acc401 all module exams latest 2017 august

Module 2 exam 1 Question 1 (20 points) On January 2 2013 Piron Corporation issued 100 000 new shares of its $5 par value common stock valued at $19 a share for all of Seana Corporation’s outstanding common shares. Piron paid $15 000 to register and issue shares. Piron also paid $20 000 for the direct combination costs of the accountants. The fair value and book value of Seana’s identifiable assets and liabilities were the same. Summarized balance sheet information for both companies just before the acquisition on January 2 2013 is as follows: Piron Seana Cash $150 000 $120 000 Inventories 320 000 400 000 Other current assets 500 000 500 000 Land 350 000 250 000 Plant assetsnet 4 000 000 1 500 000 Total assets $5 320 000 $2 770 000 Accounts payable $1 000 000 $300 000 Notes payable 1 300 000 660 000 Capital stock $5 par 2 000 000 500 000 Additional paid-in capital 1 000 000 100 000 Retained earnings 20 000 1 210 000 Total liabilities & equities $5 320 000 $2 770 000 Part 1: Prepare Piron’s general journal entry for the acquisition of Seana assuming that Seana survives as a separate legal entity. Part 2: Prepare Piron’s general journal entry for the acquisition of Seana assuming that Seana will dissolve as a separate legal entity. Question 1 options: Question 2 (20 points) Question 2 Und Pancake Corporation saw the potential for vertical integration and purchased a 15% interest in Syrup Corp. on January 1 2013 for $150 000. At that date Syrup’s stockholders’ equity included $200 000 of $10 par value common stock $300 000 of additional paid in capital and $500 000 retained earnings. The companies began to work together and realized improved sales by both parties. On December 31 2014 Pancake paid $250 000 for an additional 20% interest in Syrup Corp. Both of Pancake’s investments were made when Syrup’s book values equaled their fair values. Syrup’s net income and dividends for 2013 and 2014 were as follows: 2013 2014 Net income $220 000 $330 000 Dividends $20 000 $30 000 Part 1: Prepare journal entries for Pancake Corporation to account for its investment in Syrup Corporation for 2013 and 2014. Part 2: Calculate the balance of Pancake’s investment in Syrup at December 31 2014. Question 2 options: Question 3 (20 points) Question 3 Und On January 1 2013 Pailor Inc. purchased 40% of the outstanding stock of Saska Company for $300 000. At that time Saska’s stockholders’ equity consisted of $270 000 common stock and $330 000 of retained earnings. Saska Corporation reported net income of $360 000 for 2013. The allocation of the $60 000 excess of cost over book value acquired is shown below along with information relating to the useful lives of the items: Overvalued receivables (collected in 2013) $(5 000) Undervalued inventories (sold in 2013) 16 000 Undervalued building (4 years’ useful life remaining at January 1 2013) 24 000 Undervalued land 8 000 Unrecorded patent (6 years’ economic life remaining at January 1 2013) 18 000 Undervalued accounts payable (paid in 2013) (4 000) Total of excess allocated to identifiable assets and liabilities 57 000 Goodwill 3 000 Excess cost over book value acquired $60 000 Determine Pailor’s investment income from Saska for 2013. Question 3 options: Question 4 (20 points) Question 4 Und On July 1 2014 Polliwog Incorporated paid cash for 21 000 shares of Salamander Company’s $10 par value stock when it was trading at $22 per share. At that time Salamander’s total stockholders’ equity was $597 000 and they had 30 000 shares of stock outstanding both before and after the purchase. The book value of Salamander’s net assets is believed to approximate the fair values. Part 1: Prepare the journal entry that Polliwog would record at the date of acquisition on their general ledger. Part 2: Calculate the balance of the goodwill that would be recorded on Polliwog’s general ledger on Salamander’s general ledger and in the consolidated financial statements. Question 4 options: Question 5 (20 points) Question 5 Und On January 1 2014 Pinnead Incorporated paid $300 000 for an 80% interest in Shalle Company. At that time Shalle’s total book value was $300 000. Patents were undervalued in the amount of $10 