Practice problems - Final Exam ACCT
Woolsey Corporation, a U.S. company, expects to sell goods to a British customer at a price of 250,000 pounds, with delivery and payment to be made on October 24, 2024. On July 24, 2024, Woolsey purchased a three-month put option for 250,000 British pounds and designated this option as a cash flow hedge of a forecasted foreign currency transaction expected to be completed in late October 2024. The following exchange rates apply: Option strike price $ 2.17 Option cost $ 4,000 July 24 spot rate $ 2.17 October 24 spot rate $ 2.13 October 24 option premium $ 0.04 What amount will Woolsey record for the forecasted sale on July 24?
0.
The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet: Cash $ 25,000 // Liabilities $ 175,000 Noncash assets 500,000 //Allen, capital 90,000 ----------------- // Bevell, capital 100,000 -----------------// Carter, capital 160,000 Total $ 525,000 //Total $ 525,000 Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000. Assuming that the noncash assets were sold for $150,000, which partner(s) would have been required to contribute assets to the partnership to cover a deficit in his or her capital account, prior to considering the liquidation expenses incurred?
Allen and Carter
A local partnership has assets of cash of $30,000 and land recorded at $700,000. All liabilities have been paid and the partners are all personally insolvent. The partners' capital accounts are as follows: Roberts, $500,000, Ferry, $300,000 and Mones, $30,000. The partners share profits and losses 5:3:2. If the land is sold for $450,000, how much cash will Mones receive in the final settlement?
$0
A local partnership was considering the possibility of liquidation. Capital account balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Ding, capital $ 60,000 Laurel, capital 67,000 Ezzard, capital 17,000 Tillman, capital 96,000 At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000 and there are no liquidation expenses, what is the minimum amount that Ezzard would receive from the liquidation?
$0
Alpha, Incorporated, a U.S. company, had a receivable from a customer that was denominated in Mexican pesos. On December 31, 2023, this receivable for 75,000 pesos was correctly included in Alpha's balance sheet at $8,000. The receivable was collected on March 2, 2024, when the U.S. equivalent was $6,900. How much foreign exchange gain or loss will Alpha record on the income statement for the year ended December 31, 2024?
$1,100 loss $6,900 − $8,000 = ($1,100) Loss
Perez Company, a Mexican subsidiary of a U.S. company, sold equipment costing 200,000 pesos with accumulated depreciation of 75,000 pesos for 140,000 pesos on March 1, 2024. The equipment was purchased on January 1, 2023. Relevant exchange rates for the peso are as follows: January 1, 2023 $ 0.110 March 1, 2024 0.106 December 31, 2024 0.102 Average, 2024 0.105 The financial statements for Perez are translated by its U.S. parent. What amount of gain or loss would be reported in its translated income statement?
$1,590 [Sales Price 140,000p × $0.106 = $14,840] − [Book Value at Historical Cost 200,000p − Accumulated Depreciation 75,000p = 125,000p × $0.106 = $13,250] = $1,590 Gain
On October 1, 2024, Eagle Company forecasts the purchase of inventory from a British supplier on February 1, 2025, at a price of 100,000 British pounds. On October 1, 2024, Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of $2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2024, the option has a fair value of $1,600. The following spot exchange rates apply: Date // Spot Rate October 1, 2024 $ 2.00 December 31, 2024 $ 1.97 February 1, 2025 $ 2.01 What is the balance in the Foreign Currency Option account on December 31, 2024?
$1,600
On March 1, 2024, Mattie Company received an order to sell a machine to a customer in England at a price of 200,000 British pounds. The machine was shipped and payment was received on March 1, 2025. On March 1, 2024, Mattie purchased a put option giving it the right to sell 200,000 British pounds on March 1, 2025, at a price of $380,000. Mattie properly designates the option as a fair hedge of the pound firm commitment. The option cost $2,000 and had a fair value of $2,200 on December 31, 2024. The following spot exchange rates apply: Date // Spot Rate March 1, 2024 $ 1.90 December 31, 2024 $ 1.89 March 1, 2025 $ 1.84 What was the net impact on Mattie's 2024 income as a result of this fair value hedge of a firm commitment?
