ACC 266 3-1

On June 1, Cagle Co. received a signed agreement to sell inventory for ¥650,000. The sale would take place in 90 days. Cagle immediately signed a 90-day forward contract to sell the yen as soon as they are received. The spot rate on June 1 was ¥1 = $0.003986, and the 90-day forward rate was ¥1 = $0.004021. At what amount would Cagle record the Forward Contract on June 1?

$0

Webb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. Jones currently has 100,000 shares outstanding and a book value of $1,200,000. Jones sells 20,000 shares of previously unissued shares of its common stock to outside parties for $10 per share. What is the adjusted book value of Jones after the sale of the shares?

$1,400,000 Beginning carrying amount $1,200,000 + Additional Shares Sold $200,000 ($10 × 20,000) = $1,400,000 Current carrying amount

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, 2021. On July 24, 2021, 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, 2021. 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 in AOCI to close it as an adjustment to net income for the period ended October 31?

$10,000 debit $2.17 − $2.13 = $0.04 × £250,000 = $10,000 debit

Jacoby Co. owned a controlling interest in Trimble Inc. Jacoby reported sales of $510,000 during 2021 while Trimble reported $300,000. Inventory costing $27,000 was transferred from Trimble to Jacoby (upstream) during the year for $54,000. Of this amount, 30% was still in ending inventory at year's end. Total receivables on the consolidated balance sheet were $115,000 at the first of the year and $158,000 at year-end. No intra-entity debt existed at the beginning or ending of the year. Using the direct approach, what is the consolidated amount of cash collected by the business from its customers?

$713,000 Parent's Sales $510,000 + Subsidiary's Sales $300,000 − Intra-Entity Sales $54,000 − increase in A/R $43,000 ($158,000 − $115,000) = $713,000 Consolidated Cash Collected

Paul and Mark are partners having capital balances of $50,000 and $60,000, respectively, and share profits and losses equally. Jay is going to invest $65,000 into the business to acquire a one-third ownership interest. If the bonus method is used to record Jay's admission to the partnership: a. Jay's capital will be $58,333 b. Mark's capital will be $70,000 c. Paul's capital will be $46,667 d. Total capital will be $195,000 e. Goodwill will be recorded at $15,000

A. Jay's capital will be $58,333 Paul: original capital $50,000 plus Jay's payment ($65,000 *50%) $32,500 minus allocation to Jay (33%) (29,167) is $53,333 Mark: Original capital $60,000 plus Jay's payment ($65,000 *50%( $32,500 minus allocation to Jay (33%) is $63,334 Jay allocation (33%) $58,333

Ryan Company purchased 80% of Chase Company for $270,000 when Chase's book value was $300,000. Chase has 50,000 shares outstanding and currently has a book value of $400,000. Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. After recording the acquisition of the additional shares, what adjustment is needed for Ryan's Investment in Chase account?

$12,188 decrease

Davis Company has had bonds payable of $15,000 outstanding for several years. On January 1, 2021, when there was an unamortized discount of $2,500 and a remaining life of 5 years, its 80% owned subsidiary, Jacobson Company, purchased the bonds in the open market for $18,000. The bonds pay 7% interest annually on December 31. The companies use the straight-line method to amortize interest revenue and expense. Compute the consolidated gain or loss on a consolidated income statement for 2021.

$5,500 loss Bonds Purchase Price $18,000 − Bonds carrying amount ($15,000 − $2,500) = $5,500 Loss to Consolidated Income

The following gifts are received in 2016 by a not-for-profit entity: I. $2,000 specified by the donor to be used to pay salaries. II. $10,000 specified by the donor for new conference room furniture. III. $5,000 specified by the donor to be held for one year before being expended. The salaries are paid in 2017 and the conference room furniture is purchased in 2016. The donor did not specify any time restriction on holding the conference room furniture. What amount should be reclassified on the Statement of Activities for 2017 from the Temporarily Restricted column to the Unrestricted column?

$7,000. Net assets released from restrictions [I. Salaries $2,000] + [III. Satisfaction of one-year time restriction $5,000] = $7,000 reclassified as unrestricted in 2017.

As of December 31 of the current year, the Manhattan Co. partnership had the following capital balances: Scott, Capital $400,000 Adams, Capital $300,000 Baxter, Capital $200,000 Walters, Capital $100,000 Profits/losses are split on a 4:3:2:1 basis, respectively. Adams decided to leave the partnership and was paid $324,000 from the business based on the original contractual agreement. If the goodwill method is applied, what is the capital for Scott after Adams' withdrawal? A) $425,000 B) $432,000 C) $416,000 D) $475,000 E) $437,000

B) $432,000 Scott: Original Capital $400,000 plus Goodwill Allocation $32,000 is $432,000 Baxter: Original Capital $200,000 plus Goodwill Allocation $16,000 is $216,000 Walters: Original Capital $100,000 plus Goodwill Allocation $8,000 is $108,000

The partnership of Adams and Washington decided to admit Jefferson as a partner with a 20% interest. Jefferson invested $60,000 in cash into the partnership. Adams' and Washington's capital accounts and their profit and loss sharing ratios are shown below: Adams Capital $100,000 P&L Ratio 50% Washington Capital $50,000 P&L Ratio 50% If the partnership used the goodwill method, how much goodwill should be recognized by this transaction? A) $60,000 B) $90,000 C) $110,000 D) $150,000 E) $300,000

B) $90,000 Implied value of the business ($60,000/20%) $300,000 Total Capital ($100,000+$50,000+$60,000) ($210,000) Goodwill $90,000

A large private not-for-profit entity's statement of activities should report the net change for net assets that are

Both unrestricted and restricted

The High and Low partnership agreement stipulates that profits and losses be assigned in the following manner: -For managing the business, High receives a 15% bonus of partnership income before salary and bonus -High receives a salary of $45,000 -Any remaining profit and loss is allocated equally During the current year, the partnership had a net income of $50,000 before the bonus and salary allowance. Low's equity in the partnership would? A) Increase B) Increase the same amount as High's C) Decrease D) Decrease the same amount as High's E) Not change

C) Decrease High: Bonus ($50,000 *15%) $7,500 plus salary $45,000 minus allocation of remain loss ($50,000-$52,500=2,500) (1,250) is $51,250 Low: allocation of remain loss ($50,000-$52,500=$2,500) (1,250) Total bonus $7,000, Salary total $45,000, allocation of loss (2,500) total income allocation is $50,000