000. Patents had a 5 year remaining useful life and any remaining excess value was attributed to goodwill. The income statements for the year ended December 31 2014 of Pinnead and Shalle are summarized below: Pinnead Shalle Sales $800 000 $300 000 Income from Shalle 78 400 Cost of sales (100 000) (100 000) Depreciation (70 000) (30 000) Other expenses (130 000) (70 000) Net income $578 400 $100 000 Part 1: Calculate the goodwill that will appear in the consolidated balance sheet of Pinnead and Subsidiary at December 31 2014. Part 2: Calculate consolidated net income for 2014. Part 3: Calculate the noncontrolling interest share for 2014. Module 4 exam 2 Question 1 (20 points) Question 1 Unsaved On December 31 2014 Paladium International purchased 70% of the outstanding common stock of Sennex Chemical. Paladium paid $140 000 for the shares and determined that the fair value of all recorded Sennex assets and liabilities approximated their book values with the exception of a customer list that was not recorded and had a fair value of $10 000 and an expected remaining useful life of 5 years. At the time of purchase Sennex had stockholders’ equity consisting of capital stock amounting to $20 000 and retained earnings amounting to $80 000. Any remaining excess fair value was attributed to goodwill. The separate financial statements at December 31 2015 appear in the first two columns of the consolidation workpapers shown below. Complete the consolidation working papers for Paladium and Sennex for the year 2015. Paladium Sennex Eliminations Consolidated Debit Credit INCOME STATEMENT Sales $ 331 900 48 000 Income of Sennex 9 100 Cost of Sales (148 000) (25 000) Other Expenses (72 000) (8 000) Noncontrolling Interest Share Net Income 121 000 15 000 Retained Earnings 1/1 846 000 80 000 Add: Net Income 121 000 15 000 Less: Dividends (9 000) (4 000) Retained Earnings 12/31 $ 958 000 91 000 BALANCE SHEET Cash 135 000 64 000 Accounts Receivable-net 227 000 160 000 Inventories 316 000 86 000 Land 80 000 40 000 Equipment and Buildings-net 469 000 230 000 Investment in Sennex 146 300 Customer List Goodwill TOTAL ASSETS $ 1 373 300 580 000 LIAB. & EQUITY Accounts Payable $ 305 300 469 000 Capital Stock 110 000 20 000 Retained earnings 958 000 91 000 1/1 Noncontrol. Interest 12/31 Noncontrol. Int. TOTAL LIAB. & EQUITY $ 1 373 300 580 000 Question 1 options: Spell check Save Question 2 (20 points) Question 2 Unsaved Packo Company acquired all the voting stock of Sennett Corporation on January 1 2014 for $90 000 when Sennett had Capital Stock of $50 000 and Retained Earnings of $8 000. The excess of fair value over book value was allocated as follows: (1) $5 000 to inventories (sold in 2014) (2) $16 000 to equipment with a 4-year remaining useful life (straight-line method of depreciation) and (3) the remainder to goodwill. Financial statements for Packo and Sennett at the end of the fiscal year ended December 31 2015 (two years after acquisition) appear in the first two columns of the partially completed consolidation working papers. Packo has accounted for its investment in Sennett using the equity method of accounting. Complete the consolidation working papers for Packo Company and Subsidiary for the year ending December 31 2015. Packo Sennett Eliminations Consolidated Debit Credit INCOME STATEMENT Sales $ 206 000 60 000 Income from Sennett 8 000 Cost of Sales (150 000) (30 000) Other Expenses (38 000) (18 000) Net Income 26 000 12 000 Packo Retained Earnings 1/1 24 000 Sennett Retained Earnings 1/1 10 000 Add: Net Income 26 000 12 000 Less: Dividends (20 000) (4 000) Retained Earnings 12/31 $ 30 000 18 000 BALANCE SHEET Other Current Assets 10 000 7 000 Inventories 21 000 15 000 Land 11 000 6 000 Equipment and Buildings-net 64 000 55 000 Investment in Sennett Corp. 87 000 Goodwill TOTAL ASSETS $ 193 000 83 000 LIAB. & EQUITY Liabilities $ 63 000 15 000 Capital Stock 100 000 50 000 Retained earnings 30 000 18 000 TOTAL LIAB. & EQUITY $ 193 000 83 000 Question 3 Question 3 Unsaved Pommu Corporation paid $78 000 for a 60% interest in Schtick Inc. on January 1 2014 when Schtick’s Capital Stock was $80 000 and its Retained Earnings $20 000. The fair values of Schtick’s identifiable assets