$1,800 decrease $1.89 − $1.90 = ($0.01) × £200,000 = ($2,000) Loss on Firm Commitment $2,200 − $2,000 = $200 Option Value Increase ($2,000) Loss on Firm Commitment + $200 Option Value Increase = ($1,800) Reduction in 2024 Net Income
Oscar, Limited is a British subsidiary of a U.S. company. Oscar's functional currency is the pound sterling (£). The following exchange rates were in effect during 2024: January 1 £1 = $ 1.58 June 30 £1 = $ 1.63 December 31 £1 = $ 1.60 Weighted average rate for the year £1 = $ 1.56 Oscar reported sales of £1,200,000 during 2024. What amount (rounded) would have been included for this subsidiary in calculating consolidated sales?
$1,872,000 Current rate method: £1,200,000 × $1.56 (Average Rate) = $1,872,000
Parker Corporation, a U.S. company, had the following foreign currency transactions during 2024: 1. Purchased merchandise from a foreign supplier on July 5, 2024, for the U.S. dollar equivalent of $80,000 and paid the invoice on August 3, 2024, at the U.S. dollar equivalent of $82,000. 2. On October 1, 2024, borrowed the U.S. dollar equivalent of $872,000 evidenced by a non-interest-bearing note payable in euros on October 1, 2025. The U.S. dollar equivalent of the note amount was $860,000 on December 31, 2024, and $881,000 on October 1, 2025. What amount should be included as a foreign exchange gain or loss from the two transactions for 2024?
$10,000 gain [$80,000 − $82,000 = ($2,000) Loss] + [$872,000 − $860,000 = $12,000 Gain] = $10,000 Gain
A U.S. company's foreign subsidiary had the following amounts in stickles (§) in 2024: Cost of goods sold § 12,000,000 Ending inventory 600,000 Beginning inventory 240,000 The average exchange rate during 2024 was §1 = $0.96. The beginning inventory was acquired when the exchange rate was §1 = $1.20. The ending inventory was acquired when the exchange rate was §1 = $0.90. The exchange rate at December 31, 2024, was §1 = $0.84. Assuming that the foreign country had a highly inflationary economy, at what amount should the foreign subsidiary's cost of goods sold have been reflected in the 2024 U.S. dollar income statement?
$11,613,600 Beginning Inventory [(§240,000 × $1.20) = $288,000] − Purchases [Beginning Inventory §240,000 − Cost of Goods Sold §12,000,000 − Ending Inventory §600,000 = §12,360,000 × $0.96 = $11,865,600] − Ending Inventory [(§600,000 × $0.90) = $540,000] = Cost of Goods Sold $11,613,600
A partnership began its first year of operations with the following capital balances: Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year. What was Young's total share of net loss for the first year?
$11,700 loss Net loss ($26,000) − Interest ($390,000 total beginning capital × 10%) $39,000 − Salaries $39,000 = ($104,000) × 50% = Young's portion ($52,000) + Young's Interest $14,300 + Young's Salary $26,000 = Young's share of loss ($11,700)
A partnership began its first year of operations with the following capital balances: Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year. What was the balance in Young's Capital account at the end of the first year?
$118,300 Beginning $143,000 + Interest $14,300 + Salary $26,000 + Remainder (50%) ($52,000) − Withdrawals $13,000 = Ending Balance $118,300
A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Phillips receive in the final settlement?
$12,000 Phillips = $30,000 − Loss on Equipment ($60,000 × 30%) $18,000 = $12,000
Winston Corporation, a U.S. company, had the following foreign currency transactions during 2024: 1. Purchased merchandise from a foreign supplier on July 16, 2024, for the U.S. dollar equivalent of $47,000 and paid the invoice on August 3, 2024, at the U.S. dollar equivalent of $54,000. 2. On October 15, 2024, borrowed the U.S. dollar equivalent of $315,000 evidenced by a non-interest-bearing note payable in euros on October 15, 2025. The U.S. dollar equivalent of the note amount was $295,000 on December 31, 2024, and $299,000 on October 15, 2025. What amount should be included as a foreign exchange gain or loss from the two transactions for 2024?
$13,000 gain [$47,000 − $54,000 = ($7,000) Loss] + [$315,000 − $295,000 = $20,000 Gain] = $13,000 Gain
A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Jim's capital balance after this new investment?
$142,500 Jim $150,000 + Pam $125,000 + Cash from Cece $75,000 = $350,000 × 25% = $87,500 $87,500 Cece capital balance − $75,000 Cash from Cece = $12,500 bonus $12,500 × 60% = $7,500; $150,000 − $7,500 = $142,500
Esposito is an Italian subsidiary of a U.S. company. Esposito's ending inventory is valued at the average cost for the last quarter of the year. The following account balances are available for Esposito for 2024: Beginning inventory € 20,000 Purchases € 400,000 Ending inventory € 15,000 Relevant exchange rates follow: 4th quarter average, 2023 $ 0.93 = € 1 December 31, 2023 0.94 = € 1 Average for 2024 0.96 = € 1 4th quarter average, 2024 0.99 = € 1 December 31, 2024 1.01 = € 1 Compute ending inventory for 2024 under the current rate method.
