On March 31, 2020, Wolfson Corporation acquired all of the outstanding common stocks of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:
|
Book Value |
Fair Value |
|
|
Current assets |
$ 6,000,000 |
$ 7,500,000 |
|
Property, plant, and equipment |
11,000,000 |
14,000,000 |
|
Other assets |
1,000,000 |
1,500,000 |
|
Current liabilities |
4,000,000 |
4,000,000 |
|
Long-term liabilities |
6,000,000 |
5,500,000 |
Required:
1. Calculate the amount of goodwill (2 points).
Acquisition price =
Fair value of net assets acquired =
Goodwill =
2. Prepare Wolfson Corporation’s journal entry to record the acquisition (3 points).
|
|
Debit |
Credit |
In: Accounting
Lancer, Inc. (a U.S.-based company), establishes a subsidiary in a foreign country on January 1, 2016. The following account balances for the year ending December 31, 2017, are stated in kanquo (KQ), the local currency:
| Sales | KQ | 150,000 |
| Inventory (bought on 3/1/17) | 75,000 | |
| Equipment (bought on 1/1/16) | 50,000 | |
| Rent expense | 10,000 | |
| Dividends (declared on 10/1/17) | 20,000 | |
| Notes receivable (to be collected in 2020) | 31,000 | |
| Accumulated depreciation—equipment | 15,000 | |
| Salary payable | 4,000 | |
| Depreciation expense | 5,000 | |
The following U.S.$ per KQ exchange rates are applicable:
| January 1, 2016 | $0.14 |
| Average for 2016 | 0.15 |
| January 1, 2017 | 0.19 |
| March 1, 2017 | 0.20 |
| October 1, 2017 | 0.22 |
| December 31, 2017 | 0.23 |
| Average for 2017 | 0.21 |
Lancer is preparing account balances to produce consolidated financial statements.
Assuming that the kanquo is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?
Assuming that the U.S. dollar is the functional currency, what exchange rate would be used to report each of these accounts in U.S. dollar consolidated financial statements?
(Round your answers to 2 decimal places.)
|
In: Accounting
In: Finance
Record entries from the transaction and event list provided below in proper journal entry format. Show your work if the entry requires you to make a calculation (i.e. depreciation, interest expense, etc.).
October
29. Your top sales officer met with a new customer to discuss a potential future contract. She informs you that the customer is considering signing the $200,000 deal, which would become effective February 2020. 6 ACCY1 Accounting Fundamentals Group Project
30. On October 1st, you purchased 11,250 units at the decreased price of $61 per unit. The purchase was made on account.
31. On October 10th you paid your supplier $132,000 cash for inventory purchased on account.
November 32.
November 1st, the CEO, in an effort to adjust ratios, ordered the repurchasing of the company’s own stock. The quantity of stock repurchased was 175,000 shares.
33. Purchased a three-year building insurance policy on November 1st for $442,000 cash. [Adjusting Entry Required]
34. On November 17th a customer pays you $450,000 for work that you will finish in January of 2020.
35. November 19th, your customers bought 8,650 units of your product at $110 per unit. The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 55% in cash and the remainder was on account.
36. An employment contract is signed with a new regional manager. You have offered him $150,000 per year. He will not begin working for the company until March 2020. December
37. Wages earned from July 1st through December 31st was $480,000. Wages earned between Dec. 15th and Dec 31st amounting to $27,500 was not paid this until Jan 7th.
38. At the end of the year, $42,000 cash was paid to the local bank for the long-term note payable taken out on January 1, 2019. $38,000 of this was applied to the loan principal. The remaining amount was the accumulated interest due for 2019.
39. On December 31st, the marketable (trading) securities you purchased on September 23, 2019 transaction now has a fair market value of $134,000.
40. On December 31st, $480,000 depreciation expense for the year was calculated for equipment purchased before January 1, 2019.
41. On December 31st, you declare dividends of $.32 per share to be paid at a later date.
42. On December 31st, the utility bill was paid for the year. The amount was $66,000 and you paid in cash.
43. On December 31st, you pay in cash recurring interest on the long-term note acquired prior to the year 2017. HINT: See prior year financial statements.
44. On December 31st, your company earned interest on the average 2019 cash balance which will be paid January 5th, 2020. The average interest rate for the year was 4.0%. Note: Compute the average cash using only the beginning and ending balance.
45. By December 31st, 85 of the prepaid service hours from March 20, 2019 were completed.
46. A count of office supplies indicated that $27,000 of office supplies had been used by December 31st.
47. Since the inception of your company, you have been able to collect 84% of your ending accounts receivable balance from customers that bought your product on account. Based on this information, adjust your allowance for bad debt account. NOTE: Use your 2019 ending accounts receivable balance to make this calculation.