The partnership of Adams and Washington decided to admit Jefferson as a partner with a 20% interest. Jefferson invested $60,000 in cash into the partnership. Adams' and Washington's capital accounts and their profit and loss sharing ratios are shown below: Adams Capital $100,000 P&L Ratio 50% Washingtons Capital $50,000 P&L Ratio 50% If the partnership used the goodwill method, what would be the capital balances for Adams, Washington, and Jefferson after Jefferson's investment was recorded? A. Adams $109,000, Washington $59,000, Jeff $42,000 B. Adams $130,000, Washington $80,000, Jeff $60,000 C. Adams $145,000, Washington $95,000, Jeff $60,000 D. Adams $100,000, Washington $50,000, Jeff $100,000 E. Adams $100,000, Washington $50,000, Jeff $42,000

C. Adams $145,000, Washington $95,000, Jeff $60,000 Original Capital Adams $100,000 plus Goodwill ($90,000 *50%) $45,000 for total of $145,000 Original Capital Washington $50,000 plus Goodwill ($90,000 *505) $45,000 for total of $95,000 Original Capital Jefferson ($300,000 *20%) $60,000

A partnership was formed on January 5 of the current year with the following capital balances: Curtis $100,000, Donald $150,000, Edward $250,000. The articles of partnership stipulated that profits and losses are assigned as follows: -Each partner is allocated interest equal to 10% of the beginning capital balance -Donald is allocated a $40,000 salary -Any remaining profits/losses are allocated on a 2:3:5 basis, respectively. -Each partner is allowed to withdraw up to $10,000 per year Net income of $150,000 was earned by the business in the current year. Assuming that each partner withdraws the maximum amount, what is each partner's capital account balance at the end of the current year? A. Curtis $132,000, Donald $223,000, Edward $265,000 B. Curtis $213,000, Donald $132,000, Edward $275,000 C. Curtis $112,000, Donald $213,000, Edward $295,000 D. Curtis $122,000, Donald $233,000, Edward $265,000 E. Curtis $145,000, Donald $200,000, Edward $275,000

C. Curtis $112,000, Donald $213,000, Edward $295,000 Curtis: Beginning Capital $100,000 plus net income $22,000 minus withdraw $10,000 is $112,000 Donald: Beginning capital $150,000 plus net income $73,000 minus withdraw $10,000 is $213,000 Edward: Beginning capital $250,000 plus net income $55,000 minus withdraw $10,000 is $295,000 Total beginning capital $500,000, total net income $150,000, total withdraws is $30,000, Total ending capital $620,000

A partnership has the following capital balances: Monica, Capital (50% of P&L) $100,000 Patricia, Capital (30%) 80,000 Susan, Capital (20%) 50,000 If the partnership is to be liquidated and $20,000 becomes immediately available, who gets the money? A. Monica $10,000, Patricia $6,000, Susan $4,000 B. Monica $7,000, Patricia $8,000, Susan $5,000 C. Monica $0, Patricia $14,000, Susan $6,000 D. Monica $8,696, Patricia $6,956, Susan $4,248 E. Monica $0, Patricia $13,600, Susan $6,400

C. Monica $0, Patricia $14,000, Susan $6,000 Since the partnership currently has total capital of $230,000, the $20,000 that is available would indicate maximum potential losses of $210,000 Monica: Reported Capital Balances $100,000 minus allocate loss ($210,000 split on a 5:3:2 basis) (105,000) for potential balance of $(5,000) plus potential loss from Monica's deficit (split 3:2) 5,000 for minimum cash distributions of $0 Patricia: Reported Capital Balances $80,000 minus allocate loss ($210,000 split on a 5:3:2 basis) (63,000) for potential balance of $17,000 minus potential loss from Monica's deficit (split 3:2) (3,000) for minimum cash distribution of $14,000 Susan: Reported Capital Balance $50,000 minus allocate loss ($210,000 split on a 5:3:2 basis) (42,000) for potential balances $8,000 minus potential loss from Monica's deficit (split 3:2) (2,000) for minimum cash distributions of $6,000

Which entry would be the correct entry to record that a not-for-profit entity collected $80,000 of amounts pledged and also wrote off $3,000 of amounts pledged that were previously estimated as amounts uncollectible?

Cash 80,000 Allowance for uncollectible pledges 3,000 . . . . Pledges receivable 83,000 Cash $80,000 + Allowance for Uncollectible pledges $3,000 = Pledges Receivable $83,000

Which entry would be the correct entry on the not-for-profit entity's books to record a donor's gift when the donor retains power over the assets?

Cash xxx . . . . Refundable advance xxx

Unconditional transfers of cash or other resources to an entity in a voluntary nonreciprocal transaction is the GAAP definition of

Contributions

Paul and Mark form a partnership on January 1 of the current year. Paul contributes $50,000 and Mark contributes $100,000 and a building worth $200,000, The building is subject to a mortgage of $40,000, which is assumed by the partnership. Paul and Mark agree to share profits and losses equally. Mark's beginning capital account should be? A) $300,000 B) $280,000 C) $155,000 D) $260,000 E) $150,000

D) $260,000 Cash $100,000 Building $200,000 Less: Mortgage (40,000) Total contribution $260,000

As of December 31 of the current year, the Manhattan Co. partnership had the following capital balances: Scott, Capital $400,000 Adams, Capital $300,000 Baxter, Capital $200,000 Walters, Capital $100,000 Profits/losses are split on a 4:3:2:1 basis, respectively. Adams decided to leave the partnership and was paid $324,000 from the business based on the original contractual agreement. If the goodwill method is applied, what is the total amount of goodwill? A) $50,000 B) $72,000 C) $21,000 D) $80,000 E) $89,000

D) $80,000 ($24,000/30%)

The following condensed balance sheet is for the partnership of Andrews, Carroll, and Murray, who share profits and losses in the ratio of 6:2:2, respectively. Cash $70,000 Other assets 130,000 Total Assets $200,000 Liabilities $160,000 Andrews, Capital 25,000 Carroll, Capital 10,000 Murray, Capital 5,000 Total liabilities and partners' equity $200,000 Which partner is most vulnerable to a loss? A) Andrews B) Carroll C) Andrews and Carroll are equally vulnerable D) Murray E) Andrews and Murray are equally vulnerable

D) Murray A loss of only $25,000 will completely eliminate Murray's capital balance. Andrews: $25,000/60% = $41,667 loss to eliminate capital Carroll: $10,000/20%= $50,000 loss to eliminate capital Murray: $5,000/20%= $25,000 loss to eliminate capital

On October 1, 2021, Eagle Company forecasts the purchase of inventory from a British supplier on February 1, 2022, at a price of 100,000 British pounds. On October 1, 2021, 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, 2021, the option has a fair value of $1,600. The following spot exchange rates apply: October 1, 2021 spot rate $2.00 December 31, 2021 spot rate $1.97 February 1, 2022 spot rate $2.01 What journal entry should Eagle prepare on October 1, 2021?

