estimated fair value of $27,000,000, and a 4-year life, straight-line. On March 31, 2020, new information reveals that the equipment’s fair value was $36,000,000 at the date of acquisition. Placer’s accounting year ends on December 31.

Required:

Prepare the journal entry or entries to record the change in valuation of Sonata’s equipment on March 31, 2020, assuming the valuation change is within the measurement period, and depreciation has already been recorded through March 31. (Show any calculations made)

analyze fiscal policy responses to the unprecedented slowdown of the U.S. economy due to the coronavirus in March and April 2020

Hedging Exposed Asset Position with Adjusting Entries

On November 3, 2020, Robin Franchises, a U.S. company, sold merchandise to a franchisee in the U.K., at a price of £8,000,000, payable in three months in pounds. To hedge its exposed asset position, on November 3, 2020, Robin entered a forward contract for delivery of £8,000,000 to the broker on February 3, 2021. On February 3, 2021, Robin received payment from the franchisee, and delivered the pounds to the broker to close the forward contract. Robin’s accounting year ends December 31. Exchange rates ($/£) are as follows:

a. Prepare the journal entries Robin Franchises made on November 3, 2020 and February 3, 2021, as well as the required end of year adjusting entry. (7 total entries)

b. Calculate the cash gain or loss realized by Robin Franchises by hedging compared with not hedging.

1.a.)When using FIFO for inventories, market value generally refers to ________ under U.S. GAAP and ________ under IFRS.

A) current replacement cost; historical cost

B) historical cost; net realizable value

C) historical cost; current replacement cost

D) net realizable value; net realizable value

b. Margaret Company reported the following information for the current year:

Industry Averages available are:

How do the inventory turnover and gross profit percentage for Margaret Company compare to the industry averages for the same ratios? (Round inventory turnover to two decimal places. Round gross profit percentage to the nearest percent.)

A) Margaret Company has superior gross profit percentage and inventory turnover.

B) Margaret Company has superior gross profit percentage and inferior inventory turnover.

C) Margaret Company has inferior gross profit percentage and superior inventory turnover.

D) Margaret Company has inferior gross profit percentage and inventory turnover.

c.)Ending inventory for the year ended December 31, 2019, is understated by $8,000. How will this affect net income for 2019 and 2020?

A) Net income will be understated by $8,000 in 2019 and 2020.

B) Net income will be overstated by $8,000 in 2019 and 2020.

C) Net income will be understated by $8,000 in 2019 and overstated by $8,000 in 2020.

D) Net income will be overstated by $8,000 in 2019 and understated by $8,000 in 2020.

d.) Ending inventory for the year ended December 31, 2019, is understated by $23,000. How will this error affect net income for 2020?

A) Net income will be understated by $46,000.

B) Net income will be overstated by $46,000.

C) Net income will be understated by $23,000.

D) Net income will be overstated by $23,000.

e.) Beginning inventory for the year ended December 31, 2019, is understated. How will this error affect net income for 2019 and 2020?

A) 2019 overstated; 2020 understated

B) 2019 understated; 2020 overstated

C) 2019 overstated; 2020 no effect

D) 2019 understated; 2020 no effect

f.)Beginning inventory for the year ended December 31, 2019, is understated. How will this error affect net income for 2019 and 2020?

A) 2019 overstated; 2020 understated

B) 2019 understated; 2020 overstated

C) 2019 overstated; 2020 no effect

D) 2019 understated; 2020 no effect

Problem 1:

The following are ending balances for George’s Gorcery Store (GGS) as of December 31, 2019: Cash, $8,000, Accounts Receivable, $40,000, Allowance for Doubtful Accounts, $2,000, Inventory $80,000, Accounts Payable, $20,000, Common Stock, $40,000, and Retained Earnings, $66,000. The company uses the allowance method to record bad debts.

The following is a list of transactions that happened in 2020 for George’s Grocery Store:

1. GGS acquired an additional 10,000 cash from the issuance of common stock.
2. GGS purchased $90,000 of inventory on account.
3. GGS sold inventory that cost $91,000 for $150,000. Sales were made on account.
4. The company wrote-off $800 of uncollectible accounts.
5. On September 1, GGS loaned $15,000 to Eden Co. The note had an 8 percent interest rate and a one-year term.
6. GGS paid $22,000 cash for operating expenses.
7. The company collected $152,000 cash from accounts receivable.  
8. A cash payment of $96,000 was paid on accounts payable.
9. The company paid a $10,000 cash dividend to the shareholders.
10. GGS sold an additional amount of inventory for $6,000 on account. The cost of the inventory was $4,000.
11. It is estimated that 1 percent of credit sales will be uncollectible.

Required: Answer the following questions.

1. Provide the journal entry needed for transaction 4, assuming GGS uses the allowance method for accounting for bad debts.

