Module 20: Miscellaneous

For interim financial reporting how does a company report its tax expense

(estimated effective rate for the year x year-to-date income) - tax expense reported for previous interim period

What do personal financial statements include

1) Statement of financial condition 2) Statement of changes in net worth

What are statements of financial condition

Statements of financial condition presents estimated current values of assets, estimated current amounts of liabilities, estimated income taxes, and net worth at-->how much your stuff is currently worth

How are assets reported on a personal financial statement

on a personal financial statement assets are REPORTED at their estimated current values. Additional information such as historical cost is NOT REQUIRED

When are estimated income taxes paid?

estimated income taxes would be paid if all the assets were converted to cash and all the liabilities were paid

Opto Co. is a publicly-traded, consolidated enterprise reporting segment information. Which of the following items is a required enterprise-wide disclosure regarding external customers?

The fact that transactions with a particular external customer constitute more than 10% of the total enterprise revenues. Financial statements for public entities must report segment information about a major customer if that customer provides 10% or more of consolidated revenue for the entity.

How do we apply the 10% test for operating segments

needs to meet ONE or MORE of the 10% test 10% OR MORE OF 1) COMBINED REVENUE (ACQUIREE AND ACQUIRORS) or 2) the greater of the ABOSOLUTE VALUE OF THE COMBINED PROFIT OR COMBINED LOSS or 3) COMBINED ASSETS *start off by calculating each one of these factors

When the partners have decided to liquidate the partnership and the other assets have been sold what amount of cash should be distributed to the partners

net Partner's liabilities (debited) Partner's capital (credited) = net capital balance remaining after liabilities paid off +/- loss/gain on sale of assets =cash available for partners *unsold assets are assumed to be sold at a complete loss so the full amount of the unsold assets on books are distributed to partners as losses *When the partnership decides to liquidate each partner needs to be responsible and pay off their own loans (ignore general liability) then they'll either incur a loss/gain on selling the assets that the partners invested in together

How to admit partner using the goodwill method

new partner contribution = new partner ownership (ex. 1/3) of total partnership (x) translates to: new partner contribution = 1/3x *solving for x will get you the implied value of the total partnership including the newly admitted partner total non implied value of partners = old partner capital + newly admitted partner investment total implied value of partnership - total nonimplied value of partnership = goodwill (reputation of old partners)

Why does this qualify as an operating segment North American segment, whose assets are 12% of the company's assets of all segments, and management reports to the chief operating officer.

operating segments that meet any of the 3 quantitative thresholds (10% tests) are immediately deemed reportable segments: 1.Segment revenue is >10% of the combined revenue (including intersegment revenue) 2.Segment operating profit/loss is 10% of the greater of (in absolute amount): a.Combined operating profit of all operating segments with profit, or b.Combined operating loss of all operating segments with loss. 3.Segment assets are >10% of combined assets of all segments. Additional consideration for segment reporting is that the combined sales to nonaffiliated customers of segments reporting separately must be at least 75% of total consolidated sales.

What are statements of changes in net worth

presents the MAIN sources of increase/decreases in net worth over the time period included by the statement of changes in net worth

How to apply the greater of the absolute value of the combined profit or loss to determine whether to report operating segment factor?>

take the total operating profit (put absolute value) take the total operating loss (put absolute value) go to the operating profit (loss) column and put absolute value on all the numbers in the column

Operating segment

taking company and break into parts known as segment what doe sit have to meet in order to become operating segment--> apply management approach 1) earn rev and incur expenses 2) chief decision maker reviews operating results for resource allocating (purposes of budgeting) and performance such (ROI) 3) financial information is already available (track it separately in system)

For IFRS WHAT IS THE FUNCTIONAL CURRENCY?

the currency in which the company primarily operates

define functional currency

the functional currency is the currency of the primary economic environment in which the entity operates; normally that is the currency of the environment in whivch an enetity primarily generates and spends cash

After applying the management approach and determining what segments are considered business segments, we apply the 10% test. What is the purpose of the 10% test

the purpose of the 10% test for operating segments is to determine which operating segment is large enough to be reportable. (only going on footnote disclosure not going on F/S)

