On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired
90% of Marcus Co. (MC), a foreign company for FC 623,200. At the
acquisition date, the carrying value of MC’s net assets equaled
their fair value except for the equipment, which had a carrying
value of FC 800,000 and a fair value of FC 880,000. At the
acquisition date, MC’s equipment had a remaining useful life of 10
years. There was an FC 4,000 impairment of the goodwill which
occurred evenly throughout 20X8.
Selected financial statements for LL and MC are presented
below.
Liv Ltd.
Statement of Financial Position
As of December 31, 20X8
(in $ CDN)
Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040
Current assets:
Inventory 1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080
2,638,080
Total assets 6,761,120
Shareholders’ Equity:
Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:
Notes payable 1,860,000
Current liabilities:
Accounts payable and accrued liabilities
923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120
Liv Ltd.
Statement of Income
For the year ended December 31, 20X8
(in $ CDN)
Sales 16,472,000
Dividend income 180,080
= 16,652,080
Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)
Net income 1,272,080
*includes depreciation
LL declared and paid dividends of $928,000 CDN on December 31, 20X8.
Marcus Co.
Statement of Financial Position
(in FC)
Dec. 31, Jan. 1
20X8 20X8
Assets:
Noncurrent assets:
Equipment, net 720,000 800,000
Current assets:
Inventory 484,000 364,000
Accounts receivable 408,000 280,000
Cash 360,000 164,000
1,252,000 808,000
Total assets 1,972,000 1,608,000
Shareholders’ equity:
Share capital 400,000. 400,000
Retained earnings 390,000 146,000
= 790,000 = 546,000
Liabilities:
Noncurrent liabilities:
Notes payable 640,000 640,000
Current liabilities:
Accounts payable 542,000 422,000
Total liabilities 1,182,000. 1,062,000
Total shareholders’ equity and liabilities 1,972,000 1,608,000
Marcus Co.
Statement of Income
For the year ended December 31, 20X8
(in FC)
Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)
408,000
*includes depreciation
Marcus Co.
Statement of Changes in Equity – Retained Earnings Section
For the year ended December 31, 20X8
(in FC)
Retained earnings, January 1, 20X8 146,000
Net income 408,000
Dividends declared (164,000)
Retained earnings, December 31, 20X8 = 390,000
MC declared and paid FC164,000 in dividends on December 31,
20X8.
Selected Exchange Rates
January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN
Date when ending inventory was purchased FC1 = $2.38 CDN
Average rate for 20X8 FC1 = $2.32 CDN
Required:
In: Accounting
On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired
90% of Marcus Co. (MC), a foreign company for FC 623,200. At the
acquisition date, the carrying value of MC’s net assets equaled
their fair value except for the equipment, which had a carrying
value of FC 800,000 and a fair value of FC 880,000. At the
acquisition date, MC’s equipment had a remaining useful life of 10
years. There was an FC 4,000 impairment of the goodwill which
occurred evenly throughout 20X8.
Selected financial statements for LL and MC are presented
below.
Liv Ltd.
Statement of Financial Position
As of December 31, 20X8
(in $ CDN)
Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040
Current assets:
Inventory 1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080
2,638,080
Total assets 6,761,120
Shareholders’ Equity:
Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:
Notes payable 1,860,000
Current liabilities:
Accounts payable and accrued liabilities
923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120
Liv Ltd.
Statement of Income
For the year ended December 31, 20X8
(in $ CDN)
Sales 16,472,000
Dividend income 180,080
= 16,652,080
Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)
Net income 1,272,080
*includes depreciation
LL declared and paid dividends of $928,000 CDN on December 31, 20X8.
Marcus Co.
Statement of Financial Position
(in FC)
Dec. 31, Jan. 1
20X8 20X8
Assets:
Noncurrent assets:
Equipment, net 720,000 800,000
Current assets:
Inventory 484,000 364,000
Accounts receivable 408,000 280,000
Cash 360,000 164,000
1,252,000 808,000
Total assets 1,972,000 1,608,000
Shareholders’ equity:
Share capital 400,000. 400,000
Retained earnings 390,000 146,000
= 790,000 = 546,000
Liabilities:
Noncurrent liabilities:
Notes payable 640,000 640,000
Current liabilities:
Accounts payable 542,000 422,000
Total liabilities 1,182,000. 1,062,000
Total shareholders’ equity and liabilities 1,972,000 1,608,000
Marcus Co.