DR Foreign Currency Option 1,800 CR Cash 1,800

A U.S. company sells merchandise to a foreign company denominated in the foreign currency. Which of the following statements is true?

If the foreign currency appreciates, a foreign exchange gain will result

Duncan Inc. owned all of the outstanding stock of Brandt Co. The subsidiary had bonds payable outstanding on January 1, 2020, with a book value of $270,000. The parent acquired the bonds on that date for $291,000. Subsequently, Duncan reported interest income of $26,000 in 2020 while Brandt reported interest expense of $31,000. Consolidated financial statements were prepared for 2021. What adjustment would be required for the retained earnings balance as of January 1, 2021?

Reduction of $16,000 Bond Acquisition Price $291,000 − Bonds carrying amount $270,000 = $21,000 R/E Reduction. Intra-Entity Interest $31,000 − $26,000 = $5,000 R/E Increase $21,000 R/E Reduction − $5,000 R/E Increase = $16,000 R/E Reduction

Which entry would be the correct entry on the donor's books when the donor retains control of an asset, such as cash, which it contributes to a not-for-profit entity?

Refundable advance to charity xxx . . . . Cash xxx

Which of the following statements is required for voluntary health and welfare entities, but not for other not-for-profit entities?

Statement of Functional Expenses

Which of the following is not true about a merger of two not-for-profit entities? The two entities will together form an entirely new entity with a new governing board. Identifiable assets and liabilities are not adjusted to their fair values at the date of the merger. There will be no acquisition value or goodwill determination. Neither entity is considered to be acquired. The two entities will continue to legally exist but there will be a new governing board.

The two entities will continue to legally exist but there will be a new governing board.

How do outstanding subsidiary stock warrants affect the calculation of consolidated earnings per share?

They will only be included in diluted earnings per share if they are dilutive

Not-for-profit entities that are eligible to obtain tax-exempt status under Internal Revenue Code section 501(c)(4) are

Those functioning exclusively to promote social welfare.

To send a mailing, a private not-for-profit charity spends $100,000. The mailing solicits donations and provides educational and other information about the charity. Which of the following is true?

Under certain specified circumstances, the organization should allocate a portion of the $100,000 to program service expenses.

A local citizen gives a not-for-profit entity a cash donation that is restricted for research activities. The money should be recorded in

Temporarily Restricted Net Assets

A subsidiary issues new shares of common stock at an amount below book value. Outsiders buy all of these shares. Which of the following statements is true?

The parent's additional paid-in capital will be decreased

Which of the following is not true about a merger of two not-for-profit entities?

The two entities will continue to legally exist but there will be a new governing board.

Webb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. There was no premium paid by Webb. Jones currently has 100,000 shares outstanding and a book value of $1,200,000. Assume Jones issues 20,000 new shares of its common stock to outside parties for $15 per share. What is the adjusted book value of Jones after the stock issuance?

$1,500,000 Beginning BV $1,200,000 + Additional Shares Sold $300,000 ($15 × 20,000) = $1,500,000 Current BV

A group of high school seniors performs volunteer services for patients at a nearby nursing home. The nursing home would not otherwise provide these services, such as wheeling patients in the park and reading to them. At the minimum wage rate, these services amount to $21,320, but their actual value is estimated to be $27,400. In the nursing home's statement of activities, what amount should be reported as public support?

$-0-

Ryan Company purchased 80% of Chase Company for $270,000 when Chase's book value was $300,000. Chase has 50,000 shares outstanding and currently has a book value of $400,000. Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. What is the adjusted book value of Chase Company after the issuance of the shares?

$760,000 Beginning carrying amount $400,000 + Additional Shares Sold $360,000 ($12 × 30,000) = $760,000 Current carrying amount

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at the balance sheet date:

1. Adjust hedged asset or liability to fair value, with counterpart (change in fair value) reported as foreign exchange gain or loss in net income, 2. Adjust forward contract to fair value (either an asset or a liability), with counterpart (change in fair value) reported in OCI, 3. Recognize a loss or gain related to the hedging instrument to offset the foreign exchange gain or loss on the hedged item recognized in 1, and 4. Recognize a portion of the forward points (discount or premium) in net income with the counterpart reported in OCI.

Which of these forms must most tax-exempt organizations file annually with the Internal Revenue Service?

990

MacDonald, Inc. owns 80% of the outstanding stock of Stahl Corporation. During the current year, Stahl made $125,000 in sales to MacDonald. How does this transfer affect the consolidated statement of cash flows?

Not reported in the consolidated statement of cash flows

All of the following data points are needed to determine the fair value of a forward contract (at any point), except

The forward rate for a contract that has the same duration as the forward contract entered into

forward rate

The price today at which a foreign currency can be purchased or sold in the future

Which entry would be the correct entry on the not-for-profit entity's books to record a donor's gift when the money is simply passing through the not-for-profit entity, it creates no direct benefit, and control of the assets has been relinquished by the donor?

Cash xxx . . . . Liability to beneficiary xxx

Schrute Inc. had a receivable from a foreign customer that is due in the local currency of the customer (stickles). On December 31, 2021, this receivable for §200,000 was correctly included in Schrute's balance sheet at $167,000. When the receivable was collected on February 15, 2022, the U.S. dollar equivalent was $181,000. In Schrute's 2022 consolidated income statement, how much should have been reported as a foreign exchange gain?

$14,000 $181,000 − $167,000 = $14,000 Gain

Which of the following variable interests entitles a holder to residual profits, losses, and dividends?

Common stock

Webb Company purchased 90% of Jones Company for $990,000 when the book value of Jones was $1,000,000. There was no premium paid by Webb. Jones currently has 100,000 shares outstanding and a book value of $1,200,000. Assume Jones issues 20,000 new shares of its common stock to outside parties for $15 per share. After acquiring the additional shares, what adjustment is needed for Webb's investment in Jones account?

$30,000 increase Adjusted acquisition-date sub. fair value Consideration transferred $990,000 Noncontrolling interest acquisition-date fair value $110,000 Increase in Jones book value $200,000 Stock issue proceeds $300,000 Subsidiary valuation basis $1,600,000 New parent ownership (90,000 shares ÷ 120,000 shares) 75% Parent's post-stock issue ownership balance $1,200,000 Parent's investment account [$990,000 + (90% × $200,000)] $1,170,000 Required adjustment—increase $30,000

Brandon Co., a U.S. corporation, sold inventory on credit to a British company on April 8, 2021. Brandon received payment of 40,000 British pounds on May 8, 2021. The exchange rate was £1 = $1.56 on April 8 and £1 = 1.45 on May 8. What amount of foreign exchange gain or loss should be recognized? (Round to the nearest dollar.)