After the 10% test the company determined the reportable operating segments. Then we need the 75% test. What is the 75% test and how do we apply it?

the segments your report must cover 75% or more of your CONSOLIDATED SALES (not rev) so (total consolidated revenue x 75%) </= total reportable operating segment revenue * if it doesn't then you need to add back business with the highest revenue to bump you up

In a partnership what are salary allowances

these are the fixed salaries that partners get first

What does interim financial statements emphasize (hint: pick from the financial accounting qualities)

timeliness over reliability ---> the main purpose interim reporting is to provide more timely information and to highlight business turning points which would be BURIED in annual reports. However, this timeliness comes at an expense of reliability. Accounting information pertaining to shorter periods may require more arbitrary allocations and may not be as verifiable or representationally faithful as information contained in annual reports

advertising costs may be accrued or deferred for Interim financial reporting true or false?

true because sometimes the advertising benefits can extend beyond just an interim period

When the question mentions "translating" in a translation of foreign currency what rate do you u use?

use current rate when there's no high inflation

When the current rate method is used how are revenues and expenses translated on the foreign subsidiary's financial statements?

use the weighted-average rate for the current year

FASB statement 8 states that that historical rate will be used to translate prepaid insurance and goodwill correct>

yes

For allocation of partnership Income/loss how would this get allocated to partners: how are salaries paid to partners

first salaries are credited to partners accounts and then you need to sum up those salaries and distribute that salries expense among partners so basically in order to come up with the salaries expense you need to allocate it among partners.

For IFRS reporting purposes how are currencies defined as

foreign, functional, and presentational

How are liabilities presented on the personal financial

lower of discounted value of their future cash value or current cash settlement amount

Ross Corporation expects to sustain an operating loss of $100,000 for the full year ending December 31, 20X5. Ross operates entirely in one jurisdiction where the tax rate is 40%. Anticipated tax credits for 20X5 total $10,000. No permanent differences are expected. Realization of the full tax benefit of the expected operating loss and realization of anticipated tax credits are assured beyond any reasonable doubt because they will be carried back. For the first quarter ended March 31, 20X5, Ross reported an operating loss of $20,000. How much of a tax benefit should Ross report for the interim period ended March 31, 20X5?

$10,000 At the end of each interim period the enterprise shall make its best estimate of the EFFECTIVE tax rate expected to be applicable for the full year. The rate so determined shall be used in providing for income taxes on a current year-to-date basis. The effective tax rate shall reflect anticipated investment tax credits and other available tax planning alternatives. Tax benefit at statutory rate: $100,000 loss × 40% $40,000 Anticipated tax credits $10,000 =Net tax benefit $50,000 net tax benefit/operating loss at end of year 50k/100k = 50% .50 x 20k loss in interim period = 10k interim loss

On October 1 of the current year, a U.S. company sold merchandise on account to a British company for 2,000 pounds (exchange rate, 1 pound = $1.43). At the company's December 31 fiscal year end, the exchange rate was 1 pound = $1.45. The exchange rate was 1 pound = $1.50 on collection in January of the subsequent year. What amount would the company recognize as a gain(loss) from foreign currency translation when the receivable is collected?

$100 This question asks the candidate to determine the amount the company would recognize as a gain(loss) from foreign currency translation when the receivable is collected. On October 1, the U.S. company sold merchandise to a British company for 2,000 pounds when the exchange rate is 1 pound = $1.43. The 2,000 pounds will not be collected until the subsequent year. When the 2,000 pounds are collected in January, we must convert the 2,000 pounds to U.S. dollars. To calculate the gain, take the exchange rate at year end (1 pound = $1.45) and if the exchange rate at the date of collection is higher, it is a foreign currency gain, but if the exchange rate is lower at the date of collection, there is a foreign currency loss. The exchange rate at the date of collection is 1 pound = $1.50. Therefore, the dollar increased from year end to date of collection by $.05 ($1.50 - $1.45). if you multiply the 2,000 pounds collected in January by the foreign currency gain of $.05, the foreign currency gain at January is $100 (2,000 x $.05).

