Reference no: EM131288653

Question 1:

On January 1, Year 7, the Vine Company purchased 60,000 or the 80,000 ordinary Shares of Company for $80 per share On that date. Devine had ordinary shams of 33,460,000, and retained earnings of 62,120.000. When acquired, Devine had inventories with fair values 680,000 less than carrying amount. a parcel of and with a fair value $220.000 greater than the carrying amount. and equipment with a fair value $220.000 less than carrying amount. There were also internally generated patents with an estimated market value of $420.000 and a five-year remaining life. A long-term liability had a market value $120.000 greater than carrying amount: this liability was paid off December 31. Year 10. All other identifiable assets and liabilities of Devine had fair values equal to their carrying amounts. Devine's accumulated depreciation on the plant and equipment was $520,000 at the date of acquisition.

At the acquisition date. the equipment had an expected remaining useful life of ten years. Both companies use the straight-line method for all depreciation and amortization calculations and the FIFO inventory cost flow assumption. Assume a 40% income tax rate on all applicable items and that there were no impairment losses for goodwill.

On September 1. Year 11. Devine sold a parcel of land to Vine end recorded a total non-operating gain of $420,000

Sales of finished goods from Vine to Devine totalled $1.020.000 in Year 10 and $2.020.000 in Year 11. These sales were priced to provide a gross profit margin on selling price of 33 113% to the Vine Company. Devine's December 31, Year 10, inventory contained $306,000 of these sales: December 31. Year 11. inventory contained $606.000 of these sales.

Sales of finished goods from Devine to Vine were $820,000 in Year 10 and $1,220.000 in Year 11. These sates were priced to provide a gross profit margin on selling price of 40% to the Devine Company Vine's December 31, Year 10. inventory contained $170 000 of those sales the December 31 Year 11 inventory contained $520.000 of these sales, Vine's investment in Devine's account is carried in accordance with the cost method and includes advances to Devine of $220.000. which are also included in current liabilities.

There are no intercompany amounts other than those noted. except for the dividends of $500.000 (total amount) declared and paid by Devine.

Required:

(a) The allocation of the acquisition cost at acquisition and the related amortization schedule (Leave no cells blank - be certain to enter "0" wherever required, Enter your answers In dollars, not in thousands of dollars. Input all values as positive numbers. Do not round gross profit percentage for intermediate computations.

(b) Prepare a consolidated income statement with expenses classified by function. (Enter your answers in dollars, not in thousands of dollars. Input all values as positive numbers. Do not round gross profit percentage for intermediate computations.)(c) Calculate consolidated retained earnings at December 31. Year 11. (Enter your answer in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations.)

(d) Prepare a consolidated statement of financial position for Vine Company at December 31. Year 11_ (Negative amount should be indicated by a minus sign. Enter your answers in dollars, not in thousands of dollars. Do not round gross profit percentage for Intermediate computations.)

(e) Assume that Devine's shares were trading at $75 per share shortly before and after the date of acquisition, and that this data was used to value non-controlling interest at the date of acquisition. Calculate goodwill and non-controlling interest at December 31. Year 11 (Enter your answers in dollars, not in thousands of dollars. Do not round gross profit percentage for intermediate computations.)

(f) Prepare the consolidated financial statements using the worksheet approach. (Values in the first two columns and last column (the "parent", "subsidiary" and "consolidated" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Elimination" entries columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet Leave no cells blank - be certain to enter "0" wherever required. Enter your answers In dollars. Round your answer to nearest whole dollars.)

Question 2:

The following balance sheets have been prepared as at December 31, Year 6, for Kay Corp. and Adams Ventures.

Additional information

• Kay acquired as 40%, interest in Adams for $370,000 in Year 2. when Adams's retained ea minds amounted to $180,000. The acquisition differential on that date was fully amortized by the end of Year 6
• In Year 5, Kay sold land to Adams and recorded a gain of $70.000 on the transaction. Adams is still using this land_
• The December 31, Year 6. inventory of Kay contained a profit recorded by Adams amounting to 545.000.
• On December 31. Year 6. Adams owes Kay $39.000.
• Kay has used the cost method to account for its investment in Adams.
• Use income tax allocation at a rate of 40'in. but ignore income tax on the acquisition differential.