Statement of Income
For the year ended December 31, 20X8
(in FC)
Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)
408,000
*includes depreciation
Marcus Co.
Statement of Changes in Equity – Retained Earnings Section
For the year ended December 31, 20X8
(in FC)
Retained earnings, January 1, 20X8 146,000
Net income 408,000
Dividends declared (164,000)
Retained earnings, December 31, 20X8 = 390,000
MC declared and paid FC164,000 in dividends on December 31,
20X8.
Selected Exchange Rates
January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN
Date when ending inventory was purchased FC1 = $2.38 CDN
Average rate for 20X8 FC1 = $2.32 CDN
Required:
In: Accounting
On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired
90% of Marcus Co. (MC), a foreign company for FC 623,200. At the
acquisition date, the carrying value of MC’s net assets equaled
their fair value except for the equipment, which had a carrying
value of FC 800,000 and a fair value of FC 880,000. At the
acquisition date, MC’s equipment had a remaining useful life of 10
years. There was an FC 4,000 impairment of the goodwill which
occurred evenly throughout 20X8.
Selected financial statements for LL and MC are presented
below.
Liv Ltd.
Statement of Financial Position
As of December 31, 20X8
(in $ CDN)
Assets:
Noncurrent assets:
Plant and equipment, net 2,752,000
Investment in Marcus Co. 1,371,040
4,123,040
Current assets:
Inventory 1,376,000
Accounts receivable 700,000
Cash and cash equivalents 562,080
2,638,080
Total assets 6,761,120
Shareholders’ Equity:
Share capital 1,376,000
Retained earnings 2,601,520
3,977,520
Liabilities:
Noncurrent liabilities:
Notes payable 1,860,000
Current liabilities:
Accounts payable and accrued liabilities
923,600
Total liabilities 2,783,600
Total shareholders’ equity and liabilities 6,761,120
Liv Ltd.
Statement of Income
For the year ended December 31, 20X8
(in $ CDN)
Sales 16,472,000
Dividend income 180,080
= 16,652,080
Cost of sales 8,256,000
Other expenses* 7,124,000 (15,380,000)
Net income 1,272,080
*includes depreciation
LL declared and paid dividends of $928,000 CDN on December 31, 20X8.
Marcus Co.
Statement of Financial Position
(in FC)
Dec. 31, Jan. 1
20X8 20X8
Assets:
Noncurrent assets:
Equipment, net 720,000 800,000
Current assets:
Inventory 484,000 364,000
Accounts receivable 408,000 280,000
Cash 360,000 164,000
1,252,000 808,000
Total assets 1,972,000 1,608,000
Shareholders’ equity:
Share capital 400,000. 400,000
Retained earnings 390,000 146,000
= 790,000 = 546,000
Liabilities:
Noncurrent liabilities:
Notes payable 640,000 640,000
Current liabilities:
Accounts payable 542,000 422,000
Total liabilities 1,182,000. 1,062,000
Total shareholders’ equity and liabilities 1,972,000 1,608,000
Marcus Co.
Statement of Income
For the year ended December 31, 20X8
(in FC)
Sales 8,400,000
Cost of sales 5,304,000
Other expenses* 2,688,000 (7,992,000)
408,000
*includes depreciation
Marcus Co.
Statement of Changes in Equity – Retained Earnings Section
For the year ended December 31, 20X8
(in FC)
Retained earnings, January 1, 20X8 146,000
Net income 408,000
Dividends declared (164,000)
Retained earnings, December 31, 20X8 = 390,000
MC declared and paid FC164,000 in dividends on December 31,
20X8.
