Can anyone give a detailed explanation with some examples on these questions? I am going to have an exam soon.
1. How should we account for the borrowing costs that we incurred this year on constructing the Torry warehouse facility?
2. Why would a machine, that we have started leasing on a 10 year agreement, have to be shown on our statement of financial position when we don’t own it?
3. The Board of ABC Corp., a manufacturer of electrical goods and had acquired 3 companies already, are thinking of investing in a Scottish company called DEF Corp. next year. Discuss what difficulties they might face integrating DEF into the ABC Group.
In: Accounting
Pesto Company posesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 9 percent bonds payable with a 10 million dollar face value (maturing in 20 years) on the open market at a premium of 600,000. On January 1 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight line method of amortization. For 2018 consolidation what adjustment should be made to Pesto's beginning Retained earnings as a result of this bond acquisition? Please show step by step calculations
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 41 |
| Variable costs per unit | $ | 19 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 54,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 9,000 speakers
per year. It has received a quote of $34 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division is now selling only 45,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 41 |
| Variable costs per unit | $ | 18 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 63,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 9,000 speakers
per year. It has received a quote of $35 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division is now selling only 54,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 44 |
| Variable costs per unit | $ | 20 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 58,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 12,000 speakers
per year. It has received a quote of $36 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division is now selling only 46,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 12,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 12,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 41 Variable costs per unit $ 18 Fixed costs per unit (based on capacity) $ 9 Capacity in units 57,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 12,000 speakers per year. It has received a quote of $29 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: 1. Assume the Audio Division is now selling only 45,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 12,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling all of the speakers it can produce to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 12,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow: Selling price per unit on the intermediate market $ 40 Variable costs per unit $ 19 Fixed costs per unit (based on capacity) $ 6 Capacity in units 57,000 Sako Company has a Hi-Fi Division that could use this speaker in one of its products. The Hi-Fi Division will need 10,000 speakers per year. It has received a quote of $33 per speaker from another manufacturer. Sako Company evaluates division managers on the basis of divisional profits. Required: 1. Assume the Audio Division is now selling only 47,000 speakers per year to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place? 2. Assume the Audio Division is selling all of the speakers it can produce to outside customers. a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division? b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi-Fi Division? d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Pretzel Corporation acquired 100 percent of Stick Company’s
outstanding shares on January 1, 20X7. Balance sheet data for the
two companies immediately after the purchase follow:
| Pretzel Corporation | Stick Company | |||||||
| Cash | $ | 87,000 | $ | 31,000 | ||||
| Accounts Receivable | 96,000 | 53,000 | ||||||
| Inventory | 87,000 | 83,000 | ||||||
| Buildings & Equipment | 419,000 | 289,000 | ||||||
| Less: Accumulated Depreciation | (150,000 | ) | (89,000 | ) | ||||
| Investment in Stick Company | 318,000 | |||||||
| Investment in Stick Company Bonds | 58,000 | |||||||
| Total Assets | $ | 915,000 | $ | 367,000 | ||||
| Accounts Payable | $ | 58,000 | $ | 24,000 | ||||
| Bonds Payable | 189,000 | 118,000 | ||||||
| Common Stock | 296,000 | 155,000 | ||||||
| Capital in Excess of Par | 145,000 | |||||||
| Retained Earnings | 372,000 | (75,000 | ) | |||||
| Total Liabilities & Equities | $ | 915,000 | $ | 367,000 | ||||
As indicated in the parent company balance sheet, Pretzel purchased
$58,000 of Stick’s bonds from the subsidiary at par value
immediately after it acquired the stock. An analysis of
intercompany receivables and payables also indicates that the
subsidiary owes the parent $11,000. On the date of combination, the
book values and fair values of Stick’s assets and liabilities were
the same.
Required:
a. Prepare all consolidation entries needed to prepare a
consolidated balance sheet for January 1, 20X7. (If no
entry is required for a transaction/event, select "No journal entry
required" in the first account field.) ( 1. Record the basic
consolidation entry, 2. Record the excess value, 3. Record the
entry to eliminate the intercompany accounts for Bonds Payable.
4.Record the entry to eliminate the remaining intercompany
accounts. 5. Record the optional accumulated depreciation
consolidation entry.)
b. Complete a consolidated balance sheet worksheet. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
c. Prepare a consolidated balance sheet. (Amounts to be deducted should be entered with a minus sign.)
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 47 |
| Variable costs per unit | $ | 19 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 57,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 9,000 speakers
per year. It has received a quote of $30 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division is now selling only 48,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 9,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting
Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:
| Selling price per unit on the intermediate market | $ | 44 |
| Variable costs per unit | $ | 20 |
| Fixed costs per unit (based on capacity) | $ | 8 |
| Capacity in units | 58,000 | |
Sako Company has a Hi-Fi Division that could use this speaker in
one of its products. The Hi-Fi Division will need 12,000 speakers
per year. It has received a quote of $36 per speaker from another
manufacturer. Sako Company evaluates division managers on the basis
of divisional profits.
Required:
1. Assume the Audio Division is now selling only 46,000 speakers per year to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 12,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
2. Assume the Audio Division is selling all of the speakers it can produce to outside customers.
a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi-Fi Division?
b. From the standpoint of the Hi-Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 12,000 speakers from the Audio Division to the Hi-Fi Division?
d. From the standpoint of the entire company, should the transfer take place?
In: Accounting