$15,150 €15,000 × $1.01 = $15,150
A local partnership was in the process of liquidating and reported the following Capital account balances: Justice, capital (40% share of all profits and losses )$ 23,000 Zobart, capital (35%) 22,000 Douglass, capital (25%) (14,000) Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then in the cash account. How much of this money should Zobart receive?
$15,467 Douglass's Deficit ($14,000) × (0.35 ÷ 0.75) = ($6,533) + Zobart's Capital account balance $22,000 = $15,467 Distribution to Zobart
On May 1, 2024, Mosby Company received an order to sell a machine to a customer in Canada at a price of 2,000,000 Mexican pesos. The machine was shipped and payment was received on March 1, 2025. On May 1, 2024, Mosby purchased a put option giving it the right to sell 2,000,000 pesos on March 1, 2025, at a price of $190,000. Mosby properly designates the option as a fair value hedge of the peso firm commitment. The option cost $3,000 and had a fair value of $3,200 on December 31, 2024. The following spot exchange rates apply: Date // Spot Rate May 1, 2024 $ 0.095 December 31, 2024 $ 0.094 March 1, 2025 $ 0.089 What was the impact on Mosby's 2025 net income as a result of this firm commitment?
$188,800 increase [$190,000 Sales Revenue] − [$3,000 Cost of Option] + [$1,800 Adjustment from 2024 Net Income] = $188,800 Increase to 2025 Net Income
A local partnership was considering the possibility of liquidation. Capital account balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Ding, capital $ 60,000 Laurel, capital 67,000 Ezzard, capital 17,000 Tillman, capital 96,000 At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000 and there are no liquidation expenses, what is the amount that Ding would receive from the liquidation?
$2,500
Primo Incorporated, a U.S. company, ordered parts costing 100,000 rupees from a foreign supplier on July 7 when the spot rate was $0.025 per rupee. A one-month forward contract was signed on that date to purchase 100,000 rupees at a rate of $0.027. The forward contract is properly designated as a fair value hedge of the 100,000 rupee firm commitment. On August 7, when the parts are received, the spot rate is $0.028. At what amount should the payable be carried on Primo's books?
$2,800 $0.028 × ₹100,000 = $2,800
Parker Corporation, a U.S. company, had the following foreign currency transactions during 2024: 1. Purchased merchandise from a foreign supplier on July 5, 2024, for the U.S. dollar equivalent of $80,000 and paid the invoice on August 3, 2024, at the U.S. dollar equivalent of $82,000. 2. On October 1, 2024, borrowed the U.S. dollar equivalent of $872,000 evidenced by a non-interest-bearing note payable in euros on October 1, 2025. The U.S. dollar equivalent of the note amount was $860,000 on December 31, 2024, and $881,000 on October 1, 2025. What amount should be included as a foreign exchange gain or loss from the two transactions for 2025?
$21,000 loss $860,000 − $881,000 = ($21,000) Loss
A partnership began its first year of operations with the following capital balances: Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year. What was Thurman's total share of net loss for the first year?
$3,900 loss Net loss ($26,000) − Interest ($390,000 total beginning capital × 10%) $39,000 − Salaries $39,000 = ($104,000) × 30% = Thurman's portion ($31,200) + Thurman's Interest $14,300 + Thurman's Salary $13,000 = Thurman's share of loss ($3,900)
Goodman, Pinkman, and White formed a partnership on January 1, 2023, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: 1. interest of an amount equal to 10% of the partner's beginning capital balance for the year; 2. annual compensation of $15,000 to Pinkman; and 3. the remainder of the income or loss to be split among the partners in the following percentages: a. 20% for Goodman; b. 40% for Pinkman; and c. 40% for White. Net income was $200,000 in 2023 and $240,000 in 2024. Each partner withdrew $1,500 for personal use every month during 2023 and 2024. What was Pinkman's capital balance at the end of 2024?