In: Accounting
You are the audit senior of Sparrow Ltd (Sparrow) for the year
ended 30 June 2020. As is
customary in completing your examination, you request that the
chief executive officer (CEO)
of Sparrow, Michal Theobald, furnish you with a management
representation letter. Michael
reads the representations that you are requesting that he make, and
he refuses to furnish the
letter, stating:
You are asking me to tell you all kinds of things that I hired you
to figure out. For
example, you are asking me to say that ‘all known assets of the
company at balance
date were recorded in the books of account. I paid you to carry out
an audit and you
should know whether or not that’s true yourself.
Required:
If the client does not accept your explanation and continues to
refuse to furnish the letter, what
will be the impact on your auditor’s report?
In: Accounting
The comparative
balance sheets for 2021 and 2020 are given below for Surmise
Company. Net income for 2021 was $90 million.
|
SURMISE COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) |
||||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash | $ | 23 | $ | 31 | ||||
| Accounts receivable | 95 | 117 | ||||||
| Less: Allowance for uncollectible accounts | (29 | ) | (4 | ) | ||||
| Prepaid expenses | 24 | 21 | ||||||
| Inventory | 128 | 110 | ||||||
| Long-term investment | 95 | 50 | ||||||
| Land | 110 | 110 | ||||||
| Buildings and equipment | 441 | 295 | ||||||
| Less: Accumulated depreciation | (152 | ) | (118 | ) | ||||
| Patent | 30 | 33 | ||||||
| $ | 765 | $ | 645 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 24 | $ | 52 | ||||
| Accrued liabilities | 2 | 25 | ||||||
| Notes payable | 54 | 0 | ||||||
| Lease liability | 137 | 0 | ||||||
| Bonds payable | 70 | 148 | ||||||
| Shareholders’ Equity | ||||||||
| Common stock | 74 | 50 | ||||||
| Paid-in capital—excess of par | 271 | 205 | ||||||
| Retained earnings | 133 | 165 | ||||||
| $ | 765 | $ | 645 | |||||
Required:
Prepare the statement of cash flows of Surmise Company for the year
ended December 31, 2021. Use the indirect method to present cash
flows from operating activities because you do not have sufficient
information to use the direct method. You will need to make
reasonable assumptions concerning the reasons for changes in some
account balances. A spreadsheet or T-account analysis will be
helpful. (Hint: The right to use a building was acquired
with a seven-year lease agreement. Annual lease payments of $9
million are paid at January 1 of each year starting in 2021.)
(Enter your answers in millions (i.e., 10,000,000 should be
entered as 10). Amounts to be deducted should be indicated with a
minus sign.)
In: Accounting
The comparative balance sheets for 2021 and 2020 are given below
for Surmise Company. Net income for 2021 was $86 million.
| SURMISE COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) |
||||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash | $ | 43 | $ | 49 | ||||
| Accounts receivable | 93 | 113 | ||||||
| Less: Allowance for uncollectible accounts | (28 | ) | (5 | ) | ||||
| Prepaid expenses | 23 | 19 | ||||||
| Inventory | 141 | 125 | ||||||
| Long-term investment | 73 | 30 | ||||||
| Land | 106 | 106 | ||||||
| Buildings and equipment | 423 | 285 | ||||||
| Less: Accumulated depreciation | (146 | ) | (114 | ) | ||||
| Patent | 28 | 29 | ||||||
| $ | 756 | $ | 637 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 22 | $ | 48 | ||||
| Accrued liabilities | 3 | 23 | ||||||
| Notes payable | 50 | 0 | ||||||
| Lease liability | 131 | 0 | ||||||
| Bonds payable | 68 | 142 | ||||||
| Shareholders’ Equity | ||||||||
| Common stock | 72 | 50 | ||||||
| Paid-in capital—excess of par | 267 | 205 | ||||||
| Retained earnings | 143 | 169 | ||||||
| $ | 756 | $ | 637 | |||||
Required:
Prepare the statement of cash flows of Surmise Company for the year
ended December 31, 2021. Use the indirect method to present cash
flows from operating activities because you do not have sufficient
information to use the direct method. You will need to make
reasonable assumptions concerning the reasons for changes in some
account balances. A spreadsheet or T-account analysis will be
helpful. (Hint:The right to use a building was acquired
with a seven-year lease agreement. Annual lease payments of $7
million are paid at January 1 of each year starting in
2021.)(Enter your answers in millions (i.e., 10,000,000
should be entered as 10). Amounts to be deducted should be
indicated with a minus sign.)
