On January 1, 2020, Shamrock Company makes the two following acquisitions.
| 1. | Purchases land having a fair value of $330,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $483,153. | |
| 2. | Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $380,000 (interest payable annually). |
The company has to pay 10% interest for funds from its bank.
| (a) | Record the two journal entries that should be recorded by Shamrock Company for the two purchases on January 1, 2020. | |
| (b) | Record the interest at the end of the first year on both notes using the effective-interest method. |
(Round present value factor calculations to 5 decimal
places, e.g. 1.25124 and the final answer to 0 decimal places e.g.
58,971. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts. Credit account titles are
automatically indented when amount is entered. Do not indent
manually.)
|
No. |
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|---|
| (a) 1. |
January 1, 2020 |
enter an account title to record the first purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the first purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
|
enter an account title to record the first purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
| 2. |
January 1, 2020 |
enter an account title to record the second purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the second purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
|
enter an account title to record the second purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
| (b) 1. |
December 31, 2020 |
to record the interest on the first note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
|
to record the interest on the first note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
||
| 2. |
December 31, 2020 |
to record the interest on the second note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
|
to record the interest on the second note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
||
|
to record the interest on the second note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
In: Accounting
On January 1, 2020, Pearl Company makes the two following
acquisitions.
| 1. | Purchases land having a fair value of $360,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $566,467. | |
| 2. | Purchases equipment by issuing a 7%, 9-year promissory note having a maturity value of $520,000 (interest payable annually). |
The company has to pay 12% interest for funds from its
bank.
| (a) | Record the two journal entries that should be recorded by Pearl Company for the two purchases on January 1, 2020. | |
| (b) | Record the interest at the end of the first year on both notes using the effective-interest method. |
(Round present value factor calculations to 5 decimal
places, e.g. 1.25124 and the final answer to 0 decimal places e.g.
58,971. If no entry is required, select "No Entry" for the account
titles and enter 0 for the amounts. Credit account titles are
automatically indented when amount is entered. Do not indent
manually.)
|
No. |
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|---|
| (a) 1. |
January 1, 2020 |
enter an account title to record the first purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the first purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
|
enter an account title to record the first purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
| 2. |
January 1, 2020 |
enter an account title to record the second purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the second purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
|
enter an account title to record the second purchase on January 1, 2017 |
enter a debit amount |
enter a credit amount |
||
| (b) 1. |
December 31, 2020 |
to record the interest on the first note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
|
to record the interest on the first note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
||
| 2. |
December 31, 2020 |
to record the interest on the second note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
|
to record the interest on the second note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
||
|
to record the interest on the second note using the effective-interest method on December 31, 2017 |
enter a debit amount |
enter a credit amount |
In: Accounting
The following three entities make up an economic group as follows:
Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000. Both investments were acquired on 1 July 2018. On this date, shareholders’ equity was valued at:
|
Banana Ltd |
Cherry Ltd |
|
|
Share capital |
75,000 |
20,000 |
|
General reserve |
10,000 |
1,000 |
|
Retained earnings |
16,000 |
4,500 |
The financial statements of the entities within the group at 30 June 2020 are as follows:
Apple Ltd:
|
Total assets |
295,000 |
|
Total liabilities |
126,000 |
|
Share capital |
100,000 |
|
General reserve |
30,000 |
|
Retained earnings |
39,000 |
Banana Ltd:
|
Debentures in Cherry Ltd |
20,000 |
|
Total assets |
147,000 |
|
Total liabilities |
17,750 |
|
Share capital |
75,000 |
|
General reserve |
16,250 |
|
Retained earnings |
38,000 |
Cherry Ltd:
|
Total assets |
66,500 |
|
Debentures |
25,000 |
|
Total liabilities |
30,250 |
|
Share capital |
20,000 |
|
General reserve |
2,250 |
|
Retained earnings |
14,000 |
The tax rate is 30%. All non-controlling interest are valued at the proportionate share of the acquiree’s identifiable net assets. Inventory on hand at 30 June 2020 included goods obtained from within the group as follows:
-Apple Ltd purchased from Banana Ltd, sale price was $10,000 and cost $7,500.
-Apple Ltd purchased from Cherry Ltd, sale price was $20,000 and cost $18,500.
-Banana Ltd purchased from Cherry Ltd, sale price was $15,000 and cost $13,800.