$4,400 loss $1.45 − $1.56 = ($0.11) × £40,000 = ($4,400) Loss

Nelson Co. ordered parts costing §120,000 from a foreign supplier on May 12 when the spot rate was $0.31 per stickle. A one-month forward contract was signed on that date to purchase §120,000 at a forward rate of $0.32 per stickle. On June 12, when the parts were received and payment was made, the spot rate was $0.36 per stickle. At what amount should inventory be reported?

$43,200 $0.36 × §120,000 = $43,200

The following information has been taken from the consolidation worksheet of Graham Company and its 80% owned subsidiary, Stage Company. (1.) Graham reports a loss on sale of land (to an outside party) of $5,000. The land cost Graham $20,000. (2.) Noncontrolling interest in Stage's net income was $30,000. (3.) Graham paid dividends of $15,000. (4.) Stage paid dividends of $10,000. (5.) Excess acquisition-date fair value over book value amortization was $6,000. (6.) Consolidated accounts receivable decreased by $8,000. (7.) Consolidated accounts payable decreased by $7,000. Using the indirect method, where does the decrease in accounts payable appear in a consolidated statement of cash flows?

$7,000 decrease to net income as an operating activity

Dividends paid by a subsidiary to the parent company

- do not appear in the consolidated statement of cash flows

In not-for-profit accounting, an acquisition occurs when one not-for-profit entity obtains:

Control over another not-for-profit entity.

The accounting problems encountered in consolidated intra-entity debt transactions when the debt is acquired by an affiliate from an outside party include all of the following except:

A gain or loss must be recognized by both parent and subsidiary companies

Pel Museum is a private not-for-profit entity. If it receives a contribution of historical artifacts, it need not recognize the contribution if the artifacts are to be sold and it will use the proceeds to

Acquire other items for collections

If a subsidiary re-acquires its outstanding shares from outside ownership for more than the noncontrolling interest valuation basis at the date of buying such treasury stock, which of the following statements is true?

Additional paid-in capital on the parent company's books will decrease

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding) $500,000 Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding $300,000 Additional paid in capital $200,000 Retained earnings $500,000 Total stockholders' equity $1,500,000 The consolidation entry at date of acquisition will include (referring to Smith):

Debit Common stock $500,000 and debit Preferred stock $300,000 BV is Debited in Consolidation Entry for Acquisition-Date Preparation of Consolidated Balance Sheet

Reciprocal transfers where both parties give and receive something of value are

Exchange transactions.

On a Statement of Activities for a not-for-profit entity, what are the broad categories of supporting service costs required to be reported?

Fund-raising expenses and administrative expenses.

In reporting consolidated earnings per share when there is a wholly owned subsidiary, which of the following statements is true?

Parent company earnings per share equals consolidated earnings per share when the equity method is used

Unconditional promises to transfer cash or other resources to an entity in a voluntary nonreciprocal transaction is the GAAP definition of

Pledges

Prior to ASU 2016-14, what are the three categories of net assets required by GAAP in reporting of a not-for-profit entity?

Unrestricted, Temporarily Restricted, and Permanently Restricted.

Akers Co. owned 8,000 shares (80%) of the outstanding 8%, $100 par, preferred stock and 70% of the outstanding common stock of Brickman Co. Assuming there are no excess amortizations or intra-entity transactions, and Brickman reports net income of $810,000, what is the noncontrolling interest in the subsidiary's income?

$235,000 $810,000 Net Income − Preferred Dividends (10,000 × $8) = $730,000 × 30% = $219,000 Noncontrolling Interest $80,000 Preferred Dividends × 20% = $16,000 Noncontrolling Interest $219,000 from Income + $16,000 Preferred Dividends = $235,000 Noncontrolling Interest in Income

On December 30, 2017, Leigh Museum, a not-for-profit entity, received a $7,000,000 donation of Day Co. common stock shares with donor-stipulated requirements as follows: The museum is to sell shares valued at $5,000,000 and use the proceeds to erect a public viewing building. The museum is to retain shares valued at $2,000,000 and use the dividends to support current operations. As a consequence of its receipt of the Day Co. shares, how much should Leigh report as temporarily restricted net assets on its 2017 statement of financial position?

$5,000,000

Carlson, Inc. owns 80% of Madrid, Inc. Carlson reports net income for 2021 (without consideration of its investment in Madrid, Inc.) of $1,500,000. For the same year, Madrid reports net income of $705,000. Carlson had bonds payable outstanding on January 1, 2021 with a carrying value of $1,200,000. Madrid acquired the bonds on the open market on January 3, 2021 for $1,090,000. For the year 2021, Carlson reported interest expense on the bonds in the amount of $96,000, while Madrid reported interest income of $94,000 for the same bonds. Assuming there are no excess amortizations or other intra-entity transactions, what is Carlson's share of consolidated net income?

$2,176,000 Parent's Income $1,500,000 + Loss on Bond Sale $110,000 − Bond Interest $94,000 + Bond Income $96,000 + Sub's Income to Parent $564,000 ($705,000 × 80%) = $2,176,000 Consolidated Income

Southwest is a private not-for-profit entity. It acquires Northeast, another private not-for-profit. The acquisition value is $980,000. Northeast has two assets (and no liabilities): equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000. Northeast expects to receive some support through donations and contributions. However, it is not expected to be predominantly supported by contributions and investment income. After the combination, what should be reported for goodwill?

$30,000

Winston Corp., a U.S. company, had the following foreign currency transactions during 2021: (1.) Purchased merchandise from a foreign supplier on July 16, 2021 for the U.S. dollar equivalent of $47,000 and paid the invoice on August 3, 2021 at the U.S. dollar equivalent of $54,000. (2.) On October 15, 2021 borrowed the U.S. dollar equivalent of $315,000 evidenced by a non-interest-bearing note payable in euros on October 15, 2022. The U.S. dollar equivalent of the note amount was $295,000 on December 31, 2021, and $299,000 on October 15, 2022. What amount should be included as a foreign exchange gain or loss from the two transactions for 2022?

$4,000 loss $295,000 − $299,000 = ($4,000) Loss

On March 1, 2021, 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, 2022. On March 1, 2021, Mattie purchased a put option giving it the right to sell 200,000 British pounds on March 1, 2022 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, 2021. The following spot exchange rates apply: March 1, 2021 spot rate $1.90 December 31, 2021 spot rate $1.89 March 1, 2022 spot rate $1.84 What was the net impact on Mattie's 2022 net income including the fair value hedge of a firm commitment?

