SafeData Corporation has the following account balances and respective fair values on June 30:

Privacy First, Inc., obtained all of the outstanding shares of SafeData on June 30 by issuing 20,000 shares of common stock having a $1 par value but a $50 fair value. Privacy First incurred $10,000 in stock issuance costs and paid $50,000 to an investment banking firm for its assistance in arranging the combination. In negotiating the final terms of the deal, Privacy First also agrees to pay $75,000 to SafeData’s former owners if it achieves certain revenue goals in the next two years. Privacy First estimates the probability adjusted present value of this contingent performance obligation at $22,500.

1. What is the fair value of the consideration transferred in this combination?
2. How should the stock issuance costs appear in Privacy First’s postcombination financial statements?
3. How should Privacy First account for the fee paid to the investment bank?
4. How does the issuance of these shares affect the stockholders’ equity accounts of Privacy First, the parent?
5. How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed?
6. If Privacy First’s stock had been worth only $25 per share rather than $50, how would the consolidation of SafeData’s assets and liabilities have been affected?

req 1:

req2:

How should the stock issuance costs appear in Privacy First’s postcombination financial statements?

req:3

How should Privacy First account for the fee paid to the investment bank?

req4

How does the issuance of these shares affect the stockholders’ equity accounts of Privacy First, the parent?

req5

How is the fair value of the consideration transferred in the combination allocated among the assets acquired and the liabilities assumed?

req6

If Privacy First’s stock had been worth only $25 per share rather than $50, how would the consolidation of SafeData’s assets and liabilities have been affected?

Exercise 3-07

A partial adjusted trial balance of Skysong Company at January 31, 2020, shows the following.

Answer the following questions, assuming the year begins January 1.

1.  If the amount in Supplies Expense is the January 31 adjusting entry, and $850 of supplies was purchased in January, what was the balance in Supplies on January 1?

2.  If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for one year, what was the total premium?  When was the policy purchased?

3.  If $2,650 of salaries was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2019?

4.  If $1,750 was received in January for services performed in January, what was the balance in Unearned Service Revenue at December 31, 2019? Assume that there are no accounts receivable.

Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2020, and relevant budget data are as follows.

Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amounts

Compute the expected ROI in 2020 for the Home Division, assuming the following independent changes to actual data. (Round ROI to 2 decimal places, e.g. 1.57%.)

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,200,000. This cost included the following expenditures:

The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020.

In 2021, after the 2020 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company’s controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment.

Required:
1 & 2. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2021 and any 2021 journal entries related to the change in depreciation methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

Kapiti Ltd runs a successful chain of fashion boutiques, but has been experiencing significant cash flow problems. The directors are examining a proposal made by an accounting consultant that all the shops currently owned by the company be sold and either leased back or the businesses moved to alternative leased shops. The directors are keen on the plan but are puzzled by the consultant’s insistence that all lease agreements for the shops be ‘operating’ rather than ‘finance’ leases.

Meanwhile, Scarlett Ltd agreed to lease their 5 buildings to Kapiti Ltd.

The lease agreement details are as follows:

The Chairman of the Board directed the Company Accountant to submit a detailed report on the above project.

Required

Explain, by reference to the requirements of AASB 117, why the consultant prefers operating to finance leases.                                                   

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,308,000. This cost included the following expenditures:

The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020.

In 2021, after the 2020 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company’s controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment.

Required:
1 & 2. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2021 and any 2021 journal entries related to the change in depreciation methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.) requirement 3 Record the 2021 adjusting entry for depreciation.

The Landing Department of Gross Furniture Company has the following production and manufacturing cost data for March 2020, the first month of operation.

Production: 7,360 units finished and transferred out; 3,000 units started that are 100% complete as to materials and 20% complete as to conversion costs.

Manufacturing costs: Materials $39,368; labor $20,700; overhead $42,980.

Prepare a production cost report.

                                        Gross Furniture Company
                                           Landing Department
                                         Production Cost Report
                               For the Month Ended March 31, 2020

                                                                        Equivalent Units

Quantities                      Physical Units               Materials                ConversionCosts

Units to be accounted for

Work in process, March 1

Started into production

Total units

Units accounted for

   Transferred out

Work in process, March 31

Total units

Costs                                                 Materials                   Conversion Costs                   Total

Unit costs

   Total Costs

Equivalent units

Unit costs

Costs to be accounted for

   Work in process, March 1

Started into production

Total costs

Cost Reconciliation Schedule

Costs accounted for

   Transferred out

Work in process, March 31

      Materials

Conversion costs

Total costs

The Collins Corporation purchased office equipment at the beginning of 2019 and capitalized a cost of $2,344,000. This cost included the following expenditures:

The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2019 and 2020.

In 2021, after the 2020 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company’s controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment.

Required:
1 & 2. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2021 and any 2021 journal entries related to the change in depreciation methods. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

Steven’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2020, Steven adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of:

During 2020, the company had the following purchases and sales.

Assume the company uses three inventory pools instead of one. Compute ending inventory, cost of goods sold, and gross profit. (Round price index to 2 decimal places, e.g. 1.45 and final answers to 0 decimal places, e.g. 6,548.)