Required:

(a) Prepare three separate balance sheets for Kay as at December 31, Year 6

(I) Assuming that the investment in Adams is a control investment

(ii) Assuming that the investment in Adams is a joint operation and is reported using proportionately adjusted financial statements.

(III) Assuming that the Investment in Adams is a significant influence Investment

(b) Calculate the debt-to-equity ratio for each of the balance sheets in Part (a). (Round your answers to 2 decimal places.)

(c) Prepare the financial statement required for part (a) using the worksheet approach. (Input all amounts as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet Leave no cells blank - be certain to enter "0" wherever required.)

i) Control Investment

ii) Joint Operation Investment

iii) Significant Influence investment

Question 3.

Hull Manufacturing Corp. (HMO). a Canadian company. Manufactures instruments used to measure the moisture content of barley and wheal The company sells primary to the domestic market, but in Year 3. it developed a small market in Argentina. In Year 4, HMC began purchasing semi-finished components from a supplier in Romania. The management of HMC is concerned about the possible adverse effects of foreign exchange fluctuations. To deal with this matter, all of HMC's foreign-currency-denominated receivables and payables are hedged with contracts with the company's bank. The year-end of HMC is December 31

The following transactions occurred late in Year 4:

- On October 15, Year 4, HMC purchased components from its Romania supplier for 803,000 Romanian supplier 803,0,00 Romanian lugs (RL) On the same day HMC entered into a forward contract for RL803000 at the 50-day forward rate of RL1 = $0.411 The Romanian supplier was paid in frill on December 15, Year 4.

- On December 1. Year 4. HMC made a shipment to a customer in Argentina. The selling price was 2,503.000 Argentinean pesos (AP), with payment to be received on January 31, Year 5. HMC immediately entered into a forward contract for AP2,503,000 at the two-month forward rate of AP1 = SO 229

During this period, the exchange rates were as follows.

Hedge accounting is not adopted.

Required:

(a) Prepare the Year 4 journal entries to record the transactions described above and any adjusting entries necessary.

(b) Prepare the December 31, Year 4, balance sheet presentation of the receivable from the Argentinean customer, and the accounts associated with the forward contract.

Question 4.

The CPI Care Centre is an NFPO funded by government grants and private donations. It prepares its annual financial statements using the deferral method of accounting for contributions, and it uses only the operations fund to account for all activities

The following summarizes some of the transactions made in Year 6:

1. The founding member of OPI contributed $100.000 on the conditions that the principal amount be invested in marketable securities and that only the income earned from the investment is spent on operations

2. During the year, a public campaign was held to raise funds for daily operations for the current year. Cash of $800,000 was collected, and pledges fur an additional $100,000 were received by the end of the year. It is estimated that approximately 95% of these pledges will be collected early in the new year

3 The provincial government pledged $600.000 for the year to cover operating costs and an additional 61,000.000 to purchase equipment end furniture Al! of the orent money was received by the end of the year. except for the last 550.000 to cover operating costs for December

4. OPI used the $1,000.000 received from the provincial government to purchase equipment and furniture for the care facility The amortization of these assets amounted to $100.000 for the year A purchase order had not been issued for this purchase.

5. Invoices totaling $1,450,000 were received for goods and contracted services Of these invoices. 90% were paid by the end of the fiscal year

Required:

In accordance with the requirements of the CPA Canada Handbook, prepare the journal entries necessary to reflect the transactions.

Record contribution by the founding member and investment of the same in marketable securities.

Record cash collected and pledges receivable during the year

Record grant money received and receivable

Record purchase of equipment arid furniture.

Attachment:- Group Project-Acct.pdf