$324,810 2024 Beginning Pinkman capital balance $241,500 + Interest $24,150 + Salary $15,000 + 40% of Remaining 2024 net income (calculated below) $62,160 − Withdrawals $18,000 = $324,810. Remaining 2024 net income = $240,000 − $69,600 (10% of $696,000) − $15,000 (Pinkman Salary) = $155,400 × 40% = $62,160.
The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2024, were as follows: Apple, capital $ 25,000 Bere, capital 75,000 Carroll, capital 50,000 Total partners' capital $ 150,000 The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is
$37,500. $150,000 = 80% of the partnership value after Dorr is admitted. $150,000 ÷ 80% = $187,500 total value of the partnership after Dorr is admitted. $187,500 total value − $150,000 existing value = $37,500 investment
Quadros Incorporated, a Portuguese firm was acquired by a U.S. company on January 1, 2023. Selected account balances are available for the year ended December 31, 2024, and are stated in Euro, the local currency. Sales € 400,000 Inventory (bought on February 1, 2024) 20,000 Equipment (bought on January 1, 2023)90,000 Dividends (paid on September 1, 2024)20,000 Accumulated depreciation−Equipment 12/31/2445,000 Depreciation expense−Equipment, 20249,000 Relevant exchange rates for 1 Euro are given below: January 1, 2023 $ 0.91 January 1, 2024 0.93 February 1, 2024 0.94 September 1, 2024 0.97 December 31, 2024 1.01 4th quarter average, 2023 0.90 4th quarter average, 2024 0.98 Average, 2024 0.95 Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for sales for 2024.
$380,000 €400,000 × $0.95 = $380,000
On December 1, 2024, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the receivable is due on February 1, 2025. Keenan purchased a foreign currency put option with a strike price of $0.97 (U.S.) on December 1, 2024. This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow: Date // Spot Rate // Option Premium December 1, 2024 $ 0.97 $ 0.05 December 31, 2024 $ 0.95 $ 0.04 February 1, 2025 $ 0.94 $ 0.03 Compute the fair value of the foreign currency option at February 1, 2025.
$4,500 $0.03 × Canadian Dollars 150,000 = $4,500
Quadros Incorporated, a Portuguese firm was acquired by a U.S. company on January 1, 2023. Selected account balances are available for the year ended December 31, 2024, and are stated in Euro, the local currency. Sales € 400,000 Inventory (bought on February 1, 2024) 20,000 Equipment (bought on January 1, 2023)90,000 Dividends (paid on September 1, 2024)20,000 Accumulated depreciation−Equipment 12/31/2445,000 Depreciation expense−Equipment, 20249,000 Relevant exchange rates for 1 Euro are given below: January 1, 2023 $ 0.91 January 1, 2024 0.93 February 1, 2024 0.94 September 1, 2024 0.97 December 31, 2024 1.01 4th quarter average, 2023 0.90 4th quarter average, 2024 0.98 Average, 2024 0.95 Assume the functional currency is the U.S. Dollar; compute the U.S. balance sheet amount for accumulated depreciation for 2024.
$40,950 €45,000 × $0.91 = $40,950
A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Gregory receive in the final settlement?
$42,000 Gregory = $60,000 − Loss on Equipment ($60,000 × 30%) $18,000 = $42,000
The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet: Cash $ 25,000 // Liabilities $ 175,000 Noncash assets 500,000 //Allen, capital 90,000 ----------------- // Bevell, capital 100,000 -----------------// Carter, capital 160,000 Total $ 525,000 //Total $ 525,000 Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000. If the noncash assets were sold for $275,000, what amount of the loss would have been allocated to Bevell with respect to the noncash assets?
$45,000 Non-Cash Assets BV $500,000 − Cash Received $275,000 = Loss on Non-Cash Assets ($225,000) × 20% = Loss to Bevell ($45,000)
A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Michael receive in the final settlement?
$56,000 Michael = $80,000 − Loss on Equipment ($60,000 × 40%) $24,000 = $56,000
On April 1, 2023, Shannon Company, a U.S. company, borrowed 100,000 euros from a foreign bank by signing an interest-bearing note due April 1, 2024. The dollar value of the loan was as follows: Date // Amount April 1, 2023 $ 97,000 December 31, 2023 103,000 April 1, 2024 105,000 How much foreign exchange gain or loss should be included in Shannon's 2023 income statement?