Selected Exchange Rates
January 1, 20X8 FC1 = $2.20 CDN
December 31, 20X8 FC1 = $2.44 CDN
Date when ending inventory was purchased FC1 = $2.38 CDN
Average rate for 20X8 FC1 = $2.32 CDN
Required:
In: Accounting
Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit:
| Carrying Amounts | Fair Values | |||||
| Sand Dollar | ||||||
| Tangible assets | $ | 267,000 | $ | 285,900 | ||
| Trademark | 251,000 | 226,100 | ||||
| Customer list | 136,500 | 155,400 | ||||
| Goodwill | 183,050 | ? | ||||
| Liabilities | (39,750 | ) | (39,750 | ) | ||
| Salty Dog | ||||||
| Tangible assets | $ | 265,000 | $ | 265,000 | ||
| Unpatented technology | 236,000 | 174,500 | ||||
| Licenses | 134,500 | 148,400 | ||||
| Goodwill | 193,700 | ? | ||||
| Baytowne | ||||||
| Tangible assets | $ | 203,250 | $ | 220,650 | ||
| Unpatented technology | 0 | 170,250 | ||||
| Copyrights | 60,750 | 91,850 | ||||
| Goodwill | 98,000 | ? | ||||
The fair values for each reporting unit (including goodwill) are $781,400 for Sand Dollar, $789,900 for Salty Dog, and $712,750 for Baytowne. To date, Destin has reported no goodwill impairments.
How much goodwill impairment should Destin report this year?
| Sand Dollar | _________? | ________? |
| Salty Dog | _________? | ________? |
| Baytowne | _________? | ________? |
In: Accounting
Alcorn Service Company was formed on January 1, 2018.
Events Affecting the 2018 Accounting Period
Acquired $72,000 cash from the issue of common stock.
Purchased $3,600 of supplies on account.
Purchased land that cost $42,000 cash.
Paid $3,600 cash to settle accounts payable created in Event 2.
Recognized revenue on account of $66,000.
Paid $33,000 cash for other operating expenses.
Collected $50,000 cash from accounts receivable.
Information for 2018 Adjusting Entries
Recognized accrued salaries of $4,400 on December 31, 2018.
Had $1,400 of supplies on hand at the end of the accounting period.
Events Affecting the 2019 Accounting Period
Acquired $32,000 cash from the issue of common stock.
Paid $4,400 cash to settle the salaries payable obligation.
Paid $7,200 cash in advance to lease office space.
Sold the land that cost $42,000 for $42,000 cash.
Received $8,400 cash in advance for services to be performed in the future.
Purchased $2,200 of supplies on account during the year.
Provided services on account of $44,000.
Collected $45,000 cash from accounts receivable.
Paid a cash dividend of $4,000 to the stockholders.
Paid other operating expenses of $31,500.
Information for 2019 Adjusting Entries
The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.
The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.
Had $1,500 of supplies remaining on hand at the end of the period.
Recognized accrued salaries of $5,100 at the end of the accounting period.
Recognized $1,600 of accrued interest revenue.
b-1. Prepare an income statement for 2018 and 2019.
b-2. Prepare the statement of changes in stockholders’ equity for 2018 and 2019.
b-3. Prepare the balance sheet for 2018 and 2019.
b-4. Prepare the statement of cash flows for 2018 and 2019, using the vertical statements model.
In: Accounting
Purple Company acquired 80 percent of Silver Company's outstanding common stock for $592,000 on January 1, 20X7. On the date of acquisition, the book value and fair value of Silver Company's net assets were equal. Purple Company uses the equity method to account for investments. Trial balance data for Purple and Silver as of January 1, 20X7 are as follows:
| Purple Company | Silver Company | |
|
Assets: Cash |
218,000 |
50,000 |
| Receivables | 130,000 | 74,000 |
| Inventory | 250,000 | 174,000 |
| Investment in Silver Company | 592,000 | |
| Land | 560,000 | 250,000 |
| Depreciable Assets | 1,750,000 | 500,000 |
| Accumulated Depreciation | -1,000,000 | -48,000 |
| Total Assets | 2,500,000 | 1 ,000,000 |
| Liabilities & Stockholders' Equity | ||
| Accounts Payable | 190,000 | 60,000 |
| Bonds Payable | 500,000 | 200,000 |
| Common Stock | 1,250,000 | 500,000 |
| Retained Earnings | 560,000 | 240,000 |
| Total Liabilities & Equity | 2,500,000 | 1,000,000 |
Immediately after acquisition, the consolidation worksheet was completed with all of the appropriate elimination entries (including pre-acquisition accumulated depreciation). The last column of the worksheet showing the consolidated totals has been left blank. Fill in the consolidated totals and identify the account marked with a "?" that will be included on the consolidated balance sheet.
