Consider an economy which consists of three firms, A, B, and C,
consumers, and a government. Firm A is a smart phone factory, while
Firm B is a parts factory. Firm C is a smart phone retailer. In
2020, Firm B produces $250,000 worth of parts, of which $150,000 it
sells to Firm A, and $40,000 to Firm C. In addition Firm B sells
$30,000 worth of parts to the government, and $30,000 worth of
parts it exports. Firm B pays workers $140,000. Firm A produces
smart phones worth $400,000, out of which $250,000 it sells to the
smart phone retailer (Firm C), $80,000 it sells to the government,
and $70,000 worth of smart phones it stores as inventory to be sold
the following year. The smart phone factory (Firm A) uses imported
materials from China worth $25,000. The smart phone factory pays
workers $100,000 and $20,000 in taxes to the government. The smart
phone retailer (Firm C) sells $380,000 worth of smart phones:
$340,000 worth to domestic consumers, and $40,000 to foreign
consumers in the United States. The smart phone retailer pays taxes
$40,000 to the government and $50,000 to the workers for marketing
and sales. Consumers receive $50,000 as dividends from abroad. The
profits of firms A and C are distributed to domestic consumers.
However, firm B is foreign owned.
• (a) Calculate GDP using, the product approach, the expenditure
approach, the income approach. Show your work clearly (Note: you
will not get marks for simply providing the final number).
• (b) Calculate GNP, the current account surplus, and government
savings for this economy.
In: Economics
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
The balances in the accounts of Maybe Ltd at 30 June 2019 and 30 June 2020 are:
|
30th June 2020 ‘000 |
30th June 2019 ‘000 |
|
|
Sales (all on credit) |
300 |
420 |
|
Cost of Goods Sold |
156 |
132 |
|
Doubtful Debts expense |
30 |
36 |
|
Interest Expense |
24 |
36 |
|
Salaries |
36 |
30 |
|
Depreciation |
12 |
18 |
|
Cash |
172.80 |
166.80 |
|
Inventory |
216 |
192 |
|
Accounts Receivable |
324 |
300 |
|
Allowance for Doubtful Debts |
36 |
42 |
|
Land |
180 |
180 |
|
Plant |
120 |
108 |
|
Accumulated Depreciation |
24 |
36 |
|
Bank Overdraft |
24 |
22.80 |
|
Accounts Payable |
240 |
228 |
|
Accrued Salaries |
26.40 |
21.60 |
|
Long term loan |
108 |
84 |
|
Share Capital |
144 |
120 |
|
Opening Retained Earnings |
368.40 |
224.40 |
Other information:
Share capital is increased by the bonus issue of 24 000 shares for $1.00 each out of retained earnings. Plant is acquired during the period at a cost of $36 000, while plant with a carrying amount of $nil (cost of $24 000, accumulated depreciation of $24 000) is scrapped.
Required:
a) Reconstruct the allowance for doubtful debts and accounts receivable.
(6.5 marks)
b) Reconstruct inventory and accounts payable
c) Reconstruct accrued salaries
d) Reconstruct property, plant and equipment and accumulated depreciation
e) present a statement of cash flow for maybe ltd for the year ended 30 June 2020
In: Accounting
The property, plant, and equipment section of the Jasper Company’s December 31, 2020, balance sheet contained the following:
| Property, plant, and equipment: | ||||||
| Land | $ | 111,000 | ||||
| Building | $ | 496,000 | ||||
| Less: Accumulated depreciation | (155,000 | ) | 341,000 | |||
| Equipment | 138,450 | |||||
| Less: Accumulated depreciation | ? | ? | ||||
| Total property, plant, and equipment | ? | |||||
The land and building were purchased at the beginning of 2016.
Straight-line depreciation is used and a residual value of $31,000
for the building is anticipated.
The equipment is comprised of the following three
machines:
| Machine | Cost | Date Acquired | Residual Value | Life (in Years) | ||||||||
| 101 | $ | 49,300 | 1/1/2018 | $ | 6,100 | 8 | ||||||
| 102 | 63,800 | 6/30/2019 | 7,100 | 7 | ||||||||
| 103 | 25,350 | 9/1/2020 | 2,100 | 10 | ||||||||
The straight-line method is used to determine depreciation on the
equipment. On March 31, 2021, Machine 102 was sold for $39,000.
Early in 2021, the useful life of machine 101 was revised to five
years in total, and the residual value was revised to zero.
Required:
1.
Calculate the accumulated depreciation on the equipment at December
31, 2020.
2. Prepare the journal entry to record 2021
depreciation on machine 102 up to the date of sale.
3. Calculate the gain or loss on the sale of
machine 102.
4. Prepare the journal entry for the sale of
machine 102.
5. Prepare the 2021 year-end journal entries to
record depreciation on the building and remaining equipment.
In: Accounting
The property, plant, and equipment section of the Jasper Company’s December 31, 2020, balance sheet contained the following:
| Property, plant, and equipment: | ||||||
| Land | $ | 111,000 | ||||
| Building | $ | 496,000 | ||||
| Less: Accumulated depreciation | (155,000 | ) | 341,000 | |||
| Equipment | 138,450 | |||||
| Less: Accumulated depreciation | ? | ? | ||||
| Total property, plant, and equipment | ? | |||||
The land and building were purchased at the beginning of 2016.