In January 20X4 Homer Company paid $80,000 in property taxes on its plant for the calendar year 20X4. Also in 20X4 Horner estimated that its year-end bonus to executives for 20X4 would be $320,000. What is the amount of expenses related to these two items that should be reflected in Homer's quarterly income statement for the three months ended June 30, 20X4 (second quarter)?

$100,000 expenses which benefit more than one interim period may be allocated among periods benefitted (annual repairs, property taxes) 80k property taxes for the year covers more than one interim period 320k executive bonus for the year covers more than one interim period 400k/4 = 100k

James Dixon, a partner in an accounting firm, decided to withdraw from the partnership. Dixon's share of the partnership's profits and losses was 20%. Upon withdrawing from the partnership he was paid $74,000 in final settlement for his interest. The total of the partners' capital accounts before recognition of partnership goodwill prior to Dixon's withdrawal was $210,000. After his withdrawal the remaining partners' capital accounts, excluding their share of goodwill, totaled $160,000. The total agreed upon goodwill of the firm was

$120,000 First, determine the goodwill paid to Dixon, then calculate the total partnership goodwill: Partnership capital prior to Dixon's withdrawal $210,000 Less: Partnership capital after Dixon's withdrawal $(160,000) Partnership capital withdrawn by Dixon $50,000 Total payment to Dixon upon withdrawal $74,000 Less: Partnership capital withdrawn by Dixon $(50,000) Goodwill to Dixon $24,000 With Dixon's share of profits and losses at 20%, total partnership goodwill is: If Dixon's share of the total goodwill of the partnership is $24,000, to arrive at the total goodwill of the partnership, set up the following equation: 20% of total goodwill = Dixon's share (which is $24,000) X = Total goodwill of partnership 20% of X = $24,000 X = $24,000 / 20% X = $120,000

Kaycee Corporation's revenues for the year ended December 31, 20X5, were as follows: Consolidated revenue per income statement $1,380,000 Intersegment revenues $60,000 Combined revenue of all industry segments and intersegment revenue $1,440,000 Kaycee has a reportable segment if that segment's revenues exceed

$144,000 A segment is significant (reportable) if it satisfies the segment revenue test, which is segment revenue (including intersegment revenue) is 10% or more of the combined segment revenue (including intersegment revenue). Therefore, since Kaycee's combined revenues of all industry segments is $1,440,000, Kaycee would have a reportable segment if that segment's revenues exceed $144,000.

The following condensed balance sheet is presented for the partnership of Cooke, Dorry, and Evans, who share profits and losses in the ratio of 4:3:3, respectively: Cash $90,000 Other assets $820,000 Cooke, loan $30,000 Total = $940,000 Accounts payable $210,000 Evans, loan $40,000 Cooke, capital $300,000 Dorry, capital $200,000 Evans, capital $190,000 Total = 940,000 Assume that instead of admitting a new partner, the partners decide to liquidate the partnership. If the other assets are sold for $600,000, how much of the available cash should be distributed to Cooke?

$182,000 Pre-liquidation capital balance $300,000 Less: loss on sale of assets $(88,000) = Balance $212,000 - Loan 30k = 182k

Walker, Inc., a U.S. Corporation, ordered a machine from Pfau Company of West Germany on July 15, 20X5, for 100,000 marks when the spot rate for marks was $.4955. Pfau shipped the machine on September 1, 20X5, and billed Walker for 100,000 marks. The spot rate was $.4875 on this date. Walker bought 100,000 marks and paid the invoice on October 25, 20X5, when the spot rate was $.4855. In Walker's income statement for the year ended December 31, 20X5, how much should be reported as a foreign exchange gain?

$200 In this situation, a foreign exchange gain results because the spot rate for marks decreased between the transaction date (date the invoice was recorded, September 1, 20X5) and the date the payable is settled (October 25, 20X5). On September 1, 20X5, when Walker recorded the invoice for the machine, it entered in its books a payable amounting to $48,750 (100,000 marks × $.4875). However, when it paid the liability by purchasing 100,000 marks at a time when the spot rate was $.4855, it had to pay only $48,550 for these 100,000 marks. Consequently, there is a gain of $200 ($48,750 - $48,550) on this transaction.