In: Accounting
2. Loki Corporation acquired 80 percent ownership of Goose Company on January 1, 20X6, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Goose Company. Consolidated balance sheets at January 1, 20X8, and December 31, 20X8, are as follows:
|
Item |
Jan 1, 20X8 |
Dec 31, 20X8 |
||||||||||
|
Cash |
$ |
50,000 |
$ |
80,000 |
||||||||
|
Accounts Receivable |
75,000 |
90,000 |
||||||||||
|
Inventory |
85,000 |
100,000 |
||||||||||
|
Land |
60,000 |
80,000 |
||||||||||
|
Buildings and Equipment |
300,000 |
350,000 |
||||||||||
|
Less: Accumulated Depreciation |
(90,000 |
) |
(120,000 |
) |
||||||||
|
Patents |
12,000 |
10,000 |
||||||||||
|
Total Assets |
$ |
492,000 |
$ |
590,000 |
||||||||
|
Accounts Payable |
$ |
40,000 |
$ |
58,000 |
||||||||
|
Wages Payable |
20,000 |
16,000 |
||||||||||
|
Notes Payable |
150,000 |
175,000 |
||||||||||
|
Common Stock ($5 par value) |
100,000 |
100,000 |
||||||||||
|
Retained Earnings |
162,000 |
218,000 |
||||||||||
|
Noncontrolling Interest |
20,000 |
23,000 |
||||||||||
|
Total Liabilities and Equities |
$ |
492,000 |
$ |
590,000 |
||||||||
The consolidated income statement for 20X8 contained the following amounts:
|
Sales |
$ |
400,000 |
|||||
|
Cost of Goods Sold |
$ |
172,000 |
|||||
|
Wage Expense |
45,000 |
||||||
|
Depreciation Expense |
30,000 |
||||||
|
Interest Expense |
12,000 |
||||||
|
Amortization Expense |
2,000 |
||||||
|
Other Expenses |
52,000 |
(313,000 |
) |
||||
|
Consolidated Net Income |
$ |
87,000 |
|||||
|
Income to Noncontrolling Interest |
(6,000 |
) |
|||||
|
Income to Controlling Interest |
$ |
81,000 |
Loki and Goose paid dividends of $25,000 and $15,000, respectively, in 20X8.
Required:
1) Prepare a worksheet to develop a consolidated statement of cash flows for 20X8 using the indirect method of computing cash flows from operations. (8 points)
2) Prepare a consolidated statement of cash flows for 20X8. (12 points)
In: Accounting
Atlantic Imports, a U.S. company, acquired a wholly-owned subsidiary, located in Portugal, on January 1, 2018 for €200,000,000. The subsidiary’s functional currency is the euro. The balance sheet of the subsidiary at the date of acquisition was as follows: Assets Current assets € 30,000,000 Noncurrent assets, net 150,000,000 Total assets €180,000,000 Liabilities and Stockholders' Equity Liabilities € 60,000,000 Capital stock 80,000,000 Retained earnings 40,000,000 Total liabilities and stockholders' equity €180,000,000 Appropriate revaluations of the subsidiary’s assets at the date of acquisition are as follows: Inventories are undervalued by €500,000. The subsidiary uses FIFO. Noncurrent assets are undervalued by €10,000,000. The noncurrent assets have a 10-year remaining life, straight-line. Identifiable indefinite life intangible assets, previously unreported, have a fair value of €5,000,000. During 2018 there was no impairment of either identifiable intangible assets or goodwill. The exchange rate on January 1, 2018 was $1.10/€. The average rate for 2018 was $1.12/€, and the rate at the end of 2018 was $1.15/€. The excess of acquisition cost over book value for this acquisition, in U.S. dollars, is: The entries required to consolidate the balance sheets of Atlantic Imports and its subsidiary at the date of acquisition include recognition of goodwill of: The entries required to consolidate the balance sheets of Atlantic Imports and its subsidiary at the date of acquisition include an increase in the subsidiary's noncurrent assets in the amount of: At the end of 2018, consolidation eliminating entry (R) includes a debit to current assets in the amount of: At the end of 2018, consolidation eliminating entry (O) includes a debit to depreciation expense in the amount of: At the end of 2018, consolidation eliminating entries (R) and (O) together will have what effect on consolidated other comprehensive income (increase or decrease)?
