Campbell Manufacturing Company was started on January 1, 2018, when it acquired $89,000 cash by issuing common stock. Campbell immediately purchased office furniture and manufacturing equipment costing $7,700 and $26,500, respectively. The office furniture had an 8-year useful life and a zero salvage value. The manufacturing equipment had a $4,000 salvage value and an expected useful life of three years. The company paid $11,600 for salaries of administrative personnel and $15,100 for wages to production personnel. Finally, the company paid $14,300 for raw materials that were used to make inventory. All inventory was started and completed during the year. Campbell completed production on 4,500 units of product and sold 3,550 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)

Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)

Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)

Determine the amount of net income that would appear on the 2018 income statement.

Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet.

Determine the amount of total assets that would appear on the December 31, 2018, balance sheet.

On January 1, 2016, Cayce Corporation acquired 100 percent of Simbel Company for consideration transferred with a fair value of $127,800. Cayce is a U.S.-based company headquartered in Buffalo, New York, and Simbel is in Cairo, Egypt. Cayce accounts for its investment in Simbel under the initial value method. Any excess of fair value of consideration transferred over book value is attributable to undervalued land on Simbel’s books. Simbel had no retained earnings at the date of acquisition. Following are the 2017 financial statements for the two operations. Information for Cayce and for Simbel is in U.S. dollars ($) and Egyptian pounds (£E), respectively.

Additional Information

• During 2016, the first year of joint operation, Simbel reported income of £E 166,000 earned evenly throughout the year. Simbel declared a dividend of £E 30,600 to Cayce on June 1 of that year. Simbel also declared the 2017 dividend on June 1.

• On December 9, 2017, Simbel classified a £E 10,300 expenditure as a rent expense, although this payment related to prepayment of rent for the first few months of 2018.

• The exchange rates for 1 £E are as follows:

Translate Simbel’s 2017 financial statements into U.S. dollars and prepare a consolidation worksheet for Cayce and its Egyptian subsidiary. Assume that the Egyptian pound is the subsidiary’s functional currency.

Complete this question by entering your answers in the tabs below.

• Translation Worksheet
• Consolidation Worksheet

Prepare a Translation worksheet. (Round "Exchange Rate" answers to 3 decimal places. Round your "Dollars" answers to the nearest whole number. Amounts to be deducted and negative amounts should be indicated with a minus sign.)

On December 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as a wholly owned subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Seguros included 61,715 newly issued Pacifica common shares ($20 market value, $5 par value) and an agreement to pay an additional $130,000 cash if Seguros meets certain project completion goals by December 31 of the following year. Pacifica estimates a 50 percent probability that Seguros will be successful in meeting these goals and uses a 4 percent discount rate to represent the time value of money.

Immediately prior to the acquisition, the following data for both firms were available:

In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $186,000. Although not yet recorded on its books, Pacifica paid legal fees of $22,700 in connection with the acquisition and $11,400 in stock issue costs.

a. Prepare Pacifica’s entries to account for the consideration transferred to the former owners of Seguros, the direct combination costs, and the stock issue and registration costs.

b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of the acquisition date.

Stuart Manufacturing Company (CMC) was started when it acquired $90,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $63,700. CMC also incurred $88,200 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling, and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 4,900 units of product and sold 4,300 units at a price of $38.00 each. All transactions were cash transactions.

Prepare a GAAP-based income statement for Option 1.

Prepare a GAAP-based balance sheet for Option 1.

Prepare a GAAP-based income statement for Option 2.

Prepare a balance sheet for Option 2.

Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors.

Assume that CMC provides an incentive bonus to the company president equal to 14 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. (Round your answers to the nearest whole dollar.)

Assume a 30 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company’s income tax expense. (Round your answers to the nearest whole dollar.)

Vernon Manufacturing Company was started on January 1, 2018, when it acquired $83,000 cash by issuing common stock. Vernon immediately purchased office furniture and manufacturing equipment costing $9,100 and $24,700, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,400 salvage value and an expected useful life of three years. The company paid $11,500 for salaries of administrative personnel and $15,800 for wages to production personnel. Finally, the company paid $10,720 for raw materials that were used to make inventory. All inventory was started and completed during the year. Vernon completed production on 4,100 units of product and sold 3,190 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

1. Determine the amount of net income that would appear on the 2018 income statement. (Round your answer to the nearest dollar amount.)

2. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

3. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $795,250 in cash and issued 108,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.

Rooney Manufacturing Company was started on January 1, 2018, when it acquired $75,000 cash by issuing common stock. Rooney immediately purchased office furniture and manufacturing equipment costing $9,100 and $26,600, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,500 salvage value and an expected useful life of three years. The company paid $11,500 for salaries of administrative personnel and $15,400 for wages to production personnel. Finally, the company paid $9,580 for raw materials that were used to make inventory. All inventory was started and completed during the year. Rooney completed production on 4,300 units of product and sold 3,320 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

On October 30, 2016, Sanchez Company acquired a piece of machinery and signed a 12-month note for $24,000. The face value of the note includes the price of the machinery and interest. The note is to be paid in four $6,000 quarterly installments. The value of the machinery is the present value of the four quarterly payments discounted at an annual interest rate of 16%.

Required:

Prepare all the journal entries required to record the information given including the year-end adjusting entry and any payments. Payments are made at month-end on January 31, April 30, July 31 and October 31. Present value techniques should be used.

PAGE 9

GENERAL JOURNAL

Show how the items would be reported on the December 31, 2016, balance sheet. Additional Instructions

fn,i=(1 + i)n

FO,n,i=(1 + i)n−1i

pn,i=1(1 + i)n

pO,n,i=1−1(1 + i)ni

pD,n,i=1−1(1 + i)n-1i+1

Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $657,500 in cash and issued 110,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.

The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.

1. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.

2. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,740,250. What amount of goodwill impairment, if any, should Francisco recognize on its 2018 income statement?