and liabilities were the same as the recorded book values on the acquisition date. Trial balances at the end of the year on December 31 2014 are given below: Pommu Schtick Cash $4 500 $20 000 Accounts Receivable 24 000 30 000 Inventory 100 000 70 000 Investment in Schtick 78 000 Cost of Goods Sold 71 500 50 000 Operating Expenses 22 000 37 000 Dividends 15 000 10 000 $315 000 $217 000 Liabilities $47 000 $27 000 Capital stock $10 par value 100 000 80 000 Additional Paid-in Capital 11 000 Retained Earnings 31 000 20 000 Sales Revenue 120 000 90 000 Dividend Income 6 000 $315 000 $217 000 During 2014 Pommu made only two journal entries with respect to its investment in Schtick. On January 1 2014 it debited the Investment in Schtick account for $78 000 and on November 1 2014 it credited Dividend Income for $6 000. Part 1: Prepare a consolidated income statement and a statement of retained earnings for Pommu and Subsidiary for the year ended December 31 2014. Part 2: Prepare a consolidated balance sheet for Pommu and Subsidiary as of December 31 2014. Question 4 (20 points) Question 4 Unsaved Salli Corporation regularly purchases merchandise from their 90% owner Playtime Corporation. Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli’s net assets. At the time of acquisition the book values and fair values of Salli’s assets and liabilities were equal. Playtime makes their sales to Salli at 120% of cost. In 2014 Salli reported net income of $460 000 and made purchases totaling $172 000 from Playtime. Although Salli had no inventory on hand at the beginning of 2014 that they had purchased from Playtime at year end they had $51 600 of this merchandise in inventory. Part 1: Determine the unrealized profit in Salli’s inventory at December 31 2014. Part 2: Compute Playtime’s income from Salli for 2014. Question 5 (20 points) Question 5 Unsaved Perry Instruments International purchased 75% of the outstanding common stock of Standard Systems in 1997 when the book values and fair values of Standard’s assets and liabilities were equal. The cost of Perry’s investment was equal to 75% of the book value of Standard’s net assets. Separate company income statements for Perry and Standard for the year ended December 31 2014 are summarized as follows: Perry Standard Sales Revenue $2 400 000 $800 000 Investment income from Standard 142 000 Cost of Goods Sold (1 600 000) (400 000) Expenses (450 000) (200 000) Net Income $492 000 $200 000 During 2014 the companies began to manage their inventory differently and worked together to keep their inventories low at each location. In doing so they agreed to sell inventory to each other as needed at a markup of 10% of cost. Perry sold merchandise that cost $100 000 to Standard for $110 000 and Standard sold inventory that cost $80 000 to Perry for $88 000. Half of this merchandise remained in each company’s inventory at December 31 2014. Prepare a consolidated income statement for Perry Corporation and Subsidiary for 2014. Module 6 exam 3 Question 1 (16 points) Question 1 Unsaved On September 1 2014 Bylin Company purchased merchandise from Himeji Company of Japan for 20 000 000 yen payable on October 1 2014. The spot rate for yen was $0.0079 on September 1 and the spot rate was $0.0077 on October 1. The purchase was paid on October 1 2014. Part 1: Did the U.S. dollar strengthen or weaken from September to October and what are the implications for Bylin’s business? Part 2: What journal entry did Bylin record on September 1 2014? Part 3: What journal entry did Bylin record on October 1 2014 Question 2 Tank Corporation a U.S. manufacturer has a June 30 fiscal year end. Tank sold goods to their customer in Columbia on May 27 2014 for 18 000 000 Columbian pesos. The customer agreed to pay pesos in 60 days. When the customer wired the funds to Tank on July 26 Tank held them in their bank account until July 31 before selling them and converting them to U.S. dollars. The following exchange rates apply: May 27 $0.00055 June 30 $0.00052 July 26 $0.00058 July 31 $0.00056 Record the journal entries related to the dates listed above. If no entry is required state “no entry.” Question 3 (16 points) Charin Corporation a U.S. corporation imports and exports