$379,800 increase [$380,000 Sales Revenue] − [$2,000 Cost of Option] + [$1,800 Adjustment from 2021 Net Income] = $379,800 Increase to 2022 Net Income

On January 1, 2021, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30% of Involved's preferred stock, and $1,850,000 for 80% of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows: Common stock, $10 par value, 100,000 shares outstanding $1,000,000 Preferred stock, 7% fully participating, $100 par value, 10,000 shares outstanding $1,000,000 Retained earnings $2,000,000 Total stockholders' equity $4,000,000 What is the total acquisition-date fair value of Involved?

$4,812,500 Common Stock Noncontrolling Interest at Acquisition = $1,850,000 ÷ 80% = $2,312,500 Preferred Stock Noncontrolling Interest at Acquisition = $750,000 ÷ 30% = $2,500,000 $2,312,500 + $2,500,000 = $4,812,500 FV of Subsidiary at Acquisition $1,850,000 + $462,500 + $750,000 + $1,750,000 = $4,812,500

Jackson Corp. (a U.S.-based company) sold parts to a Korean customer on December 16, 2021, with payment of 20 million Korean won to be received on January 15, 2022. The following exchange rates applied: December 16, 2021 - spot rate: $0.00082 forward rate: $0.00089 December 31, 2021 - spot rate: 0.00080 forward rate: 0.00083 January 15, 2022 - spot rate: 0.00086 forward rate: 0.00086 Assuming a forward contract was not entered into, what would be the net impact on Jackson Corp.'s 2021 income statement related to this transaction?

$400 (loss) $0.00080 − $0.00082 = ($0.00002) × FC 20,000,000 = ($400) Loss

On January 1, 2021, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding) $500,000 Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding $300,000 Additional paid in capital $200,000 Retained earnings $500,000 Total stockholders' equity $1,500,000 Compute the noncontrolling interest in Smith at date of acquisition.

$486,000 Common Stock Noncontrolling Interest at Acquisition = $1,200,000 ÷ 80% = $1,500,000 × 20% = $300,000 Preferred Stock Noncontrolling Interest at Acquisition = $124,000 ÷ 40% = $310,000 × 60% = $186,000 $300,000 + $186,000 = $486,000 Noncontrolling Interest at Acquisition Date

Kearns Inc. owned all of Burke Corp. For 2021, Kearns reported net income (without consideration of its investment in Burke) of $350,000 while the subsidiary reported $127,000. There are no excess amortizations associated with this consolidation. The subsidiary had bonds payable outstanding on January 1, 2021, with a book value of $303,000. The parent acquired the bonds on that date for $285,000. During 2021, Kearns reported interest income of $32,000 while Burke reported interest expense of $29,000. What is consolidated net income for 2021?

$492,000 Income of the Parent $350,000 + Income of the Subsidiary $127,000 − Difference in Interest Income over Interest Expense on Intra-Entity Bonds ($32,000 − $29,000) $3,000 + Gain on Bonds Purchase ($303,000 − $285,000) $18,000 = $492,000 Consolidated Net Income

A partnership is considering the possibility of liquidation because one of the partners, Stewart, is insolvent. Capital balances at the current time are as follows, and profits and losses are divided on a 6:3:1 basis, respectively. George, Capital $70,000 Stewart, Capital $50,000 Thomas, Capital $80,000 Stewart's creditors have filed a $60,000 claim against the partnership's assets. The partnership currently holds assets reported at $300,000 and liabilities of $100,000. If the assets can be sold for $150,000, what is the minimum amount that Stewart's creditors would receive?

$50,000 George: Reported Capital Balances $70,000 minus allocate loss on sale of assets ($150,000 split on a 6:3:1 basis) (90,000) for adjusted balances of $(20,000) plus potential loss from george' deficit (split 3:1) $20,000 for a minimum cash distribution of $0 Stewart: Reported Capital Balances $50,000 minus allocate loss on sale of assets ($150,000 split on 6:3:1 basis) (45,000) for adjusted balance of $5,000 minus potential loss from George' deficit (split 3:1) (15,000) plus assignment of Stewart's loss to Thomas $10,000 for a minimum cash distribution of $0 Thomas: Reported Capital Balances $80,000 minus allocate loss on sale of assets ($150,000 split on 6:3:1 basis) (15,000) for adjusted balance of $65,000 minus potential loss from George' deficit (split 3:1) (5,000) minus assignments of Stewart's loss to Thomas (10,000) for a minimum cash distribution of $50,000

On December 1, 2021, Joseph Company, a U.S. company, entered into a three-month forward contract to purchase 50,000 pesos on March 1, 2022, as a fair value hedge of a foreign currency denominated account payable. The following U.S. dollar per peso exchange rates apply: December 1, 2021 - spot rate: $0.092 forward rate: $0.105 December 31, 2021 - spot rate: 0.090 forward rate: 0.095 March 1, 2022 - spot rate: 0.089 forward rate: N/A Which of the following is included in Joseph's December 31, 2021 balance sheet for the forward contract?

$500 liability $0.105 − $0.095 = ($0.010) × MP 50,000 = ($500.00) Liability

On April 1, Quality Corporation, a U.S. company, expects to sell merchandise to a French customer in three months, denominating the transaction in euros. On April 1, the spot rate is $1.41 per euro, and Quality enters into a three-month forward contract cash flow hedge to sell 400,000 euros at a rate of $1.36. At the end of three months, the spot rate is $1.37 per euro, and Quality delivers the merchandise, collecting 400,000 euros. What amount will Quality recognize in Sales from these transactions?

$548,000 [€400,000 × $1.36 = $544,000] (Alternate solution: [Recorded Sales (€400,000 × 1.37) − Amortized discount ((1.41 − 1.36) × €400,000) + Adjustment to close AOCI (20,000 − 4,000) = $544,000)]

The following gifts are received in 2016 by a not-for-profit entity: I. $2,000 specified by the donor to be used to pay salaries. II. $10,000 specified by the donor for new conference room furniture. III. $5,000 specified by the donor to be held for one year before being expended. The salaries are paid in 2017 and the conference room furniture is purchased in 2016. The donor did not specify any time restriction on holding the conference room furniture. With respect to the donations received in 2016, what amount should be reported in the Statement of Activities as net increase to Temporarily Restricted Net Assets for the year 2016?

$7,000 When the donations are recorded in the accounting records, Temporarily Restricted Net Assets are increased by $17,000 = [I. Salaries $2,000 + II. $10,000 for new conference room furniture] + [III. Time Restricted gift $5,000]. .During 2016, the conference room furniture is purchased and the donor did not stipulate a time restriction on holding the furniture. Thus, there is a reclassification of net assets released from restriction as a $10,000 reduction in the Temporarily Restricted column. The net increase.in Temporarily Restricted Net Assets is $17,000 - $10,000 = $7,000.