Plains, Inc., engages in three types of businesses, each of which is considered to be a significant industry segment. Company sales aggregated $1,800,000 in 20X9, of which Segment No. 3 contributed 60%. Traceable costs were $600,000 for Segment No. 3 out of a total of $1,200,000 for the company as a whole. In addition, $350,000 of common costs are allocated based on the ratio of a segment's income before common costs to the total income before common costs. What should Plains report as operating profit for Segment No. 3 in 20X9?

$200,000 Segment No. 3 60% 60% x 1,800,000 = 1080000 Segment No .3 traceable cost 600k out of 1.2M 350k need to be allocated based on the ratio of a segment's income before common costs to the total income before common costs. 1080000-600k = 480k 480k/600k = 80% *600k = 1.8m - 1.2m .8 x 350k = 280k 1080000-600k-280k=200k

Mr. & Mrs. Carson are applying for a bank loan and the bank has requested a personal statement of financial condition as of December 31, 1983. Included in their assets at this date are the following: 1,000 shares of Alden Corporation common stock purchased in 1980 at a cost of $50,000. The quoted market value of the stock was $75 per share on December 31, 1983. A residence purchased in 1981 at a cost of $120,000. Improvements costing $15,000 were made in 1982. Unimproved similar homes in the area are currently selling at approximately the same price levels as in 1981. In the Carson's December 31, 1983, personal statement of financial condition, the above assets should be reported at a total amount of

$210,000 Regarding personal financial statements, assets should be presented at their estimated current value. Assets presented at estimated current value on a personal financial statement: Alden common stock estimated current value $75,000 Personal residence ($120,000 + $15,000) $135,000 Total asset value presented on Carson's 20X5 personal statement of financial condition $210,000

Assume that the assets and liabilities are fairly valued on the balance sheet and the partnership decides to admit Fisher as a new partner with a one-fourth interest. No goodwill or bonus is to be recorded. How much should Fisher contribute in cash or other assets?

$230,000

The following condensed balance sheet is presented for the partnership of Cooke, Dorry, and Evans, who share profits and losses in the ratio of 4:3:3, respectively: Cash $90,000 Other assets $820,000 Cooke, loan $30,000 Total = $940,000 Accounts payable $210,000 Evans, loan $40,000 Cooke, capital $300,000 Dorry, capital $200,000 Evans, capital $190,000 Total = 940,000 Assume that the assets and liabilities are fairly valued on the balance sheet and the partnership decides to admit Fisher as a new partner with a one-fourth interest. No goodwill or bonus is to be recorded. How much should Fisher contribute in cash or other assets?

$230,000 Current partnership capital balances: $300,000 + $200,000 + $190,000 = $690,000 Since the new partnership's total capital balance (after Fisher's admission) may be assumed to be 'X,' then the current partners' balances will be 75% of the new partnership balance, or .75X (since Fisher will have a one-fourth interest). Therefore, we have: $690,000 = .75X X = $920,000 Fisher's contribution is 25% of $920,000, or $230,000.

During the first quarter of the calendar year, Worth Co. had income before taxes of $100,000, and its effective income tax rate was 15%. Worth's effective annual income tax rate for the previous year was 30%. Worth expects that its effective annual income tax rate for the current year will be 25%. The statutory tax rate for the current year is 35%. In its first quarter interim income statement, what amount of income tax expense should Worth report?

