Far sim 1 exam Flashcards
Explain
To calculate the consolidated net income of a parent and its subsidiary how do you calculate
You take Parents net income then you subtract out the subequity in earnings of sub from parents net income then you add back parents investment in subsidiaries income and you subtract out any goodwill
Marr Co. had the following sales and accounts receivable balances, prior to any adjustments at year end:
Credit sales
10,000,000
Accounts receivable
3,000,000
Allowance for uncollectible accounts (debit balance)
50,000
Marr uses 3% of accounts receivable to determine its allowance for uncollectible accounts at year end. By what amount should Marr adjust its allowance for uncollectible accounts at year end?
First to calculate we see that that it uses the percentage of ar we multiply the 3 million times 3% to get a 90,000 credit balance. However we have aa debit balance in order to get a debit to a credit we have to take
(50000). =50+90=140000
140000 is what you have to adjust it by to get to the ending credit balance.
Debit uncollectible accounts expense and credit allowance for uncollectible accounts
Balfour Charities, a not-for-profit organization, received a $200,000 cash donation from Emily Balfour under a charitable remainder annuity trust agreement designating the Balfour Charities as both trustee and remainder beneficiary. The trust agreement specifies that Balfour Charities must both invest the $200,000 and pay $10,000 per year to Roscoe Balfour, Emily’s cousin, until his death. Any funds remaining after Roscoe’s death will be retained by Balfour Charities and used in a manner consistent with their vision. The present value of the annuity payable to Roscoe is $65,000. As a result of this transaction, Balfour would recognize contributions of:
Emilys contribution represents a split interest agreement and to account for such we take the fair value of the investment less the present value of the payable to get the amount of contribution. We also recognize contributions in the amount that the fair value of contributions exceeds the present value of
On December 31, Year 4, the stockholders’ equity section of Adler Co. was as follows:
Common stock, par value $10, authorized, 60,000 shares, issued and outstanding, 18,000 shares
180,000
Additional paid-in capital
232,000
Retained earnings
192,000
Total stockholders’ equity
604,000
On March 31, Year 5, Adler declared a 10% stock dividend, and accordingly 1,800 additional shares were issued, when the fair market value of the stock was $16 per share. For the three months ended March 31, Year 5, Adler sustained a net loss of $64,000. The balance of Adler’s retained earnings as of March 31, Year 5, is:
Disregard the percentage of the small stock dividends small stock dividends are calculaated as faoir value times number of shares then subtracted from retained earnings.And then reduced by the net loss as well
Marvin Corporation signed a five-year lease agreement on January 1, Year 1, in a transaction properly classified as a finance lease. The present value of the $125,000 minimum lease payments discounted at 10 percent at the date of signing was $600,000. Marvin owed $125,000 at the date of signing and five installments of $125,000 due on December 31 of each year, starting on December 31, Year 1. What should Marvin record as the current maturity on the lease at December 31, Year 2?
Current maturity will be the amortixation calculated at the end of the third year not the second
Cross Corp. had outstanding 2,000 shares of 11% preferred stock, $50 par. On August 8, Cross redeemed and retired 25% of these shares for $22,500. On that date, Cross’ additional paid-in capital from preferred stock totaled $30,000. To record this transaction, Cross should debit (credit) its capital accounts as follows:
ule: If the reacquisition price is:
a)
Less than original issue price, the “gain” is credited to APIC;
b)
More than original issue price, the “loss” is debited to retained earnings.
Preferred
stock
Add. paid-
in capital
Retained
earnings
Cash
Recorded book values (2,000 sh x $50)
100,000
30,000
Percentage redeemed
x 25%
x 25%
Book value of redemption
25,000
7,500
Redemption/retirement debit (credit)
(25,000)
2,500
± 0
= (22,500)
Question
The following question is based on the following:
Vane Co.’s trial balance of income statement accounts for the year ended December 31, Year 1, included the following:
Debit Credit
Sales
575,000
Cost of sales
240,000
Administrative expenses
70,000
Loss on sale of equipment
10,000
Sales commissions
50,000
Interest revenue
25,000
Freight out
15,000
Loss on early retirement of long-term debt
20,000
Uncollectible accounts expense
15,000
Total
420,000
600,000
Other information
Finished goods inventory:
January 1, Year 1 $400,000
December 31, Year 1
$360,000
Vane’s income tax rate is 30%.
In Vane’s Year 1 multiple-step income statement, what amount should Vane report as income from continuing operations?
Just taake your debits less your credits and multiply by your tax rate
Burgess Co. purchase 35% of Egg Co’s outstanding common stock on December 31 for $300,000. On that date, Egg’s stockholders’ equity was $600,000, and the fair value of its identifiable assets was $700,000. On December 31, what amount of goodwill should Burgess attribute to this acquisition?
Take 300,000 subtract out she times 35%
Then take the fair value of assets and subtract out she and multiply by 35% subtract from amount calculated abive
Question
Giaconda, Inc. acquires an asset for which it will measure the fair value by discounting future cash flows of the asset. Which of the following terms best describes this fair value measurement approach?
Income
subsequent events classification
. Subsequent events that provide information about conditions that occurred after the balance sheet date and did not exist at the balance sheet date are nonrecognized subsequent events. This type of subsequent event is not recognized in the financial statements; but, is disclosed in the notes to the financial statements.
Discontinued ops reported
net of tax aand also with imairment losses
USE BASE to see depreciation and retirements
B-begin accumulaated depreciation from prior yeaar
Add depreciation expense from current year unknown retirement
Ending is accumulated depreciation for current yeara