Straight-line depreciation is used and a residual value of $31,000
for the building is anticipated.
The equipment is comprised of the following three
machines:
| Machine | Cost | Date Acquired | Residual Value | Life (in Years) | ||||||||
| 101 | $ | 49,300 | 1/1/2018 | $ | 6,100 | 8 | ||||||
| 102 | 63,800 | 6/30/2019 | 7,100 | 7 | ||||||||
| 103 | 25,350 | 9/1/2020 | 2,100 | 10 | ||||||||
The straight-line method is used to determine depreciation on the
equipment. On March 31, 2021, Machine 102 was sold for $39,000.
Early in 2021, the useful life of machine 101 was revised to five
years in total, and the residual value was revised to zero.
Required:
1. Calculate the accumulated depreciation on
the equipment at December 31, 2020.
2. Prepare the journal entry to record 2021
depreciation on machine 102 up to the date of sale.
3. Calculate the gain or loss on the sale of
machine 102.
4. Prepare the journal entry for the sale of
machine 102.
5. Prepare the 2021 year-end journal entries to
record depreciation on the building and remaining
equipment.
In: Accounting
The property, plant, and equipment section of the Jasper Company’s December 31, 2020, balance sheet contained the following:
| Property, plant, and equipment: | ||||||
| Land | $ | 111,000 | ||||
| Building | $ | 496,000 | ||||
| Less: Accumulated depreciation | (155,000 | ) | 341,000 | |||
| Equipment | 138,450 | |||||
| Less: Accumulated depreciation | ? | ? | ||||
| Total property, plant, and equipment | ? | |||||
The land and building were purchased at the beginning of 2016.
Straight-line depreciation is used and a residual value of $31,000
for the building is anticipated.
The equipment is comprised of the following three
machines:
| Machine | Cost | Date Acquired | Residual Value | Life (in Years) | ||||||||
| 101 | $ | 49,300 | 1/1/2018 | $ | 6,100 | 8 | ||||||
| 102 | 63,800 | 6/30/2019 | 7,100 | 7 | ||||||||
| 103 | 25,350 | 9/1/2020 | 2,100 | 10 | ||||||||
The straight-line method is used to determine depreciation on the
equipment. On March 31, 2021, Machine 102 was sold for $39,000.
Early in 2021, the useful life of machine 101 was revised to five
years in total, and the residual value was revised to zero.
Required:
1. Calculate the accumulated depreciation on
the equipment at December 31, 2020.
2. Prepare the journal entry to record 2021
depreciation on machine 102 up to the date of sale.
3. Calculate the gain or loss on the sale of
machine 102.
4. Prepare the journal entry for the sale of
machine 102.
5. Prepare the 2021 year-end journal entries to
record depreciation on the building and remaining equipment.
In: Accounting
The balances in the accounts of Maybe Ltd at 30 June 2019 and 30 June 2020 are:
|
2020 ‘000 |
2019 ‘000 |
|
|
Sales (all on credit) |
300 |
420 |
|
Cost of Goods Sold |
156 |
132 |
|
Doubtful Debts expense |
30 |
36 |
|
Interest Expense |
24 |
36 |
|
Salaries |
36 |
30 |
|
Depreciation |
12 |
18 |
|
Cash |
172.80 |
166.80 |
|
Inventory |
216 |
192 |
|
Accounts Receivable |
324 |
300 |
|
Allowance for Doubtful Debts |
36 |
42 |
|
Land |
180 |
180 |
|
Plant |
120 |
108 |
|
Accumulated Depreciation |
24 |
36 |
|
Bank Overdraft |
24 |
22.80 |
|
Accounts Payable |
240 |
228 |
|
Accrued Salaries |
26.40 |
21.60 |
|
Long term loan |
108 |
84 |
|
Share Capital |
144 |
120 |
|
Opening Retained Earnings |
368.40 |
224.40 |
Other information:
Share capital is increased by the bonus issue of 24 000 shares for $1.00 each out of retained earnings. Plant is acquired during the period at a cost of $36 000, while plant with a carrying amount of $nil (cost of $24 000, accumulated depreciation of $24 000) is scrapped.
Required:
a) Reconstruct the allowance for doubtful debts and accounts receivable.
b) Reconstruct inventory and accounts payable
c) Reconstruct accrued salaries
d) Reconstruct property, plant and equipment and accumulated depreciation
e) Present a statement of cash flow for Maybe Ltd for the year ended 30 june 2020
In: Accounting
3. Computing real exchange rates
Consider a bundle of consumer goods that costs $90 in the United States. The same bundle of goods costs CNY 105 in China.
Holding constant the cost of the bundle in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table.
Cost of Bundle in U.S. Cost of Bundle in China Nominal Exchang Real Exchange Rate
(Dollars) (Yuan) (Yuan per dollar) (Bundles of Chinese goods per bundle of U.S. goods)
90 105 7.00
90 105 10.50
In: Economics