$25,000 To calculate interim income tax expense, multiply the income for the interim period by the effective annual tax rate for that interim period and this will provide the income tax expense for that interim period. 100k income for the year x 25% annual income tax rate for CURRENT year = 25k income tax expense for interim period

On November 30, 20X4, Tyrola Publishing Company, located in Colorado, executed a contract with Ernest Blyton, an author from Canada, providing for payment of 10% royalties on Canadian sales of Blyton's book. Payment is to be made in Canadian dollars each January 10 for the previous year's sales. Canadian sales of the book for the year ended December 31, 20X5, totaled $50,000 Canadian. Tyrola paid Blyton his 20X5 royalties on January 10, 20X6. Tyrola's 20X5 financial statements were issued on February 1, 20X6. Spot rates for Canadian dollars were as follows: November 30, 20X4 $0.87 January 1, 20X5 $0.88 December 31, 20X5 $0.89 January 10, 20X6 $0.90 How much should Tyrola accrue for royalties payable at December 31, 20X5?

$4,450 The current answer is C. According to ASC 830 - Foreign Currency Matters, at each balance sheet date, recorded dollar balances representing cash and amounts owed, by or to the enterprise, that are denominated in foreign currency, shall be adjusted to the current rate. In this case, Tyrola, an American company, is to make payment to Blyton in Canadian dollars. Therefore, to convert the liability as of December 31, 20X5, to U.S. dollars, use the current rate, which must reflect the translation rate in effect at that date, or $.89. As for the amount of the liability, since the royalty rate is 10%, we have: Sales in Canadian dollars during 20X5 $50,000 x Royalty rate 10% = Royalties in Canadian dollars: $5,000 x Translation rate, December 31, 20X5 $0.89 = Royalties in American dollars: $4,450

On January 1, 20X5, Kiner Company formed a foreign branch. The branch purchased merchandise at a cost of 720,000 local currency units (LCU) on February 15, 20X5. The purchase price was equivalent to $180,000 on this date. The branch's inventory at December 31, 20X5, consisted solely of merchandise purchased on February 15, 20X5, and amounted to 240,000 LCU. The exchange rate was 6 LCU to $1 on December 31, 20X5, and the average rate of exchange was 5 LCU to $1 for 20X5. Assume that the LCU is the functional currency of the branch. In Kiner's December 31, 20X5, balance sheet, the branch inventory balance of 240,000 LCU should be translated into United States dollars at

$40,000 All elements of financial statements are translated by using a current exchange rate. For assets and liabilities, the exchange rate at the balance sheet date shall be used. For revenues, expenses, gains and losses, the exchange rate on the dates on which those elements are recognized shall be used. Because translation at the exchange rates at the dates the numerous revenues, expenses, gains and losses are recognized is generally impractical, an appropriately weighted average exchange rate for the period may be used to translate these elements.

Blackwood Corporation had a $20,000 translation loss adjustment resulting from the translation of the accounts of its wholly owned foreign subsidiary for the year ended December 31, 20X4. On December 31, 20X4, Blackwood also had a receivable from a foreign customer which was payable in the local currency of the foreign customer. The receivable was appropriately included in Blackwood's balance sheet at $55,000. When the receivable was collected on February 10, 20X5, the exchange rate was 2 LCU to $1 and there were 100,000 LCU's. For 20X5, what amount should be included as a foreign exchange loss in Blackwood's other comprehensive income?

$5,000 However, any loss resulting from the settlement of a foreign receivable or payable at an amount which differs from the recorded amount is included in the determination of net income. In this situation, a receivable that was carried on Blackwood's books at $55,000 is settled in 20X5 for $50,000 (because at the settlement date the translation rate was 2 LCU to $1). Therefore, Blackwood has a foreign exchange translation loss of $5,000 in 20X5 that is included in other comprehensive income for 20X5.

Bard Co., a calendar-year corporation, reported income before income tax expense of $10,000 and income tax expense of $1,500 in its interim income statement for the first quarter of the year. Bard had income before income tax expense of $20,000 for the second quarter and an estimated effective annual rate of 25%. What amount should Bard report as income tax expense in its interim income statement for the second quarter?

$6,000 year 1 income 10k year 2 income 20k = 30k total income up to the second quarter 30k x the EFFECTIVE ANNUAL RATE OF 25% = 7,500 * we multiply the cumulative total income with the effective annual rate because this is the annual rate so we need the total income not just for the quarter 7,500 - first quarter income tax expense 1,500

On January 16, Tree Co. paid $60,000 in property taxes on its factory for the current calendar year. On April 2, Tree paid $240,000 for unanticipated major repairs to its factory equipment. The repairs will benefit operations for the remainder of the calendar year. What amount of these expenses should Tree include in its third quarter interim financial statements for the three months ended September 30?

