Question 1
1) On January 3, 2013, Matteson Corporation acquired 30 percent of the outstanding common stock of O?Toole Company for $1,209,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $840,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on balance sheet. This copyright has a remaining useful life of 10 years. For the year ended December 31, 2013, O?Toole reported net income of $308,000 and paid cash dividends of $40,000. At December 31, 2013, what should Matteson report as its investment in O?Toole under the equity method? 2) On January 1, 2012, Alison, Inc., paid $72,000 for a 40 percent interest in Holister Corporation?s common stock. This investee had assets with a book value of $260,500 and liabilities of $115,500. A patent held by Holister having a $10,200 book value was actually worth $23,700. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2012, Holister earned income of $39,000 and paid dividends of $13,000. In 2013, it had income of $61,500 and dividends of $18,000. During 2013, the fair value of Allison?s investment in Holister had risen from $84,500 to $92,700. a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2013? Investment in Holister $ b. Assuming Alison uses the fair-value option, what income from the investment in Holister should be reported for 2013? Investment income $ 3) Waters, Inc., acquired 10 percent of Denton Corporation on January 1, 2012, for $274,300 although Denton?s book value on that date was $2,190,000. Denton held land that was undervalued by $148,000 on its accounting records. During 2012, Denton earned a net income of $315,000 while paying cash dividends of $118,000. On January 1, 2013, Waters purchased an additional 30 percent of Denton for $779,250. Denton?s land is still undervalued on that date, but then by $170,000. Any additional excess cost was attributable to a trademark with a 10-year life for the first purchase and a 9-year life for the second. The initial 10 percent investment had been maintained at cost because fair values were not readily available. The equity method will now be applied. During 2013, Denton reported income of $366,500 and distributed dividends of $137,000. Prepare all of the 2013 journal entries for Waters. 4) On January 1, 2011, Monroe, Inc., purchased 10,300 shares of Brown Company for $267,800, giving Monroe 10 percent ownership of Brown. On January 1, 2012, Monroe purchased an additional 20,600 shares (20 percent) for $628,300. This latest purchase gave Monroe the ability to apply significant influence over Brown. The original 10 percent investment was categorized as an available-for-sale security. Any excess of cost over book value acquired for either investment was attributed solely to goodwill. Brown reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Net Income Cash Dividends (paid quarterly) 2011 $416,000 $129,000 2012 546,000 166,000 2013 579,500 224,000 On July 1, 2013, Monroe sells 2,060 shares of this investment for $48 per share, thus reducing its interest from 30 to 28 percent. However, the company retains the ability to significantly influence Brown. Using the equity method, what amounts appear in Monroe?s 2013 income statement? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar amount.) As total income accrual (no unearned gains) $ As (Click to select)gain or loss on sale of shares $ 5) Russell owns 30 percent of the outstanding stock of Thacker and has the ability to significantly influence the investee?s operations and decision making. On January 1, 2013, the balance in the Investment in Thacker account is $382,000. Amortization associated with this acquisition is $10,500 per year. In 2013, Thacker earns an income of $156,000 and pays cash dividends of $39,000. Previously, in 2012, Thacker had sold inventory costing $54,600 to Russell for $78,000. Russell consumed all but 20 percent of this merchandise during 2012 and used the rest during 2013. Thacker sold additional inventory costing $59,400 to Russell for $90,000 in 2013. Russell did not consume 40 percent of these 2013 purchases from Thacker until 2014. a. What amount of equity method income would Russell recognize in 2013 from its ownership interest in Thacker? Equity income $ b. What is the equity method balance in the Investment in Thacker account at the end of 2013? Investment in Thacker $ 6) On January 1, 2012, Allan acquires 15 percent of Bellevue?s outstanding common stock for $69,350. Allan classifies the investment as an available-for-sale security and records any unrealized holding gains or losses directly in owners? equity. On January 1, 2013, Allan buys an additional 10 percent of Bellevue for $53,010, providing Allan the ability to significantly influence Bellevue?s decisions. During the next two years, the following information is available for Bellevue: Income Dividends Common Stock Fair Value (12/31) 2012 $ 170,000 $ 120,000 $ 477,500 2013 201,200 135,600 524,300 In each purchase, Allan attributes any excess of cost over book value to Bellevue?s franchise agreements that had a remaining life of 10 years at January 1, 2012. Also at January 1, 2012, Bellevue reports a net book value of $319,000. Assume Allan applies the equity method to its Investment in Bellevue account: a-1. On Allan?s December 31, 2013, balance sheet, what amount is reported for the Investment in Bellevue account? Investment in Bellevue $ a-2. What amount of equity income should Allan report for 2013? Equity income $ a-3. Prepare the