In: Accounting
On January 1, 2016, Aspen Company acquired 80 percent of Birch Company's voting stock for $332,000. Birch reported a $370,000 book value and the fair value of the noncontrolling interest was $83,000 on that date. Then, on January 1, 2017, Birch acquired 80 percent of Cedar Company for $184,000 when Cedar had a $197,000 book value and the 20 percent noncontrolling interest was valued at $46,000. In each acquisition, the subsidiary's excess acquisition-date fair over book value was assigned to a trade name with a 30-year remaining life.
These companies report the following financial information. Investment income figures are not included.
| 2016 | 2017 | 2018 | ||||
| Sales: | ||||||
| Aspen Company | $ | 585,000 | $ | 585,000 | $ | 885,000 |
| Birch Company | 246,250 | 315,500 | 454,500 | |||
| Cedar Company | Not available | 221,200 | 238,800 | |||
| Expenses: | ||||||
| Aspen Company | $ | 530,000 | $ | 420,000 | $ | 642,500 |
| Birch Company | 189,000 | 247,000 | 375,000 | |||
| Cedar Company | Not available | 202,000 | 204,000 | |||
| Dividends declared: | ||||||
| Aspen Company | $ | 15,000 | $ | 30,000 | $ | 40,000 |
| Birch Company | 8,000 | 15,000 | 15,000 | |||
| Cedar Company | Not available | 4,000 | 12,000 | |||
Assume that each of the following questions is independent:
If all companies use the equity method for internal reporting purposes, what is the December 31, 2017, balance in Aspen's Investment in Birch Company account?
What is the consolidated net income for this business combination for 2018?
What is the net income attributable to the noncontrolling interest in 2018?
Assume that Birch made intra-entity inventory transfers to Aspen that have resulted in the following intra-entity gross profits in inventory at the end of each year:
| Date | Amount |
| 12/31/16 | $15,000 |
| 12/31/17 | 19,000 |
| 12/31/18 | 34,400 |
What is the accrual-based net income of Birch in 2017 and 2018, respectively?
a. If all companies use the equity method for internal reporting
purposes, what is the December 31, 2017, balance in Aspen's
Investment in Birch Company account?
b. What is the consolidated net income for this business
combination for 2018?
c. What is the net income attributable to the noncontrolling
interest in 2018?
Show less
|
|||||||||||||
Assume that Birch made intra-entity inventory transfers to Aspen
that have resulted in the following intra-entity gross profits in
inventory at the end of each year:
| Date | Amount |
| 12/31/16 | $15,000 |
| 12/31/17 | 19,000 |
| 12/31/18 | 34,400 |
What is the accrual-based net income of Birch in 2017 and 2018, respectively?
Show less
|
In: Operations Management
Mr Ahmed Kumar runs a snack distribution business located in the Light Industrial area in Lusaka. The following list of balances was extracted from his ledger as at 31 March, 2020; the end of his most recent financial year.
K
Capital 83,887
Sales 259,870
Trade accounts payable 19,840
Returns outwards 13,407
Allowance for doubtful debts 512
Discounts allowed 2,306
Discounts received 1,750
Purchases 135,680
Returns inwards 5,624
Carriage outwards 4,562
Drawings 18,440
Carriage inwards 11,830
Rent, rates and insurance 25,973
Heating and lighting 11,010
Postage, stationery and telephone 2,410
Advertising 5,980
Salaries and wages 38,521
Bad debts 2,008
Cash in hand 534
Cash at bank 4,440
Inventory as at 1st April 2019 15,654
Trade accounts receivable 24,500
Fixtures and fittings - at cost 120,740
Prov. for depreciation on fixtures and fittings – 31/03/2020 63,020
Depreciation 12,074
The following additional information as at 31st March, 2020 is available:
(a) Inventory at the close of business was valued at K17,750
(b) Insurances have been prepaid by K1,120
(c) Heating and lighting is accrued by K1,360
(d) Rates have been prepaid by K5,435
(e) The allowance for doubtful debts is to be adjusted so that it is 3% of trade accounts receivable.
Required:
For the year 2020, prepare Mr Kumar’s:
General Journal recording the adjustments highlighted above.
Trading, Profit or Loss statement for the year ended 31st March, 2020.
Statement of financial position as at 31st March, 2020.
In: Accounting