small electronics. On December 1 2014 Charin purchased components from an Egyptian manufacturer amounting to 500 000 Egyptian pounds. The purchase is payable in Egyptian pounds. At December 30 Charin wanted to take advantage of favorable exchange rates but did not have the full amount required to pay off the entire amount. Charin wired the funds to pay off half of the balance owed and expected to pay the remaining balance on January 3 2015. Charin paid the remaining balance on January 3 2015. The respective exchange rates were as follows: December 1 2014 1 pound = $.170 December 30 2014 1 pound = $.165 December 31 2014 1 pound = $.175 January 3 2015 1 pound = $.180 Document the journal entries related to these transactions for the four dates shown. If no entry is required record “no entry. Question 4 Question 4 Unsaved On June 1 2014 Dapple Industries purchases an option contract for $5 000 on 10 000 gallons of aviation gas to minimize its purchasing cost price exposure. At the time the market price is $2.50 per gallon and the option price of $2 per gallon will expire 6 months later. Dapple can exercise the option at its discretion. When Dapple prepares quarterly reports on June 30 Dapple is still holding the option. On June 30 the market price of aviation gas is $4.50 per gallon. The option is to be settled net. On August 1 Dapple exercises the option when the gas market price is $5.00 per gallon and purchases 40 000 gallons of gas. On August 15 Dapple uses all of the gas on a charter flight. What are Dapple’s journal entries with regard to the aviation gas option? Assume this is a cash flow hedge. Ignore the time value of money. Question 5 (16 points) On November 1 2013 Mayberry Corporation a U.S. corporation purchased from Cantata Corporation a Mexican company some machinery that cost 1 000 000 pesos. The invoice was payable in pesos on January 30 2014. To hedge against rapid changes in the peso Mayberry entered into a forward contract on November 1 2013 with AB Trader & Company a US brokerage and investment firm. The contract specified that Mayberry would buy 1 000 000 pesos from AB Trader at $0.084 per peso for settlement on January 30 2014. Assume that all three companies are subject to the same accounting standards and have December 31st year-ends. The spot rates for pesos on November 1 December 31 and January 30 are $0.082 $0.080 and $0.089 respectively. The 30-day forward rate for pesos on December 31 2013 is $0.083. The forward contract is not settled net. Record General Journal entries for Mayberry Corporation on November 1 December 31 and January 30. If no entry is required on a particular date indicate “no entry” in the General Journal. This is a fair value hedge. Module 8 exam 4 Question 1 Dan and Ellie share partnership profits and losses at 70% and 30% respectively. The partners agree to admit Fran into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Fran are: Dan (70%) $ 800 000 Ellie (30%) 400 000 Total $ 1 200 000 Part 1: Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $800 000 for the ownership interest and that this is a fair price for that share of the partnership to be acquired. Fran paid the money directly to Dan and to Ellie for 50% of each of their respective capital interests. The partnership records goodwill. Part 2: Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $1 000 000 for the ownership interest. Fran paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership which is fairly valued. The partnership records goodwill. Part 3: Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $1 400 000 for the ownership interest and that this is a fair price for that share of the partnership to be acquired. Fran paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill. Question 2 Adam Bella and Chris operate a partnership with a complex profit and loss sharing agreement. The average capital balance for Adam Bella and Chris on December 31 2014 is $120 000 $270 000 and $340 000 respectively. A 6% interest allocation is provided to each partner based on the average capital balance on December 31 2014. Adam and Bella receive salary allocations of $40 000 and $50 000 respectively. If partnership net income is above $160 000 after the