January 1, 2013, journal entry to retrospectively adjust the Investment in Bellevue account to the equity method. General Journal Debit Credit To eliminate AFS fair value adjustment account. (Click to select)Fair Value Adjustment (Available-for-Sale Securities)Accounts ReceivableUnrealized Holding Gain-Shareholders' EquityInvestment in BellevueAccounts PayableRetained Earnings (January 1, 2013)CashInterest Payable (Click to select)Investment in BellevueAccounts PayableCashInterest PayableUnrealized Holding Gain-Shareholders' EquityAccounts ReceivableRetained Earnings (January 1, 2013)Fair Value Adjustment (Available-for-Sale Securities) To record retrospective adjustment. (Click to select)CashAccounts PayableInterest PayableFair Value Adjustment (Available-for-Sale Securities)Retained Earnings (January 1, 2013)Investment in BellevueAccounts ReceivableUnrealized Holding Gain-Shareholders' Equity (Click to select)Fair Value Adjustment (Available-for-Sale Securities)Interest PayableAccounts ReceivableInvestment in BellevueCashAccounts PayableRetained Earnings (January 1, 2013)Unrealized Holding Gain-Shareholders' Equity Assume Allan elects the fair-value reporting option for its investment in Bellevue: b-1. On Allan?s December 31, 2013, balance sheet, what amount is reported for the Investment in Bellevue account? Investment in Bellevue $ b-2. What amount of income from its investment in Bellevue should Allan report for 2013? Reported income $ 7) Hobson acquires 40 percent of the outstanding voting stock of Stokes Company on January 1, 2012, for $341,100 in cash. The book value of Stokes?s net assets on that date was $655,000, although one of the company?s buildings, with a $65,200 carrying value, was actually worth $125,450. This building had a 10-year remaining life. Stokes owned a royalty agreement with a 20-year remaining life that was undervalued by $137,500. Stokes sold inventory with an original cost of $107,100 to Hobson during 2012 at a price of $153,000. Hobson still held $25,050 (transfer price) of this amount in inventory as of December 31, 2012. These goods are to be sold to outside parties during 2013. Stokes reported a loss of $66,000 for 2012, $44,000 from continuing operations and $22,000 from an extraordinary loss. The company still manages to pay a $6,000 cash dividend during the year. During 2013, Stokes reported a $47,400 net income and distributed a cash dividend of $8,000. It made additional inventory sales of $76,000 to Hobson during the period. The original cost of the merchandise was $47,500. All but 30 percent of this inventory had been resold to outside parties by the end of the 2013 fiscal year. Prepare all journal entries for Hobson for 2012 and 2013 in connection with this investment. Assume that the equity method is applied. (Do not round intermediate calculations.)
Question 3
Pinnacle Manufacturing: Part VI 50 marks Part VI of the Pinnacle Manufacturing case covers analytical procedures and tests of details of balances for accounts payable. Assume that the understanding of internal controls over acquisitions and cash payments, and the related tests of controls and substantive tests of transactions support an assessment of a low control risk. The accounts payable listing at year-end shows 519 accounts, making up the accounts payable balance of $11,277,989 at 31 December 20X2. Accounts payable balances between $50,001 and $200,000 total $4,075,355 and balances less than $50,000 are $4,792,683. Required: 1. List the relationships, ratios and trends that will provide useful information about the overall reasonableness of accounts payable. Consider income statement accounts that affect accounts payable in selecting the analytical procedures. (6 marks) 2. Prepare a substantive audit programme for accounts payable in a performance format. Group the procedures under the headings General, Ending Balances, Cut off and Disclosure & Classification. (10 marks) Note: Use Figure 12.14 (page 427) as an example of the format of a balances audit programme. 3. Assume that a) assessed control risk had been high rather than low for each transaction-related audit objective; b) inherent risk was high for each balance-related audit objective; and c) analytical procedures indicated a high potential for misstatement. What would be the effect on the audit procedures and sample sizes in the audit programme in 2? (5 marks) 4. Confirmation requests were sent to a stratified sample of 51 vendors listed in Figure 14.10 (page 530). Confirmation responses from 45 suppliers were returned, indicating no difference between the supplier?s and Pinnacle?s records. Figure 14.11 (pages 531-532) presents the six replies that indicate a difference between the supplier?s balance and the company?s record. The auditor?s follow-up findings are indicated for each reply. Prepare an Analysis of Accounts Payable Confirmation Exceptions as shown in Figure 14.12* (page 533) to determine the misstatements, if any, for each difference. Include the balances confirmed without exception as one amount on the schedule for each stratum, and total the schedule columns. Brief explanations should show accounts to be debited and credited where appropriate. (13 marks) Note: Assume that Pinnacle Manufacturing took a complete physical inventory as at 31 December 20X2 and the auditor concluded that recorded inventory reflects all inventory on hand at the balance sheet date. * Figure 14.12 shows the $27,500 difference in Fiberchem as a Timing difference (no misstatement) in accounts payable; this is incorrect. It is an understatement in accounts payable. 