The directors had applied the impairment test for goodwill annually and determined that a write-down of $3,090 is required for consolidation purposes at 30 June 2020 (write-down of goodwill in Banana Ltd is $440 and write-down of goodwill in Cherry Ltd is $2,650) with the same amounts deemed to be attributable for the prior period. All debentures (including the debenture from Cherry Ltd to Banana Ltd) is due 30 June 2030.
Required:
In the space provided - show goodwill calculation
In: Accounting
|
|
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In: Accounting
Sheffield Inc. acquired 20% of the outstanding common stock of Theresa Kulikowski Inc. on December 31, 2020. The purchase price was $1,320,800 for 50,800 shares. Kulikowski Inc. declared and paid an $0.90 per share cash dividend on June 30 and on December 31, 2021. Kulikowski reported net income of $755,000 for 2021. The fair value of Kulikowski’s stock was $29 per share at December 31, 2021. Assume that the security is a trading security.
Prepare the journal entries for Sheffield Inc. for 2020 and 2021, assuming that Sheffield cannot exercise significant influence over Kulikowski. (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.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec. 31, 2020June 30, 2021Dec. 31, 2021 |
|||
|
Dec. 31, 2020June 30, 2021Dec. 31, 2021 |
|||
|
Dec. 31, 2020June 30, 2021Dec. 31, 2021 |
|||
|
(To record dividend.) |
|||
|
(To record fair value.) |
eTextbook and Media
List of Accounts
Prepare the journal entries for Sheffield Inc. for 2020 and 2021, assuming that Sheffield can exercise significant influence over Kulikowski. (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.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec. 31, 2020June 30, 2021Dec. 31, 2021 |
|||
|
Dec. 31, 2020June 30, 2021Dec. 31, 2021 |
|||
|
Dec. 31, 2020June 30, 2021Dec. 31, 2021 |
|||
|
(To record dividend.) |
|||
|
(To record revenue.) |
eTextbook and Media
List of Accounts
At what amount is the investment in securities reported on the balance sheet under each of these methods at December 31, 2021? What is the total net income reported in 2021 under each of these methods?
|
Fair Value Method |
Equity Method |
|||
| Investment amount (balance sheet) |
$ |
$ |
||
| Dividend revenue (income statement) | ||||
| Unrealized holding gain (income statement) | ||||
| Investment income (income statement) |
In: Accounting
1. Which of the following is generally false when a consolidation occurs?
(a) The consolidated entity assumes the debts of the original corporations.
(b) The consolidated entity takes on the rights of the original companies.
(c) The consolidated entity obtains the original corporations’ assets.
(d) The new corporation has independent legal status.
(e) The original corporations continue to exist legally.
2. Which of the following is true regarding the type of intangible item that may constitute an asset?
(a) A company name is a type of intangible item that may constitute an asset, but goodwill and a company logo are not.
(b) Goodwill, a company name, and a company logo all constitute types of intangible items that may constitute assets.
(c) Goodwill is a type of intangible item that may constitute an asset, but a company name and a company logo are not.
(d) Goodwill and a company name are types of intangible items that may constitute assets, but a company logo is not.
(e) A company name and a company logo are types of intangible items that may constitute assets, but goodwill is not.
3.
What key piece of information does an aggressor generally need in order to gain control of a target corporation through proxies?
(a) The income statements of the target.
(b) The list of members of the board of directors of the target.
(c) A list of target shareholders.
(d) A list of target officers.
(e) The balance sheet of the target.
4.
In a consolidation, which of the following is true regarding the property of the original corporations?
(a) It must be held in trust for at least one year to satisfy claims of creditors.
(b) It is acquired by the new corporation.
(c) It must be sold and distributed to the respective shareholders.
(d) It must be placed within the jurisdiction of the secretary of state for at least one year in order to satisfy the claims of creditors.
(e) It must be held in trust for at least six months to satisfy claims of creditors.
5. In a consolidation, which of the following is true regarding the property of the original corporations?.
(a) It must be held in trust for at least one year to satisfy claims of creditors.
(b) It is acquired by the new corporation.
(c) It must be sold and distributed to the respective shareholders.
(d) It must be placed within the jurisdiction of the secretary of state for at least one year in order to satisfy claims of creditors.
(e) It must be held in trust for at least six months to satisfy claims of creditors.
In: Accounting
What justifications were given by the U.S. officials in the Department of the Treasury and the U.S. Agency for International Development (USAID) to NOT invest U.S. resources in AIDS therapy for Africa? Why is Farmer so troubled by these justifications?