On January 1, 2021, Harrison Corporation spent $2,600,000 to acquire control over Involved, Inc. This price was based on paying $750,000 for 30% of Involved's preferred stock, and $1,850,000 for 80% of its outstanding common stock. As of the date of the acquisition, Involved's stockholders' equity accounts were as follows: Common stock, $10 par value, 100,000 shares outstanding $1,000,000 Preferred stock, 7% fully participating, $100 par value, 10,000 shares outstanding $1,000,000 Retained earnings $2,000,000 Total stockholders' equity $4,000,000 Assuming Involved's accounts are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in Involved?

$812,500 Common Stock Noncontrolling Interest at Acquisition = $1,850,000 ÷ 80% = $2,312,500 × 20% = $462,500 Preferred Stock Noncontrolling Interest at Acquisition = $750,000 ÷ 30% = $2,500,000 × 70% = $1,750,000 (CS Parent $1,850,000) + (CS NCI $462,500) + (PS Parent $750,000) + (PS NCI $1,750,000) = $4,812,500 FV of Subsidiary at Acquisition FV $4,812,500 − carrying amount $4,000,000 = $812,500 Goodwill

New bonds are issued from a parent to its subsidiary

- Any premium or discount on bonds payable is exactly offset by a premium or discount on bond investment - There will be $0 net gain or loss on the bond transaction - Interest expense needs to be eliminated on the consolidated income statement - Interest revenue needs to be eliminated on the consolidated income statement - FALSE: A net gain or loss on the bond transaction will be reported

Intra-entity transfers of inventory

- do not appear in the consolidated statement of cash flows - effect on preparation of statement of cash flows: because the consolidated balance sheet and income statement are used in preparing the consolidated statement of cash flows, no special elimination is required

To account for a forward contract cash flow hedge of a foreign currency denominated asset or liability at initiation date requires which of the following?

1. Recognize the transaction (sale or purchase) and foreign currency denominated asset or liability 2. No entry related to forward contract (zero fair value)

Historically, what pattern of reporting was used by private not-for-profit entities? (1) The same as used with respect to for-profit entities. (2) Reporting that utilizes a fund accounting approach. (3) A pattern of reporting that does not consider the entire entity.

2 only

Ryan Company purchased 80% of Chase Company for $270,000 when Chase's book value was $300,000. Chase has 50,000 shares outstanding and currently has a book value of $400,000. Assume Chase issues 30,000 additional shares common stock solely to Ryan for $12 per share. What is the new percent ownership Ryan owns in Chase?

87.5% Shares Outstanding 50,000 × 80% = 40,000 Parent's Shares 50,000 + 30,000 = 80,000 New Outstanding Shares 40,000 + 30,000 = 70,000 Parent's Shares after New Issue 70,000 ÷ 80,000 = 87.5% New Ownership Percentage

What is a contractual adjustment?

A reduction in patient service revenues caused by agreements with third-party payors that allows them to pay a health care entity based on their determination of reasonable costs.

A partnership was formed on January 5 of the current year with the following capital balances: Curtis $100,000, Donald $150,000, Edward $250,000. The articles of partnership stipulated that profits and losses are assigned as follows: -Each partner is allocated interest equal to 10% of the beginning capital balance -Donald is allocated a $40,000 salary -Any remaining profits/losses are allocated on a 2:3:5 basis, respectively. -Each partner is allowed to withdraw up to $10,000 per year Net income of $150,000 was earned by the business in the current year. Assuming that each partner withdraws the maximum amount, how much income is allocated to Donald in the current year? A) $73,000 B) $33,000 C) $22,000 D) $55,000 E) $81,000

A) $73,000 Curtis: Interest 10% of beginning capital $10,000 plus allocation of remaining income ($60,000 allocated 2:3:5) $12,000 is $22,000 Donald: Interest 10% of beginning capital $15,000 plus salaries $40,000 plus allocation of remaining income ($60,000 allocated 2:3:5) $18,000 is $73,000 Edward: Interest 10% of beginning capital $25,000 plus allocation of remaining income ($60,000 2:3:5) $30,000 is $55,000 Total interest beginning $50,000, salaries $40,000, allocation of remaining income $60,000 and total income allocation is $150,000

A partnership is in the process of liquidating and is currently reporting the following capital balances. Marla, Capital (50% share of all P&L) $100,000 Barbara, Capital (30%) $80,000 Roberta, Capital (20%) $(40,000) Roberta has indicated that the $40,000 deficit will be covered by a forthcoming contribution. However, the two remaining partners have asked to receive the $140,000 in cash that is presently available. How much of this money should each partner be given? A. Marla $75,000 Barbara $65,000 B. Marla $87,500 Barbara $52,500 C. Marla $70,000 Barbara $70,000 D. Marla $80,000 Barbara $60,000 E. Marla $85,000 Barbara $55,000

A. Marla $75,000 Barbara $65,000 Marla: Reported Capital Balances $100,000 minus the potential loss from Roberta's Deficit (split on a 5:3 basis) (25,000) is $75,000 Barbara: Reported Capital Balances $80,000 minus the potential loss from Roberta's Deficit (split on a 5:3 basis) (15,000) is $65,000 Roberta: Reported Capital Balances $(40,000) plus potential loss from Roberta's deficit (5:3 basis) $40,000 is $0

Stanley, a partner of the Newtown partnership, made a loan to the partnership. The partnership is now in liquidation. Which one of the following statements is INCORRECT regarding the status of this loan during the liquidation process? A. the loan must be repaid before any cash distribution is made to the other partners, even if Stanley does not have a sufficient amount of capital to absorb all possible losses. B. The loan has a lower priority than obligations to outside creditors. C. If the partner has a negative safe capital balance, a portion or even all of the loan should be retained as an offset against the capital account D. The loan is accounted for in liquidation as if it were a component of the partner's capital E. If Stanley is insolvent and reports a negative capital balance, the handling of the loan become significant

A. The loan must be repaid before any cash distribution is made to the other partners, even if Stanley does not have a sufficient amount of capital to absorb all possible losses.

On a Statement of Activities for a not-for-profit entity, what is the minimum required classification for categories of expenses?

Program services expenses and supporting services expenses.

Acquisition of existing debt of a consolidated affiliate in the year of the debt acquisition

Any gain or loss is recognized in the year of acquisition on a consolidated income statement

The Jones family lost its home in a fire. On December 25, 2017, a philanthropist sent money to the Amer Benevolent Society, a private not-for-profit entity, specifically to purchase furniture for the Jones family. During January 2018, Amer purchased furniture for the Jones family. How should Amer report the receipt of the money in its 2017 financial statements?

As a liability.