5. Estimate the total misstatement in the income statement, based on the income statement misstatement identified in 4 above. The misstatement should be calculated separately for each stratum of accounts payable. The total misstatement should include the projected misstatement and an estimate for sampling error; consider the size of the population and the amounts tested and use professional judgement to estimate the sampling error. (5 marks) 6. Estimate the total misstatement in accounts payable using the same methodology as in 5 above. Note that a misstatement caused by the failure to record an FOB origin purchase is an understatement of accounts payable and inventory and has no effect on income. (6 marks) 7. What is your conclusion about the fairness of the recorded balance in accounts payable for Pinnacle Manufacturing as it affects the income statement and balance sheet, and your assessment of control risk as low for all transaction-related audit objectives? Assume that tolerable error for accounts payable as it affects the income statement is $230,000. (5 marks),Is it possible to just help in looking at this question?,I can give in 40 dollars for this assignment, part 2 if thats fine with you...thanks
Question 4
Problem 13-7 "TUTOR CAN YOU PLACE THE RESULTS ON A EXCEL SPREADSHEET, QUESTION #1. AND #2. ARE CORRECT ALL I NEED IS QUESTION #3 TO BE ANSWERED, THANK YOU. Corporate Valuation eBook Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dozier's weighted average cost of capital is WACC 13%. Year 1 2 3 Free cash flow ($ millions) - $20 $30 $40 #1. What is Dozier's terminal, or horizon, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.). Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ 713.33 million #2. What is the current value of operations for Dozier? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. $ 527.89 million #3. Suppose Dozier has $11 million in marketable securities, $120 million in debt, and 11 million shares of stock. What is the price per share? Round your answer to the nearest cent. $_______,Tutor i am sorry to ask again but the answer came up wrong can you check the problem again,Dear tutor I emailed my professor for so clarification on this problem and this was his response on how he wants the problem solved, can you please apply his method. Thank you so much. My question to the Prof Attached is a excel file with my calculation for the problem, I have gone over them, the formulas are correct but the answer comes up wrong. His response The cash flow in year 1 is -40. You must include the negative sign. The terminal value cash flow calculated wrongly by you cell g6. However, you found the correct value in part A (The numerator is simply (WACC -g). (It is not raised to any power). Furthermore this terminal value cash flow does not occur i yr. 4 (as you have it) but in year3. It must be added to the $40 FCF of Year 3 (eg. 713.33+40). Then find its PV
Question 5
I need some help. I do not have any time. I do not need detailed answers. Just need to find the answers. all mutliple choice... (TCO D) A bond discount should be shown on the balance sheet as (Points: 4) an asset. a contra account to bonds payable. a reduction of stockholders' equity. both an asset and a liability. 2. (TCO D) A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank $80,000 each year for ten years to repay the loan. Which of the following relationships can you expect to apply to the situation? (Points: 4) The balance of mortgage payable at a given balance sheet date will be reported as a long-term liability. The balance of mortgage payable will remain a constant amount over the ten-year period. The amount of interest expense will decrease each period the loan is outstanding, while the portion of the annual payment applied to the loan principal will increase each period. The amount of interest expense will remain constant over the ten-year period. 3. (TCO D) On January 1, 2010, Ellison Co. issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%. Table values are: The present value of the interest is (Points: 4) $344,820. $349,560. $372,600. $376,830. 4. (TCO D) On January 1, 2010, Jacobs Company sold property to Dains Company which originally cost Jacobs $760,000. There was no established exchange price for this property. Danis gave Jacobs a $1,200,000 zero-interest-bearing note payable in three equal annual installments of $400,000 with the first payment due December 31, 2010. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $1,200,000 note payable in three equal annual installments of $400,000 at a 10% rate of interest is $994,800. What is the amount of interest income that should be recognized by Jacobs in 2010, using the effective-interest method? (Points: 4) $0. $40,000. $99,480. $120,000. 5. (TCO D) On June 30, 2011, Omara Co. had outstanding 8%, $3,000,000 face amount, 15-year bonds maturing on June 30, 2021. Interest is payable on June 30 and December 31. The unamortized balances in the bond discount and deferred bond issue costs accounts on June 30, 2011 were $105,000 and $30,000, respectively. On June 30, 2011, Omara acquired all of these bonds at 94 and retired them. What net carrying amount should be used in computing gain or loss on this early extinguishment of debt? (Points: 4) $2,970,000. $2,895,000. $2,865,000. $2,820,000.
