QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1

Tim Asisten Dosen

Problem 1 Intercompany Inventory Transactions (15%)

Randall Corporation acquired 80 percent of Sharp Companys voting shares on January 1,

20X4, for $280,000 in cash and marketable securities. At that date, the non-controlling interest
had a fair value of $70,000 and Sharp reported net assets of $300,000. Assume Randall uses
the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7,
are as follows:

Randall Corporation Sharp Company

Item Debit Credit Debit Credit
Cash $ 130,300 $ 10,000
Accounts Receivable $ 80,000 $ 70,000
Inventory $ 170,000 $ 110,000
Buildings & Equipment $ 600,000 $ 400,000
Investment in Sharp Company Stock $ 293,000
Cost of Goods Sold $ 416,000 $ 202,000
Depreciation & Amortization $ 30,000 $ 20,000
Other Expenses $ 24,000 $ 18,000
Dividends Declared $ 50,000 $ 25,000
Accumulated Depreciation $ 310,000 $ 120,000
Accounts Payable $ 100,000 $ 15,200
Bonds Payable $ 300,000 $ 100,000
Bond Premium $ 4,800
Common Stock $ 200,000 $ 100,000
Additional Paid-in Capital $ 20,000
Retained Earnings $ 337,500 $ 215,000
Sales $ 500,000 $ 250,000
Other Income $ 20,400 $ 30,000
Income from Sharp Company $ 25,400
$ 1,793,300 $ 1,793,300 $ 855,000 $ 855,000

Additional Information:

1. The full amount of the differential at acquisition was assigned to buildings and equipment
with a remaining 10-year economic life.
2. Randall and Sharp regularly purchase inventory from each other. During 20X6, Sharp
Company sold inventory costing $40,000 to Randall Corporation for $60,000, and
Randall resold 60 percent of the inventory in 20X6 and 40 percent in 20X7. Also in 20X6,
Randall sold inventory costing $20,000 to Sharp for $26,000. Sharp resold two-thirds of
the inventory in 20X6 and one-third in 20X7.
 QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1
Tim Asisten Dosen

3. During 20X7, Sharp sold inventory costing $30,000 to Randall for $45,000, and Randall
sold items purchased for $9,000 to Sharp for $12,000. Before the end of the year,
Randall resold one-third of the inventory it purchased from Sharp in 20X7. Sharp
continues to hold all the units purchased from Randall during 20X7.
4. Sharp owes Randall $10,000 on account on December 31, 20X7.
5. Assume that both companies use straight-line depreciation and that no property, plant,
and equipment have been purchased since the acquisition.

Required:

a. Prepare the 20X7 journal entries recorded on Randalls books related to its investment in
Sharp if Randall uses the equity method.
b. Prepare all elimination entries needed to complete a consolidation worksheet as of
December 31, 20X7.
c. Prepare a three-part consolidation worksheet as of December 31, 20X7.
d. Prepare, in good form, a consolidated income statement, balance sheet, and retained
earnings statement for 20X7.

Problem 2 Intercompany Transfers of Noncurrent Assets and Services (20%)

On January 1, 2013, Papyrus Co. purchased 80% of Slime Inc. outstanding common stock for
$152,000. On the acquisition date, Slimes net asset values equal to its fair value, and there was
no excess of cost or book value resulting from the purchase. Papyrus has been maintaining its
investment under fully adjusted equity method. Over the next three years, the inventory
transactions between the companies were as follows:
a. On January 1, 2013, Slime sold its 4-year-old delivery truck to Papyrus for $14,000 in
cash. At that time, Slime has depreciated the truck, which had cost $15,000 to its 5,000
salvage value. Papyrus estimated on the date of the sale that the asset had a remaining
useful life of three years and no salvage value.
b. On January 1, 2014, Papyrus sold equipment to Slime for $103,000. Papyrus originally
paid $80,000 for the equipment and planned to depreciate it over 20 years, assuming no
salvage value. However, Papyrus had the property for only 10 years and carried it at a
net book value of $40,000 on the sale date. Slime will use the equipment for 10 years, at
which time Slime expects no salvage value.
 QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1
Tim Asisten Dosen