If the total acquisition value of an acquired not-for-profit entity is greater than the fair value of all identifiable net assets of the entity, and that entity's revenues are not generated by rendering goods or services or from membership dues, then the excess of acquisition value over identifiable net assets is immediately reported:

As a reduction in unrestricted net assets on the Statement of Activities.

George H. Ruth takes a leave of absence from his job to work full time for a voluntary health and welfare entity for six months. Ruth fills the position of finance director, a position that normally pays $88,000 per year. Ruth accepts no remuneration for his work. How should this donated service be recorded?

As contributed support of $44,000 and an expense of $44,000.

Which of the following statements is true? . . I. Private not-for-profit universities must report depreciation expense. . . II. Public universities must report depreciation expense.

Both I and II are true.

The partnership of Adams and Washington decided to admit Jefferson as a partner with a 20% interest. Jefferson invested $60,000 in cash into the partnership. Adams' and Washington's capital accounts and their profit and loss sharing ratios are shown below: Adams Capital $100,000 P&L Ratio 50% Washingtons Capital $50,000 P&L Ratio 50% If the partnership used the bonus method, what would be the capital balances for Adams, Washington, and Jefferson after Jefferson's investment was recorded? A. Adams $145,000, Washington $95,000, Jeff $60,000 B. Adams $109,000, Washington $59,000, Jeff $42,000 C. Adams $130,000, Washington $80,000, Jeff $42,000 D. Adams $85,000, Washington $35,000, Jeff $30,000 E. Adams $85,000, Washington $35,000, Jeff $90,000

B. Adams $109,000, Washington $59,000, Jeff $42,000 Original Capital Adams $100,000 plus Jefferson's Cash ($60,000 * 50%) $30,000 minus allocation to Jefferson (20%) (21,000) is $109,000 Original Capital Washington $50,000 plus Jefferson's Cash ($60,000 * 50%) $30,000 minus allocation to Jefferson (20%) (21,000) is $59,000 Jefferson allocation (20%) $42,000

The following condensed balance sheet is for the partnership of Andrews, Carroll, and Murray, who share profits and losses in the ratio of 6:2:2, respectively. Cash $70,000 Other assets $130,000 Total assets $200,000 Liabilities $160,000 Andrews, Capital $25,000 Carroll, Capital $10,000 Murray, Capital $5,000 Total liabilities and partners' equity $200,000 If the other assets are sold for $100,000, how should the available cash be distributed? a. Andrews $7,000, Carroll $3,000, Murray $0 B. Andrews $6,250, Carroll $3,750, Murray $0 C. Andrews $7,250, Carroll $2,500, Murray $250 D. Andrews $6,250 Carroll $2,750, Murray $1,000 E. Andrews $6,750, Carroll $3,250, Murray $900

B. Andrews $6,250, Carroll $3,750, Murray $0 Andrews: Reported Capital Balances $25,000 minus allocate loss on sale of assets ($30,000 split on a 6:2:2 basis) (18,000) for adjusted balances of $7,000 minus potential loss from Murray's Deficit (split 6:2) (750) for minimum cash distributions $6,250 Carroll: Reported Capital Balances $10,000 minus allocate loss on sale of assets ($30,000 split on a 6:2:@ basis) (6,000) for adjusted balance of $4,000 minus potential loss from Murray's Deficit (split 6:2) (250) for minimum cash distributions $3,750 Murray: Reported Capital Balances $5,000 minus allocate loss on sale of assets ($30,000 split on a 6:2:2 basis) (6,000) for adjusted balance $(1,000) plus potential loss from Murray's Deficit (Split 6:2) $1,000 for minimum cash distributions of $0 Reported cash balance $70,000 + Proceeds from sale of other assets $100,000 Adjusted Balance Total $170,000 -Cash used to pay creditors (160,000) Available Cash Total $10,000

The following condensed balance sheet is for the Ashley, Bart, and Charles partnership. The partners share profits and losses in the ratio of 5:3:2, respectively. Cash $125,000 Inventory 100,000 Other Assets 300,000 Total Assets $525,000 Liabilities $270,000 Ashley, Capital 100,000 Bart, Capital 85,000 Charles, Capital 70,000 Total liabilities and partners' equity $525,000 The partners have decided to liquidate the business. Liquidation expenses are estimated to be $8,000. The other assets are sold for $180,000. What distribution can be made to the partners? A. Ashley $14,000, Bart $6,600, Charles $6,400 B. Ashley $0, Bart $8,200, Charles $18,800 C. Ashley $4,000, Bart $6,400, Charles $16,600 D. Ashley $0, Bart $8,400, Charles $18,600 E. Ashley $4,500, Bart $7,400, Charles $15,100

B. Ashley $0, Bart $8,200, Charles $18,800 Ashley: Reported Capital Balances $100,000 minus allocate loss on sale of assets ($120,000 split on a 5:3:2 basis) (60,000) for adjusted balance of $40,000 minus anticipated liquidation expenses ($8,000 split on a 5:3:2 basis) (4,000) minus anticipated loss on inventory ($100,000 split on a 5:3:2 basis) (50,000) for potential balance of $(14,000) plus potential loss from Ashley deficit (split 3:2) 14,000 for current cash distributions $0 Bart: Reported Capital Balances $85,000 minus allocate loss on sale of assets ($120,000 split on a 5:3:2 basis) (36,000) for adjusted balance of $49,000 minus anticipated liquidation expenses ($8,000 split on a 5:3:2 basis) (2,400) minus anticipated loss on inventory ($100,000 split on a 5:3:2 basis) (30,000) for potential balance of $16,600 minus potential loss from Ashley deficit (split 3:2) (8,400) for total current cash distribution of $8,200 Charles: Reported Capital Balances $70,000 minus allocate loss on sale of assets ($120,000 split on a 5:3:2 basis) (24,000) for adjusted balance of $46,000 minus anticipated liquidation expenses ($8,000 split on a 5:3:2 basis) (1,600) minus anticipated loss on inventory ($100,000 split on a 5:3:2 basis) (20,000) for potential balance of $24,400 minus potential loss from Ashley's deficit (split 3:2) (5,600) for current cash distributions of $18,800

Paul and Mark are partners having capital balances of $50,000 and $60,000, respectively, and share profits and losses equally. Jay is going to invest $65,000 into the business to acquire a one-third ownership interest. If the goodwill method is used to record Jay's admission to the partnership: a. Jay's capital will be $58,333 b. Mark's capital will be $70,000 c. Paul's capital will be $46,667 d. Total capital will be $175,000 e. Goodwill will be recorded at $15,000

B. Mark's capital will be $70,000 Implied value of the business ($65,000/(1/3)) is $195,000 Total capital ($50,000 + $60,000 + $65,000) is $(175,000) for total goodwill $20,000 Paul: Original capital $50,000 plus goodwill (20,000 * 50%) $10,000 is $60,000 Mark: Original capital $60,000 plus goodwill (20,000*50%) $10,000 is $70,000. Jay payment $65,000

Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2019, when Cocker had the following stockholders' equity accounts. Common stock — 40,000 shares outstanding $140,000 Additional paid-in capital $105,000 Retained earnings $476,000 Total stockholders' equity $721,000 To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess acquisition date fair value over book value being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2022. Popper did not pay any premium when it acquired its original interest in Cocker. On January 1, 2022, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker. On January 1, 2022, Cocker reacquired 8,000 of the outstanding shares of its own common stock for $34 per share. None of these shares belonged to Popper. How would this transaction have affected the additional paid-in capital of the parent company?