$6,000 loss $97,000 − $103,000 = ($6,000) Loss
When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally, and no revaluation will take place. The journal entry to record the effect on John's capital due to Danny's withdrawal would include
$6,667 debit to John, Capital. $80,000 − $60,000 = $20,000 ÷ 3 = $6,667
The Keller, Long, and Mason partnership had the following balance sheet just before entering liquidation: Keller, Long, and Mason share profits and losses in a ratio of 2:4:4. Assume that noncash assets were sold for $60,000 and liquidation expenses in the amount of $18,500 were incurred. If Long was personally insolvent and could not contribute any assets to the partnership, and Keller and Mason were both solvent, what amount of cash would Keller receive from the distribution of partnership assets?
$60,500
On December 1, 2024, Keenan Company, a U.S. firm, sold merchandise to Velez Company of Canada for 150,000 Canadian dollars (CAD). Collection of the receivable is due on February 1, 2025. Keenan purchased a foreign currency put option with a strike price of $0.97 (U.S.) on December 1, 2024. This foreign currency option is designated as a cash flow hedge. Relevant exchange rates follow: Date // Spot Rate // Option Premium December 1, 2024 $ 0.97 $ 0.05 December 31, 2024 $ 0.95 $ 0.04 February 1, 2025 $ 0.94 $ 0.03 Compute the fair value of the foreign currency option at December 1, 2024.
$7,500 $0.05 × Canadian Dollars 150,000 = $7,500
A partnership began its first year of operations with the following capital balances: Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year. What was the balance in Eaton's Capital account at the end of the second year?
$71,760 Beginning $80,600 + Interest $8,060 + Salary $0 + Remainder (20%) ($3,900) − Withdrawals $13,000 = Ending Balance $71,760
Quadros Incorporated, a Portuguese firm was acquired by a U.S. company on January 1, 2023. Selected account balances are available for the year ended December 31, 2024, and are stated in Euro, the local currency. Sales € 400,000 Inventory (bought on February 1, 2024) 20,000 Equipment (bought on January 1, 2023)90,000 Dividends (paid on September 1, 2024)20,000 Accumulated depreciation−Equipment 12/31/2445,000 Depreciation expense−Equipment, 20249,000 Relevant exchange rates for 1 Euro are given below: January 1, 2023 $ 0.91 January 1, 2024 0.93 February 1, 2024 0.94 September 1, 2024 0.97 December 31, 2024 1.01 4th quarter average, 2023 0.90 4th quarter average, 2024 0.98 Average, 2024 0.95 Assume the functional currency is the U.S. Dollar; compute the U.S. income statement amount for depreciation expense for 2024.
$8,190 €9,000 × $0.91 = $8,190
A partnership began its first year of operations with the following capital balances: Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year. What was the balance in Eaton's Capital account at the end of the first year?
$80,600 Beginning $104,000 + Interest $10,400 + Salary $0 + Remainder (20%) ($20,800) − Withdrawals $13,000 = Ending Balance $80,600
The capital account balances for Donald & Hanes LLP on January 1, 2024, were as follows: Donald, capital $ 200,000 Hanes, capital 100,000 Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized. What is the balance of Hanes's capital account after the new partnership is created?
$84,000 Bonus to May $40,000 × 40% = $16,000 from Hanes' $100,000 = $84,000 New capital balance
Goodman, Pinkman, and White formed a partnership on January 1, 2023, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: 1. interest of an amount equal to 10% of the partner's beginning capital balance for the year; 2. annual compensation of $15,000 to Pinkman; and 3. the remainder of the income or loss to be split among the partners in the following percentages: a. 20% for Goodman; b. 40% for Pinkman; and c. 40% for White. Net income was $200,000 in 2023 and $240,000 in 2024. Each partner withdrew $1,500 for personal use every month during 2023 and 2024. What was Pinkman's total share of net income for 2023?
$84,500 Interest on Pinkman's beginning balance of capital contribution ($175,000 × 10% = $17,500) + Salary ($15,000) + 40% of the Remaining net income (calculated below) ($52,000) = $84,500. Remaining net income: $200,000 − $55,000 (10% of $550,000) − $15,000 (Pinkman Salary) = $130,000, of which 40% is allocated to Pinkman = $52,000.
A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners' capital accounts are as follows: Harry $40,000, Landers $30,000 and Waters $15,000. The partners share profits and losses 4:4:2. If the building is sold for $50,000, what amount should Waters receive in the final settlement?