$95,000 60k/4 = 15k 240k/3 = 80k (repairs paid on 4/2 so divide it by 3 quarters = 95k

What expense should be recorded on the income statement on 6/30/1 (3rd quarter) 12/31/1 est. total depreciation expense 60k 12/31/1 total bonus to employees 120k

(6/12) x 60k + (6/12/) x 120k = 90k expense will be reported on the interim income statement

Gordon Ltd., a 100% owned British subsidiary of a U.S. parent company, reports its financial statements in local currency, the British pound. A local newspaper published the following U.S. exchange rates to the British pound at year end: Current rate $1.50 Historical rate (acquisition) $1.70 Average rate $1.55 Inventory (FIFO) $1.60

1.55 Gordon's (the British subsidiary) functional currency is the British pound. To convert the British pound to U.S. dollars (U.S. parent's reporting currency), the current method is utilized in which income statement items such as, revenues, expenses, gains and losses, are translated at the weighted-average rate for the year. The chart below reflects the various foreign currency translation components, including using the weighted-average rate for income statement items.

An enterprise must separately report information about an operating segment when the segment's revenue meets what minimum percentage of the combined revenue of all reported operating segments?

10%

On October 1, 20X2, Velec Co., a U.S. company, contracted to purchase foreign goods requiring payment in francs one month after their receipt at Velec's factory. Title to the goods passed on December 15, 20X2. The goods were still in transit on December 31, 20X2. Exchange rates were one dollar to 22 francs, 20 francs, and 21 francs, on October 1, December 15, and December 31, 20X2, respectively. Velec should account for the exchange rate fluctuation in 20X2 as

A gain included in income from continuing operations. To illustrate, assume the amount of francs needed to purchase the goods was 4,000 francs. At December 15, 20X2 , the exchange rate was one dollar to 20 francs. If we converted this to U. S. Dollars, take the 4,000 francs, divided by 20 francs and the purchase price in U.S. dollars is $200, at December 15, 20X2. At year end December 31, 20X2, the exchange rate was one dollar to 21 francs. To convert the 4,000 francs to U. S. dollars at December 31, 20X2, take the 4,000 and divide it by 21 francs and this would give you the purchase price of $190 at December 31, 20X2. The purchase price on the date that title passed was $200 and because the yearend financial statements are prepared at 12/31/X2, the cost to purchase at 12/31/X2 would have been $190 or, $10 less, due to the exchange rates. When the amount to purchase the goods at year end is less than the price that the company would have to pay when title passes, this would result in a foreign currency transaction gain of $10.

On June 1, year 1, ABC Co. issued a 200,000 euro purchase order for equipment to be supplied by a German company. ABC's functional currency is the U.S. dollar. The equipment was delivered to ABC on November 1, year 1, and ABC recorded a payable due to the German company. ABC paid for the equipment on January 31, year 2. The following are the exchange rates in effect: June 1, year 1 1 euro = 1.40 U.S. dollars November 1, year 1 1 euro = 1.50 U.S. dollars December 31, year 1 1 euro = 1.35 U.S. dollars January 31, year 2 1 euro = 1.30 U.S. dollars Under IFRS, what is the foreign currency gain or loss that ABC should record for the year ended December 31, year 1?