Both companies use straight line depreciation method for all assets. Trial balances of both
companies as of December 31, 2015 are as follows:
Papyrus Slime
Debit Credit Debit Credit
Cash $ 120,000 $ 50,000
Accounts Receivable $ 115,000 $ 18,000
Notes Receivable $ 10,000
Inventory $ 175,000 $ 34,000
Investment in Slime $ 167,040
Plant and Equipment $ 990,700 $ 295,000
Other Assets $ 28,000
Cost of Goods Sold $ 598,000 $ 132,000
Selling and General expenses $ 108,000 $ 80,000
Interest Expense $ 37,750
Dividends declared $ 90,000 $ 7,000
Accumulated Depretiation $ 170,000 $ 85,000
Accounts Payable $ 80,000 $ 50,200
Notes Payable $ 28,900
Bonds Payable $ 300,000
Common Stock $ 290,000 $ 70,000
Additional Paid in Capital $ 110,000 $ 62,000
Retained Earnings $ 498,850 $ 118,000
Sales $ 920,000 $ 240,000
Interest Income $ 800

Income from Slime $ 31,740

Total $ 2,429,490 $ 2,429,490 $ 626,000 $ 626,000

Required: Prepare a consolidation worksheet for December 2015! (Hint: assume depreciation
expense is a part of selling and general expense)

Problem 3 Intercompany Indebtedness (20%)

Subsidiary issued to Yunanto $400,000 par value, 10-year bonds with a coupon rate of 12
percent on January 1, 2013, at 110. The bonds pay interest semiannually on July 1 and January
1. On January 1, 2015, Parent Corporation purchased $100,000 of the bonds from Yunanto for
$95,000. On January 1, 2016, Parent purchased again $100,000 of the bonds from Yunanto for
$108,000. Parent owns 70% percent of the voting common shares of Subsidiary and prepares
consolidated financial statements. (use straight line amortization schedule)

Required:

a. Prepare the worksheet elimination entry or entries needed to remove the effects of the
intercorporate bond ownership in preparing consolidated financial statements for 2015.
 QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1
Tim Asisten Dosen

b. Prepare the worksheet elimination entry or entries needed to remove the effects of the
intercorporate bond ownership in preparing consolidated financial statements for 2016.

Problem 4 Consolidation Ownership Issues (20%)

On January 1, 20X1 Bapak Company acquired 80% of Anak Company by purchasing 60.000
shares of Toms Common Stock. There was no differential related this transaction. The
noncontrolling interest had a fair value equal to 20% of book value. The book value of Anaks
equity on December 31, 20X1 was as follows:

Common stock (IDR 12.000 par) IDR 900 million

Retained Earnings IDR 630 million

On January 1, 20X2, Anak sold an additional 15.000 shares to Bapak for IDR 21.000 per share.

Required:

1. What is the ending balance of non-controlling interest in the net assets of Anak before
and after the sale of the additional shares?
2. Prepare entry made Bapaks book in 2016 related to the sale.
3. Prepare the elimination entries required to prepare consolidated balance sheet on
January 1, 2016.
4. What is the elimination entries required to prepare consolidated Balance Sheet on
January 1, 2016 if instead of selling the additional shares to non-affiliated, Anak sold the
additional shares to non-affiliate company.

Problem 5 Foreign Currency Transactions and Reporting (25%)

Part A

On December 5, 2008, Texas based Imperial Corporation purchased goods from a Saudi
Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 2009. The transaction is
denominated in Saudi riyals. Imperial's fiscal year ends on December 31, and its reporting
currency is the U.S. dollar. The exchange rates are:
 QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1
Tim Asisten Dosen

Required:

1. What journal entry would Imperial make on December 31, 2008, to revalue
foreign currency payable to equivalent U.S. dollar value?
2. What journal entry would Imperial make on January 10, 2009, to revalue foreign
currency payable to equivalent U.S. dollar value?
3. What was the overall foreign currency gain or loss on the accounts payable
transaction?

