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"Cost Plus Inc.'s portfolio of marketable securiti...

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"Cost Plus Inc.'s portfolio of marketable securities was as follows (all securities were purchased in the current year): Securities Purchase Price Year-end Fair Market Value A One 10-year bond $1,500 $1,400 (face value$1,000) (carrying value $1,450) B 100 shares common stock $30 per share $28 per share C 50 shares preferred stock $100 per share $105 per share Cost Plus intends to keep the A bond until maturity and to sell one half of its investment in B common stock next year. It is unsure of its intention for the remaining 50 shares of B common stock and its 50 shares of C preferred stock. At what amount should Cost Plus report investment securities (in total) on its year-end balance sheet? (Points: 10) $9,500 $9,450 $9,550 $9,400 2. Cost Plus Inc.'s portfolio of marketable securities was as follows: (all securities were purchased this year) Securities Purchase Price Year-End Fair Market Value A One 10-year Bond $1,500 $1,400 (face value $1,000) (carrying value $1,450) B 100 shares common stock $30 per share $28 per share C 50 shares preferred stock $100 per share $105 per share Cost Plus intends to keep the A bond until maturity and to sell one half of its B common stock investment next year. It is unsure of its intention for the remaining 50 shares of B common stock and its 50 shares of C preferred stock. What amount of unrealized gain/loss should be reported on this year's income statement as part of income from continuing operations? (Points: 10) $100 loss. $200 loss. $150 loss. $ 50 gain. 3. Louis, Inc. acquired 40% of the outstanding non-voting preferred stock of Rich Co. What method for recording the investment should Louis use? (Points: 10) The equity method since significant influence must be assumed. The equity method if no other investor has more than a 40% interest. The equity method if it can acquire an additional 11% by year-end. The cost method. 4. On 12/31/Year 1, Passey Co. acquired a 100% interest in Solomon Co. by exchanging 10,000 shares of its common stock for 100,000 shares of Solomon's common stock. The fair market value of Passey's common stock on December 31, Year 1, was $9 per share, and the fair value of Solomon's was $3.50 per share. Additional information as of December 31, Year 1, is as follows: Solomon Co. Book Values Fair Values Current assets $115,000 $115,000 Plant assets 200,000 255,000 Liabilities 10,000 10,000 Passey Co. Plant assets $1,700,000 $1,800,000 Passey Co.'s consolidated financial statements as of December 31, Year 1, would report: (Points: 10) Gain of $235,000. Gain of $270,000. A deferred credit (negative goodwill) of $235,000. A deferred credit (negative goodwill) of $270,000. 5. On 12/31/Year 1, Passey Co. acquired a 100% interest in Solomon Co. by exchanging 10,000 shares of its common stock for 100,000 shares of Solomon's common stock. The fair market value of Passey's common stock on December 31, Year 1, was $9 per share, and the fair value of Solomon's was $3.50 per share. Additional information as of December 31, Year 1, is as follows: Solomon Co. Book Values Fair Values Current assets $115,000 $115,000 Plant assets 200,000 255,000 Liabilities 10,000 10,000 Passey Co. Plant assets $1,700,000 $1,800,000 Passey's consolidated financial statements as of December 31, Year 1, would report plant assets at: (Points: 10) $1,700,000 $1,800,000 $1,955,000 $2,055,000 6. On January 1, Year 1, Pepper Company acquired 30% of the voting common stock of Salt, Inc. for $60 per share. Pepper was able to exercise significant influence over the affairs of Salt. Salt had 50,000 common shares outstanding on January 1, Year 1. On July 1, Year 1, Pepper sold all but 500 shares of its investment in Salt, Inc. Pepper held all 500 shares through year-end Year 1. Salt declared and paid a $1 per share common stock dividend on March 31, Year 1, and a $1.50 per share dividend on September 30, Year 1. Salt's net income was exactly $50,000 each quarter. What amount of revenue should Pepper record for the Year 1 from this investment? (Points: 10) $15,250 $15,750 $30,750 $31,000 7. Palmetto Inc. is currently using the equity method to account for its 30% investment in Royal Company. In the acquisition last year of Royal Co. common stock, Palmetto calculated $1,000,000 of goodwill. The correct accounting for this goodwill during the current year is: (Points: 10) Amortization over 40 years. Amortization over the anticipated holding period of the Royal Company stock. Test for impairment at year-end. No accounting necessary. 8. On December 31, Year 1, Starlight Enterprises acquired a 90% ownership interest in Lunar Importers by purchasing 90,000 of Lunar's 100,000 voting common shares outstanding for $900,000 cash. Additional information regarding Lunar as of December 31, Year 1, follows: Book value Fair value Net assets $600,000 $800,000 Under U.S. GAAP, the consolidated balance sheet of Starlight Enterprises and Subsidiary would report goodwill in the amount of: (Points: 10) $200,000 $280,000 $400,000 $460,000 9. On December 31, Year 1, Starlight Enterprises acquired a 90% ownership interest in Lunar Importers by purchasing 90,000 of Lunar's 100,000 voting common shares outstanding for $900,000 cash. Additional information regarding Lunar as of December 31, Year 1, follows: Book Value Fair Value Net assets $600,000 $800,000 Under the IFRS partial goodwill method, the consolidated balance sheet of Starlight Enterprises and subsidiary would report goodwill in the amount of: (Points: 10) $180,000 $200,000 $280,000 $360,000 10. During Year 1, Abaco Co., the 100% owned subsidiary of Walker Inc., sold merchandise to Walker at a 25% markup over its cost. Intercompany sales to Walker totaled $800,000 during Year 1. On December 31, Year 1, Walker held $200,000 of the inventory purchased from Abaco in its ending inventory. In Walker's December 31, Year 1 elimination of the intercompany sales transaction, the intercompany profit that must be eliminated from ending inventory is: (Points: 10) $40,000 $120,000 $160,000 $200,000

 

Paper#6028 | Written in 18-Jul-2015

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