A gain of $30,000. The US dollar is the functional currency. Also, the transaction is denominated in Euro's, so the transaction must be adjusted for a gain or loss at the reporting date of 12/31/1. 11/1/1: Delivery and payable recording date (200,000 × 1.5) $300,000 12/31/1: (200,000 × 1.35) $(270,000) = Gain $30,000

In a personal financial statement how is a person's artwork reported

A person's artwork is reported on the financial statement as an Appraised value

In a statement of personal financial condition what should be shown as the investment in another company

In a personal financial statement it should be recorded using the estimated current value at the FV

How should vested interest in the pension plan be reported as in personal financial statement

In a personal financial statement the vested interest in the pension plan should be reported at estimated current values which is the discounted amount for pension plans

How should a business interest that constitute a large part of an individual's total assets should be presented in a personal statement of financial condition

hat business interest is a SINGLE AMOUNT EQUAL to the estimate current value of business interest. This business interest that constitute a large part of a person's total assets should be shown separately from OTHER INVESTMENTS at FV

Due to a decline in market price in the second quarter, Petal Co. incurred an inventory loss. The market price is expected to return to previous levels by the end of the year. At the end of the year the decline had not reversed. When should the loss be reported in Petal's interim income statements?

In the fourth quarter only. In the second interim period Petal Co. determined that the inventory loss is only temporary because the price is EXPECTED to rise again. Temporary market declone need not be recognized at the interim date because it's temporary so there's no reason to incorproate it. IN the 4th quarter Petal noticed that the decline had not reversed so it needs to record the loss.

A component of Ace Inc. was discontinued during 20X2. Ace's loss on disposal should

Include additional pension costs associated with the decision to dispose. Opinion states further, costs and expenses directly associated with the decision to dispose" are included in computing the loss on disposal. Such costs include severance pay, additional pension costs, employee relocation expenses, and future rentals on long-term leases.

What amount should be recorded for investment in life insurance on an individual's personal statement of financial condition?

Cash value at year end - policy loan

On April 30, 20X3, Algee, Belger, and Ceda formed a partnership by combining their separate business proprietorships. Algee contributed cash of $50,000. Belger contributed property with a $36,000 carrying amount, a $40,000 original cost, and $80,000 fair value. The property contributed by Belger had a $35,000 mortgage attached to it and the partnership accepted responsibility for the debt. Ceda contributed equipment with a $30,000 carrying amount, a $75,000 original cost, and $55,000 fair value. The partnership agreement specifies that profits and losses are to be shared equally but is silent regarding capital contributions. Which partner has the largest April 30, 20X3, capital account balance?

Ceda. In determining the capital balances of the partners, we look at the net fair value of the assets contributed to the partnership. We are given that Algee contributed cash of $50,000. Thus, his capital balance is $50,000. As for Belger, although the fair value of the property contributed was $80,000 (carrying amount is totally ignored since it is irrelevant), his capital account will only be credited for $45,000. This is because the partnership assumed the mortgage of $35,000 on the property, reducing Belger's net contribution is only $45,000. As for Ceda, his capital account is credited for the fair value of the equipment contributed, or $55,000. Therefore, Ceda will have the largest April 30, 20X3, capital account balance.

How are discontinued operations that occur at midyear initially reported?

Included in net income and disclosed in the notes to interim financial statements. Discontinued operations that occur at midyear are reported in the net income of the interim period and are disclosed in the footnotes of the interim financial statements.

In a personal statement of financial condition how is income taxes payable recorded

Income taxes payable in includes 1) unpaid income tax for completed tax years and 2) estimated income tax for elapsed portion of current tax year to date of financial statement

How are ESTIMATED income taxes reported on the statement of financial condition and how are CURRENT taxes owed

Estimated income taxes is the difference between the ESTIMATED CURRENT values and CURRENT amounts and CURRENT amounts of assets and liabilities at the respective tax bases CURRENT taxes are reported as CURRENT liability in the statement of financial condition

under IFRS how does a company apply interim reporting

Interim reports are NOT required under IFRS but if it decides to do so it must provide 1)statement of financial position 2) statement of comprehensive income 3) the statement of changes in equity 4) statement of cash flows

What would be reported for a person's vested interest in the 401(k) plan in that person's 12/31/3 personal statement of financial condition if that person did NOT complete 3 years of service but was supposed to

If that individual did not complete 3 years of service then NONE of the employer's contributions have vested. Then this employee's vested 401k is their own contribution year 1 contributions $2,100 year 2 contributions $2300 year 3 contributions $2600 = $7000 earnings above contributions $1200 Person's vested interest=$8200