Part B

On January 2, 2011, United States Game Company (USG Co), has taken over 80% of the
ownership of Game for Life (GFL Co) in India for INR 2,000,000 (Indian Rupee). GFL is still
using Rupee for their bookkeeping and their book has been adjusted to the US GAAP. This is
the information of exchange rate INR and US $:

Date Spot Rate

January 2 $0.150
September 1 $0.160
December 31 $0.170
Average for 4th quarter $0.165
Average for the year $0.156

Income and expenses are generating and charging during the year. The company is using FIFO
method for their inventory valuation and ending inventory was from the fourth quarter
purchased. Dividend payment for 300.000 Rupee, it was declared and paid on September 1.
On January 2, 2011, the statement of financial position of GFL Co as follows: (in Rupee)

Assets Liabilities and Stockholders Equity

Monetary assets 1,100,000 Monetary liabilities 1,800,000
 QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1
Tim Asisten Dosen

Nonmonetary assets Share Capital Ordinary 960,000

Inventory 760,000 Share Premium Ordinary 300,000
Fixed assets 1,680,000 Retained earnings 480,000
Total 3,540,000 Total 3,540,000

The following information is the balance of accounts in ledger of GFL Co which is stated in INR

Items Dr Cr
Sales 3,020,000
Cost of Goods Sold 1,850,000
Depreciation Expense 100,000
Other Expenses 655,000
Income Tax Expense 82,000
Dividends 300,000
Cash 930,000
Accounts Receivable 608,000
Inventories 830,000
Land 500,000
Buildings 650,000
Equipment 430,000
Accounts Payable 640,000
Short-term Notes Payable 635,000
Bonds Payable 900,000
Share Capital Ordinary 960,000
Share Premium Ordinary 300,000
Retained Earnings awal 480,000
6,935,000 6,935,000
 QUIZ TAKEHOME ADVANCED FINANCIAL ACCOUNTING 1
Tim Asisten Dosen

Required:

1. Based on the abovementioned information, what is the proper method to convert

the financial statement of GFL Co? Please explain.
2. Prepare the Trial Balance in US $ currency.
3. Compute the Proof the calculation of point 2

Items Dr Cr Translation Rate Dr Cr

Cash 930,000 0.17 158,100.00 -
Accounts Receivable 608,000 0.17 103,360.00 -
Inventories 830,000 0.17 141,100.00 -
Land 500,000 0.17 85,000.00 -
Buildings 650,000 0.17 110,500.00 -
Equipment 430,000 0.17 73,100.00 -
Accounts Payable 640,000 0.17 - 108,800.00
Short-term Notes Payable 635,000 0.17 - 107,950.00
Bonds Payable 900,000 0.17 - 153,000.00
Common Stock 960,000 0.15 - 144,000.00
Additional Paid in Capital 300,000 0.15 - 45,000.00
Retained Earnings awal 480,000 0.15 - 72,000.00
Sales 3,020,000 0.156 - 471,120.00
Cost of Goods Sold 1,850,000 0.156 288,600.00 -
Depreciation Expense 100,000 0.156 15,600.00 -
Other Expenses 655,000 0.156 102,180.00 -
Income Tax Expense 82,000 0.156 12,792.00 -
Dividends 300,000 0.16 48,000.00 -
3,948,000 3,915,000 1,138,332 1,101,870
Selisih --> OCI 36,462
Total 1,138,332 1,138,332

3. Verification of Translation Adjustment Rupees Rate Dollars

Beginning net asset position
Adjustments for changes in net asset position during year
Net income
Dividends
Translated ending net asset position
Ending net asset position
Change in cumulative translation adjustment (cr)
Beginning cumulative translation adjustment
Ending cumulative translation adjustment