Decrease it by $23,100 Adjusted acquisition-date fair value ($852,500 + $392,000) $1,244,500 Less Stock repurchase $(272,000) Adjusted fair value after stock repurchase $972,500 New parent ownership (32,000 shares ÷ 32,000 shares) 100% Fair value equivalency of parent's ownership $972,500 Parent's investment account ($682,000 + [80% × $392,000]) $995,600 Required adjustment—decrease$(23,100)

Popper Co. acquired 80% of the common stock of Cocker Co. on January 1, 2019, when Cocker had the following stockholders' equity accounts. Common stock — 40,000 shares outstanding $140,000 Additional paid-in capital $105,000 Retained earnings $476,000 Total stockholders' equity $721,000 To acquire this interest in Cocker, Popper paid a total of $682,000 with any excess acquisition date fair value over book value being allocated to goodwill, which has been measured for impairment annually and has not been determined to be impaired as of January 1, 2022. Popper did not pay any premium when it acquired its original interest in Cocker. On January 1, 2022, Cocker reported a net book value of $1,113,000 before the following transactions were conducted. Popper uses the equity method to account for its investment in Cocker, thereby reflecting the change in book value of Cocker. On January 1, 2022, Cocker issued 10,000 additional shares of common stock for $21 per share. Popper did not acquire any of this newly issued stock. How would this transaction affect the additional paid-in capital of the parent company?

Decrease it by $64,720 Consideration transferred $682,000 Noncontrolling interest acquisition-date fair value $170,500 Increase in Sub book value ($1,113,000 − $721,000) $392,000 Stock issue proceeds $210,000 Subsidiary valuation basis $1,454,500 New parent ownership (32,000 shares ÷ 50,000 shares) 64% Parent's post-stock issue ownership balance $930,880 Parent's investment account ($682,000 + [80% × 392,000]) $995,600 Required adjustment — decrease $(64,720)

A private not-for-profit entity receives three large cash donations: . . One gift of $70,000 is unrestricted. . . One gift of $90,000 is restricted to pay the salary of the organization's workers. . . One gift of $120,000 is restricted forever with the income to be used to provide food for needy families. Which of the following statements is not true?

Permanently restricted net assets have increased by $210,000.

The following information has been taken from the consolidation worksheet of Graham Company and its 80% owned subsidiary, Stage Company. (1.) Graham reports a loss on sale of land (to an outside party) of $5,000. The land cost Graham $20,000. (2.) Noncontrolling interest in Stage's net income was $30,000. (3.) Graham paid dividends of $15,000. (4.) Stage paid dividends of $10,000. (5.) Excess acquisition-date fair value over book value amortization was $6,000. (6.) Consolidated accounts receivable decreased by $8,000. (7.) Consolidated accounts payable decreased by $7,000. Where does the noncontrolling interest in Stage's net income appear on a consolidated statement of cash flows?

Noncontrolling interest in Stage's net income does not appear on a consolidated statement of cash flows

Which of the following is NOT a characteristic of a partnership? a. Limited life b. Mutual agency c. Unlimited liability d. Double taxation of income e. Ease of formation

d. Double taxation of income

The partnership of Paul, Mark, and Jo is liquidating and the ledger shows the following balances: Cash $80,000 Inventory $100,000 Accounts Payable $60,000 Paul, Capital (50%) $40,000 Mark, Capital (25%) $45,000 Jo, Capital (25%) $35,000 If all available cash is distributed immediately: a. Paul, Mark, and Jo would receive $26,667 each b. Paul, Mark, and Jo would receive $6,667 each c. Paul would receive $10,000 and Mark and Jo would each receive $5,000 d. Mark would receive $15,000 and Jo would receive $5,000 e. None of the partners can receive any of the cash until loss of inventory is determined

d. Mark would receive $15,000 and Jo would receive $5,000 Paul: Reported Capital Balances $40,000 minus allocate loss ($100,000 split on a 5:2.5:2.5 basis) (50,000) for potential balance of $(10,000) plus potential loss from Paul's deficit (split 2.5:2.5) 10,000 for minimum cash distribution of $0 Mark: Reported Capital Balance $45,000 minus allocate loss ($100,000 split on a 5:2.5:2.5 basis) (25,000) for potential balance of $20,000 minus potential loss from Paul's deficit (split 2.5:2.5) (5,000) for minimum cash distribution of $15,000 Jo: Reported Capital Balance $35,000 minus allocate loss ($100,000 split on a 5:2.5:2.5 basis) (25,000) for potential basis $10,000 minus potential loss from Paul's deficit (split 2.5:2.5) (5,000) for minimum cash distribution of $5,000

The partnership of Paul, Mark, and Jo is liquidating and the ledger shows the following balances: Cash $80,000 Inventory $100,000 Accounts Payable $60,000 Paul, Capital (50%) $40,000 Mark, Capital (25%) $45,000 Jo, Capital (25%) $35,000 If no distributions have been made and the inventory is sold for $80,000, cash should be distributed? a. Paul, Mark, and Jo would receive $33,333 each b. Paul, Mark, and Jo would receive $26,667 each c. Paul would receive $50,000 and Mark and Jo would each receive $25,000 d. Paul would receive $40,000, Mark would receive $45,000 and Jo would receive $35,000 e. Paul would receive $30,000, Mark would receive $40,000 and Jo would receive $30,000

e. Paul would receive $30,000, Mark would receive $40,000 and Jo would receive $30,000 Paul: Reported Capital Balances $40,000 minus allocate loss ($20,000 split on a 5:2.5:2.5 basis) (10,000) for minimum cash distribution of $30,000 Mark: Reported Capital Balances $45,000 minus allocate loss ($20,000 split on a 5:2.5:2.5 basis) (5,000) for minimum cash distribution of $40,000 Jo: Reported Capital Balance $35,000 minus allocate loss ($20,000 split on a 5:2.5:2.5 basis) (5,000) for minimum cash distribution of $30,000