In: Economics
On Friday afternoon you received a call from a gentleman who identified himself as the chief executive officer of a firm in a small city about 100 miles from your headquarters. He wanted to charter an aircraft to make a trip to a small U.S. border town. He assured you that you would not be required to fly over the border into a foreign country or deal with customs agents. The trip would depart tomorrow (Saturday) evening, make a two-hour stop at the town’s airport, and return sometime after midnight Sunday morning.
The caller cautioned you about the confidentiality of the trip and requested that your two “most closed-mouthed” pilots fly the charter. In reply to some serious and repeated questions concerning the mission and legality of the trip and/or cargo, the caller assured you that the trip was for legal business purposes, and no contraband would be involved. He alluded to “a highly sensitive business matter” that would have an enormous effect on his firm if “the parties can agree.”
The aircraft you would have available to send is in good condition and its maintenance schedule is up-to-date; thus the trip would not endanger the readiness of the aircraft for its normal schedule the following Sunday. The prospective customer has offered you a fee that would net your firm $5,000 profit above the direct costs. The fee is somewhat large, considering the length of the trip, but the caller offered it, and you did not object.
You couldn’t find information about the firm online. Because it is late in the day on a Friday, you aren’t able to research the firm any further.
Your director of marketing is urging you to take the charter because of the potential profit and future business this firm might provide. “I’ve heard of the company. They’re in air conditioning or something like that. I’ve also heard they’re either trying to acquire another company, or they’re about to be acquired. This might be the final closing of the deal.”
1. Take the charter trip.
2. Do not take the charter trip.
In: Operations Management
At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:
| Category | Plant Asset |
Accumulated Depreciation and Amortization |
|||||
| Land | $ | 184,000 | $ | — | |||
| Buildings | 1,950,000 | 337,900 | |||||
| Machinery and equipment | 1,575,000 | 326,500 | |||||
| Automobiles and trucks | 181,000 | 109,325 | |||||
| Leasehold improvements | 234,000 | 117,000 | |||||
| Land improvements | — | — | |||||
Depreciation methods and useful lives:
Buildings—150% declining balance; 25 years.
Machinery and equipment—Straight line; 10 years.
Automobiles and trucks—150% declining balance; 5 years, all
acquired after 2014.
Leasehold improvements—Straight line.
Land improvements—Straight line.
Depreciation is computed to the nearest month and residual values
are immaterial. Transactions during 2018 and other
information:
On January 6, 2018, a plant facility consisting of land and building was acquired from King Corp. in exchange for 34,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $50 a share. Current assessed values of land and building for property tax purposes are $210,000 and $630,000, respectively.
On March 25, 2018, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $246,000. These expenditures had an estimated useful life of 12 years.
The leasehold improvements were completed on December 31, 2014, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2020, was renewable for an additional four-year term. On April 30, 2018, Cord exercised the renewal option.
On July 1, 2018, machinery and equipment were purchased at a total invoice cost of $334,000. Additional costs of $10,000 for delivery and $59,000 for installation were incurred.
On August 30, 2018, Cord purchased a new automobile for $13,400.
On September 30, 2018, a truck with a cost of $24,900 and a book value of $10,800 on date of sale was sold for $12,400. Depreciation for the nine months ended September 30, 2018, was $2,430.
On December 20, 2018, a machine with a cost of $21,500 and a book value of $3,200 at date of disposition was scrapped without cash recovery.
Required:
1. Prepare a schedule analyzing the changes in
each of the plant asset accounts during 2018. Do not analyze
changes in accumulated depreciation and amortization.
2. For each asset category, prepare a schedule
showing depreciation or amortization expense for the year ended
December 31, 2018
Prepare a schedule analyzing the changes in each of the plant asset accounts during 2018. Do not analyze changes in accumulated depreciation and amortization.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2018. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)
|
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In: Accounting
Over the past year, the South African Rand has depreciated against the U.S. dollar by 5%. Furthermore, the inflation in the U.S. was at 4% over the year while the inflation in South Africa stood at 7% over the year.
A.
The U.S. exporters to South Africa have lost their competitive
advantage relative to the local firms by about 3%.
B.
The U.S. exporters to South Africa have gained a competitive
advantage relative to the local firms by about 2%.
C.
The U.S. exporters to South Africa have gained a competitive
advantage relative to the local firms by about 3%.
D.
The U.S. exporters to South Africa have lost their competitive
advantage relative to the local firms by about 2%.
In: Finance