2. What is the adjusting entry GGS would need to record at December 31, 2020 for transaction 5?

3. What is the amount of bad debt expense GGS will report in 2020?
4. What is the NRV that GGS would report on its 2020 balance sheet?
5. What is GGS’ gross margin for 2020?
6. What is operating income for GGS for 2020?
7. What is the amount of total assets that GGS will report on its 2020 balance sheet?
8. What is the amount of net income GGS will report for 2020?
9. What is the ending balance in Retained Earnings GGS will report for 2020?
10. What is the net cash from operating activites that would be reported on the Statement of Cash Flows for GGS for 2020?
11. Which transaction would be classified as an investing activity on the Statement of Cash Flows?

Problem 1:

The following are ending balances for George’s Gorcery Store (GGS) as of December 31, 2019: Cash, $8,000, Accounts Receivable, $40,000, Allowance for Doubtful Accounts, $2,000, Inventory $80,000, Accounts Payable, $20,000, Common Stock, $40,000, and Retained Earnings, $66,000. The company uses the allowance method to record bad debts.  

The following is a list of transactions that happened in 2020 for George’s Grocery Store:

1. GGS acquired an additional 10,000 cash from the issuance of common stock.

2. GGS purchased $90,000 of inventory on account.

3. GGS sold inventory that cost $91,000 for $150,000. Sales were made on account.

4. The company wrote-off $800 of uncollectible accounts.

5. On September 1, GGS loaned $15,000 to Eden Co. The note had an 8 percent interest rate and a one-year term.

6. GGS paid $22,000 cash for operating expenses.

7. The company collected $152,000 cash from accounts receivable.   

8. A cash payment of $96,000 was paid on accounts payable.

9. The company paid a $10,000 cash dividend to the shareholders.

10. GGS sold an additional amount of inventory for $6,000 on account. The cost of the inventory was $4,000.  

11. It is estimated that 1 percent of credit sales will be uncollectible.

Required: Answer the following questions.

1. Provide the journal entry needed for transaction 4, assuming GGS uses the allowance method for accounting for bad debts.  

2. What is the adjusting entry GGS would need to record at December 31, 2020 for transaction 5?

3. What is the amount of bad debt expense GGS will report in 2020?  

4. What is the NRV that GGS would report on its 2020 balance sheet?

5. What is GGS’ gross margin for 2020?

6. What is operating income for GGS for 2020?

7. What is the amount of total assets that GGS will report on its 2020 balance sheet?

8. What is the amount of net income GGS will report for 2020?

9. What is the ending balance in Retained Earnings GGS will report for 2020?

10. What is the net cash from operating activites that would be reported on the Statement of Cash Flows for GGS for 2020?

11. Which transaction would be classified as an investing activity on the Statement of Cash Flows?

Golf-Travel, Inc. is a U.S. company that provides ... Bookmark Golf-Travel, Inc. is a U.S. company that provides travel packages for individual golfers and corporate golf outings. The company has mainly focused on U. S. customers but has decided to expand its business globally. Ben Watson, the company’s CEO, has decided that the best location for the company’s European operations is Ireland due to Ireland’s low 12.5% corporate tax rate. In January, 2013, Golf-Travel formally opened its European operations, called Europe-Golf in Portmarnock, Ireland as a wholly owned subsidiary of Golf-Travel. During 2013, the subsidiary’s performance exceeded expectations by hosting almost 400 individual golf trips and 200 corporate outings. At the end of the year, the subsidiary reported pretax income of €324,260 and the subsidiary paid Irish taxes of €40,533, leaving a net income of €283,727. Question: What FASB, GAAP, IFRS references address the tax issues of earnings of foreign subsidiaries, In particular, what are the different financial reporting issues if the company remits the earnings back to the United States versus a strategy of permanently reinvesting the earnings back into the Irish subsidiary. *** Answer must include the FASB, GAAP, IFRS references. ****

A U.S. based internet company offers an on-line proficiency course in
basic accounting. Completion of this online course satisfies the "Fundamentals of Accounting"
course requirement in many MBA programs. In the first semester 315 students have enrolled in
the course. The marketing research manager divided the country into seven regions of
approximately equal populations. The course enrollment values in each of the seven regions
are given below. The management wants to know if there is equal interest in the course across
all regions. (Hint: To answer this question you must determine the expected frequency per
region if it is equal)
a. State the null and alternative hypotheses
b. What is the test statistic?
c. Using a .05 significance level, what is the decision rule?
d. Show the test statistic and essential calculations.
e. Interpret you results

Region    1 2    3    4 5 6    7

enrollment 45 60 30 40 50 55 35

Q3 Foreign currency translation A: 20 marks

On January 1, 2020, in an effort to diversify, Bauman Corp. (a Canadian company that sells decorative cedar branches), purchased 80% of Noskova Inc, an American company that manufacturers nitrous oxide, for US$50,000.

Noskova’s book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years.   A goodwill impairment loss of US$1,000 occurred during 2020. Noskova’s January 1, 2020, Balance Sheet is shown below (in U.S. dollars):

The following exchange rates were in effect during 2020:

Sales, purchases and other expenses occurred evenly throughout the year.
Dividends declared and paid December 31, 2020.
The financial statements of Bauman (in Canadian dollars) and Noskova (in U.S. dollars) are shown below:

Balance Sheets

Translate Noskova’s 2020 Income Statement into Canadian dollars if the functional currency is the Canadian dollar (i.e. the same functional currency as the parent).