salary allocations are considered (but before the interest allocations are considered) Chris will receive a bonus of 10% of the income (pre-salary and interest but net of the bonus). All residual income is allocated in the ratios of 2:2:6 to Adam Bella and Chris respectively. Part 1: Prepare a schedule to allocate income to the partners assuming that the partnership net income for 2014 is $330 000. Part 2: Prepare a journal entry to distribute the partnership’s income to the partners (assume that an Income Summary account is used by the partnership). Question 3 The balance sheet of the Addy Bess and Clara partnership on January 1 2014 (the date of partnership dissolution) was as follows: Cash $ 4 000 Liabilities $ 8 000 Other assets 26 000 Loan from Addy 1 000 Loan to Clara 2 000 Addy capital (20%) 2 000 Bess capital (40%) 9 000 Clara capital (40%) 12 000 Total assets $ 32 000 Total liab./equity $ 32 000 In January other assets with a book value of $16 000 were sold for $10 000 in cash. Determine how the available cash on January 31 2014 will be distributed. (Use a safe payments schedule.) Question 4 Alitech Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Alitech at the time of filing are summarized as follows: Estimated Realizable Book Value Value Cash $ 10 000 $ 10 000 Accounts receivable-net 60 000 50 000 Inventory 110 000 65 000 Land 20 000 35 000 Building 200 000 126 000 Goodwill 22 000 $ 422 000 Accounts payable $ 120 000 Wages and salaries 30 000 Taxes payable 80 000 Accrued mortgage interest payable 22 000 Mortgage payable 100 000 Capital stock 90 000 Deficit (20 000) $ 422 000 The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage. Wages and salaries were earned within 90 days of filing the petition for bankruptcy and do not exceed $10 000 per employee. Liquidation expenses are expected to be $30 000. Part 1: Prepare a schedule showing the priority rankings of the creditors and the expected payouts. Part 2: Billing Corporation was a supplier to Alitech Corporation and at the time of Alitech’s bankruptcy filing Billing’s account receivable from Alitech was $40 000. On the basis of the estimates how much can Billing expect to receive? Question 5 Kline Corporation incurred major losses in 2014 and entered into voluntary Chapter 7 bankruptcy in the early part of 2015. By July 1 all assets were converted into cash the secured creditors were paid and $122 700 in cash was left to pay the remaining claims as follows: Accounts payable $ 37 000 Claims incurred between the date of filing an involuntary 5 000 petition and the date an interim trustee is appointed Property taxes payable 8 000 Wages payable (all under $10 000 per employee; 74 000 earned within 90 days of filing bankruptcy petition) Unsecured note payable 19 000 Accrued interest on the note payable 2 000 Administrative expenses of the trustee 12 180 Total $ 157 180 Classify the claims by their Chapter 7 priority ranking and analyze which amounts will be paid and which amounts will be written off. Question 6 Hilfmir Corporation filed for Chapter 11 bankruptcy on January 1 2014. A summary of their financial status is shown below on June 30 2014 at the date of the approved reorganization along with the fair value of their assets. Per Books Fair Value Cash $ 134 000 $ 134 000 A/R – net 20 000 20 000 Inventory 32 000 40 000 Plant Assets – net 114 000 106 000 Patent 80 000 0 $ 380 000 A/P $ 60 000 Wages Payable 20 000 Prepetition liab. 250 000 Common Stock 140 000 Deficit (90 000) $ 380 000 Under the reorganization plan the reorganization value has been set at $320 000. Prepetition liabilities include $30 000 of trade Accounts Payable and a $220 000 Note Payable to Bigg Bank. The reorganization plan calls for the Prepetition accounts payable to be paid at 80% at a later date and the Note Payable for $220 000 to be replaced by a Note Payable for $76 000 and the issuance of common stock of the new entity for $100 000. The former stockholders will receive $40 000 in common stock of the new entity Hilfmir in exchange for their shares. Show the calculations to determine if Hilfmir is eligible for fresh-start accounting and prepare a fresh-start balance sheet for the new entity Hilfmir as of July 1 2014.