Are noncancelable personal commitments liabilities

No they're not. They are recorded at their discounted cash flow

What is the process for admission of a new partner using the bonus method? What is the JE? IF there is no goodwill method then use the bonus method

Old Partnership equity +new partner contribution = New Partnership equity New partnership equity x new partner % = new partner equity account new partner contribution -new partner equity amount = bonus to/payment from prior partners using same allocation as P/L Cash xx Bonus to new partner (plug) _____new partner capital _____old partner's capital bonus (plug)

What is the journal entry for partners dissolving their partnership and transferred all assets and liabilities to a newly formed corporation?

Partnerships net assets xx _____common shares received _____APIC (plug) Partners gave up their partnership capital (debited) and received common stocks (credited) to become owners of the corporation

Which of the following types of entities are required to report on business segments?

Publicly-traded enterprises.

What are the accounting principles used for interim reporting?

Same principals used for annual reporting purposes should be applied to interim periods.

How do we report a partner's capital contribution if there is a mortgage associated with it?

The FV of the asset contributed is REDUCED by the mortgage/loan associated with it ex. if you contribute a 100k building with a 20k loan you capital account is increased by 80k and not the full 100k. This liability associated with the building CANNOT BE ALLOCATED TO OTHER PARTNERS BASED ON OWNERSHIP %

lets say for example a partnership incurs a loss because it earned 80k but it needs to distribute 100k in salary allowances. How is this 20k loss distributed?

This loss is distributed based on allocation

What is the forign currency translation

Translation U.S. corporation has a subsidiary in a foreign Country Functional/Reporting currency is the US dollar The translation issue then revolves around translating the foreign subsidiary's financial statements into the reporting currency of the parent for purposes of preparing consolidated financial statements G/L goes to OCI

For interim financial reporting a company's income tax provision for the 2nd quarter of year 1 should be determined using what rate?

effective tax rate expected to be applicable for the full year of year 1 as estimated at the end of the second quarter of year 1 (the estimated tax rate should be updated as of the end of each interim period in this case it would be the 2nd quarter)

In the formation of a partnership how should contributed assets be recorded?

When the partner contributes assets they should be recorded at FV

A publicly traded company that uses segment reporting needs an additional disclosure of major customer data under what circumstance?

a company must additionally disclose a single customer data if sales to this single customer exceed 10% or more of consolidated revenue

Define policy loan

a policy loan is when the insurance company gives a loan to the policyholder (person who holds the insurance) and if the policyholder dies before paying back the loan then the insurance company will take the policy holder's death benefit and minus the unpayed portion of loan before that loan gets distributed

define monetary assete

assets that can be converted into cash in the short term 3 motnhs or less

In the formation of a partnership how should liabilities assumed by the partnership be valued?

at the present value of the remaining cash flow

What is the aggregate reportable operating segment?

company might want to lump operating segments together. GAAP discourages you from doing this ONLY ALLOWED IF (aggregation criteria) 1) auditors allow it because it's consistent with the standards 2) segments share similar characteristics 3) before 10% tests the operating segments must meet ALL of the factors or after failing 10% test but are similar in a MAJORITY of the following nature of products, services, production process, methods used to distribute products, provide sevices, regulatoiry environment, customer

what is the big picture in foreign currency translations

converting financial statements non us dollars into us dollars 2 method under us GAAP 1)current rate 2) remeasurement metghod

when is the current rate method for translation of foreign currency financial statement used?

current rate method is used when a foreign subsidiriary's functional currency is its local currency * foreign subsidiary's spends their local currency and raises it in their country

What does estimated current value include in a personal financial statement

depending on the NATURE OF THE ASSET, current value can be estimated using the following 1) Fair market value 2) net realizable value 3) Discounted cash flow 4) appraised value

What is the management approach?

determine whether or not a segment is operating it must meet all 3 factors: 1) earn rev and incur expenses 2) chief decision maker reviews operating results for resource allocating (purposes of budgeting) and performance such (ROI) 3) financial information is already available (track it separately in system) *helps determine what information to report for business segments