$9,000 Waters = $15,000 − Loss on Building ($30,000 × 20%) $6,000 = $9,000
Quadros Incorporated, a Portuguese firm was acquired by a U.S. company on January 1, 2023. Selected account balances are available for the year ended December 31, 2024, and are stated in Euro, the local currency. Sales € 400,000 Inventory (bought on February 1, 2024) 20,000 Equipment (bought on January 1, 2023)90,000 Dividends (paid on September 1, 2024)20,000 Accumulated depreciation−Equipment 12/31/2445,000 Depreciation expense−Equipment, 20249,000 Relevant exchange rates for 1 Euro are given below: January 1, 2023 $ 0.91 January 1, 2024 0.93 February 1, 2024 0.94 September 1, 2024 0.97 December 31, 2024 1.01 4th quarter average, 2023 0.90 4th quarter average, 2024 0.98 Average, 2024 0.95 Assume the functional currency is the Euro; compute the U.S. balance sheet amount for equipment for 2024.
$90,900 €90,000 × $1.01 = $90,900
Jell and Dell were partners with capital balances of $600 and $800, and an income-sharing ratio of 2:3. They admitted Zell with a 30% interest in the partnership, and the total amount of goodwill credited to the original partners was $700. What amount did Zell contribute to the business?
$900 Jell $600 + Dell $800 + Goodwill $700 = $2,100 ÷ 70% = $3,000 × 30% = $900 Cash
Goodman, Pinkman, and White formed a partnership on January 1, 2023, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: 1. interest of an amount equal to 10% of the partner's beginning capital balance for the year; 2. annual compensation of $15,000 to Pinkman; and 3. the remainder of the income or loss to be split among the partners in the following percentages: a. 20% for Goodman; b. 40% for Pinkman; and c. 40% for White. Net income was $200,000 in 2023 and $240,000 in 2024. Each partner withdrew $1,500 for personal use every month during 2023 and 2024. What was White's total share of net income for 2024?
$96,000 Interest $30,900 (10% of $309,000) + Salary ($0) + 40% of the 2024 Remaining net income $62,160 = $93,060. Remaining net income = $240,000 − $69,600 (10% of $696,000) − $15,000 (Pinkman Salary) = $155,400 × 40% = $62,160.
Jackson Corporation (a U.S.-based company) sold parts to a Korean customer on December 16, 2024, with payment of 20 million Korean won to be received on January 15, 2025. The following exchange rates applied: Date // Spot Rate // Forward Rate to January 15 December 16, 2024 $ 0.00082 $ 0.00089 December 31, 2024 0.0008 00.00083 January 15, 2025 0.00086 0.00086 Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2024, at a:
Forward contract premium $1,400. $0.00089 − $0.00082 = $0.00007 × Foreign Currency 20,000,000 = $1,400 Premium
The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000. The liquidation expenses of $5,000 were paid prior to the sale of noncash assets. How would the $120,000 be distributed to the partners? (Hint: Either a predistribution plan or a statement of liquidation would be appropriate for solving this item.)
Option B
The Keller, Long, and Mason partnership had the following balance sheet just before entering liquidation: Keller, Long, and Mason share profits and losses in a ratio of 2:4:4. Assuming noncash assets were sold for $70,000 and liquidation expenses in the amount of $18,500 were incurred, how much will each partner receive in the liquidation?
Option C
White, Sands, and Luke has the following capital account balances and profit and loss ratios: $60,000 (30%); $100,000 (20%); and $200,000 (50%). The partnership has received a predistribution plan. How would $90,000 be distributed? White // Sands // Luke A)$ 15,000$ 25,000$ 50,000 B)$ 0$ 18,947$ 71,053 C)$ 0$ 40,000$ 50,000 D)$ 0$ 10,588$ 79,412 E)$ 27,000$ 18,000$ 45,000
Option C
White, Sands, and Luke has the following capital account balances and profit and loss ratios: $60,000 (30%); $100,000 (20%); and $200,000 (50%). The partnership has received a predistribution plan. How would $200,000 be distributed? White // Sands // Luke A)$ 60,000$ 40,000$ 100,000 B)$ 6,000$ 44,000$ 150,000 C)$ 48,148$ 65,432$ 86,420 D)$ 12,000$ 68,000$ 120,000 E)$ 60,000$ 100,000$ 40,000
Option D
Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively. Anne retires and is paid $80,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital of the remaining partners?
Donald, $30,000; Todd, $10,000 The $30,000 bonus is deducted from the remaining partners according to their relative profit and loss ratio. Donald = 20% and Todd = 40% which is a 1/3, 2/3 split Donald = $40,000 - ( 1313 × $30,000) = $30,000 Todd = $30,000 - ( 2323 × $30,000) = $10,000
