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 assets-net 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:

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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.