In: Accounting
The comparative balance sheets for 2021 and 2020 are given below
for Surmise Company. Net income for 2021 was $80 million.
| SURMISE COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in millions) |
||||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash | $ | 55 | $ | 58 | ||||
| Accounts receivable | 89 | 106 | ||||||
| Less: Allowance for uncollectible accounts | (24 | ) | (4 | ) | ||||
| Prepaid expenses | 19 | 16 | ||||||
| Inventory | 132 | 110 | ||||||
| Long-term investment | 89 | 50 | ||||||
| Land | 98 | 98 | ||||||
| Buildings and equipment | 400 | 270 | ||||||
| Less: Accumulated depreciation | (137 | ) | (108 | ) | ||||
| Patent | 25 | 26 | ||||||
| $ | 746 | $ | 622 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 19 | $ | 42 | ||||
| Accrued liabilities | 4 | 20 | ||||||
| Notes payable | 48 | 0 | ||||||
| Lease liability | 122 | 0 | ||||||
| Bonds payable | 64 | 132 | ||||||
| Shareholders’ Equity | ||||||||
| Common stock | 69 | 50 | ||||||
| Paid-in capital—excess of par | 261 | 205 | ||||||
| Retained earnings | 159 | 173 | ||||||
| $ | 746 | $ | 622 | |||||
Required:
Prepare the statement of cash flows of Surmise Company for the year
ended December 31, 2021. Use the indirect method to present cash
flows from operating activities because you do not have sufficient
information to use the direct method. You will need to make
reasonable assumptions concerning the reasons for changes in some
account balances. A spreadsheet or T-account analysis will be
helpful. (Hint: The right to use a building was acquired
with a seven-year lease agreement. Annual lease payments of $8
million are paid at January 1 of each year starting in 2021.)
(Enter your answers in millions (i.e., 10,000,000 should be
entered as 10). Amounts to be deducted should be indicated with a
minus sign.)
In: Accounting
STRATEGY EXECUTION——“Strategic Risk Management”
1. Assume you are presenting (as a consultant) the concept of Strategic Risk Management to the executive team at a company that is considering implementing it for strategy execution. The pre-reads for the session included Strategic Risk Assessment Frameworks: A Guidebook for Management Teams Mark L. Frigo and Ricard J. Anderson 2017 and Creating and Protecting Value: Understanding and Implementing ERM Anderson and Frigo (COSO 2020), The CEO asks the following question: What are the primary benefits of Strategic Risk Management and Strategic Risk Assessment? In one short paragraph, please describe how you would reply to this question.
2. Situation: Assume you are presenting (as a consultant) the concept of Strategic Risk Management to the executive team at a company that is considering implementing it for strategy execution. One of the pre-reads for the session is Strategic Risk Management Excerpt from Strategic Analysis IMA SMA 2020 Frigo and Krumwiede, the CFO asks the following question: What are the strengths and limitations of Strategic Risk Management? In one short paragraph, please describe how you would reply to this question.
3. Situation: Assume you are presenting (as a consultant) the concept of Strategic Risk Management to the executive team at a company that is considering implementing it for strategy execution. One of the pre-reads for the session is Strategic Risk Management Excerpt from Strategic Analysis IMA SMA 2020 Frigo and Krumwiede, the CFO asks the following question: What role can CFOs play in Strategic Risk Management? In one short paragraph, please describe how you would reply to this question.
4. For one of the following companies (UPS, Microsoft, Coca-Cola, McDonalds, Harley-Davidson, Southwest Airlines, Abbott, Marriott International), applying the DuPont ROI model, please describe in one short paragraph the top strategic risks of the company using the Strategic Risk Management framework described in Strategic Risk Assessment Frameworks: A Guidebook for Management Teams Mark L. Frigo and Ricard J. Anderson 2017 and Creating and Protecting Value: Understanding and Implementing ERM Anderson and Frigo (COSO 2020).
5. For one of the following companies (UPS, Microsoft, Coca-Cola, McDonalds, Harley-Davidson, Southwest Airlines, Abbott, Marriott International), applying the DuPont ROI model, please describe in one short paragraph what Genuine Assets are at risk of the company using the Strategic Risk Management framework described in Strategic Risk Assessment Frameworks: A Guidebook for Management Teams Mark L. Frigo and Ricard J. Anderson 2017 and Creating and Protecting Value: Understanding and Implementing ERM Anderson and Frigo (COSO 2020).
In: Finance
As the CEO of a company, discuss how you can apply the FOUR (4) types of growth strategies.
In: Operations Management