Monthly Archives: October 2015

Jensen Company forecasts a need for 200,000 pounds of cotton in May



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

Jensen Company forecasts a need for 200,000 pounds of cotton in May. On April 11, the company acquires a call option to buy 200,000 pounds of cotton in May at a strike price of $0.3765 per pound for a premium of $814. Spot prices and options values at selected dates follow:

April 11 April 30 May 3
Spot price per pound $0.3718 $0.3801 $0.3842
Fair value of option 814 1,137 1,689

Jensen Company settled the option on May 3 and purchased 200,000 pounds of cotton on May 17 at a spot price of $0.3840 per pound. During the last half of May and the beginning of June the cotton was used to produce cloth. One third of the cloth was sold in June. The change in the option’s time value is excluded from the assessment of hedge effectiveness.

Required:
a. Prepare all journal entries necessary through June to record the above transactions and events.
b. What would the effect on earnings have been if the forecasted purchase were not hedged?



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000. On this date Seaman had total owners’ equity of $400,000. Any excess of cost over book value is attributable to patent, which is to be amortized over 20 years.

During 20X1 and 20X2, Prange has appropriately accounted for its investment in Seaman using the simple equity method.

On January 1, 20X2, Prange held merchandise acquired from Seaman for $30,000. During 20X2, Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by Prange on December 31, 20X2. Seaman’s gross profit on all sales is 40%.

On December 31, 20X2, Prange still owes Seaman $20,000 for merchandise acquired in December.

Required:
Complete the Figure 4-2 worksheet for consolidated financial statements for the year ended December 31, 20X2.



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

State how each of the following items is reflected in the financial statements



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

State how each of the following items is reflected in the financial statements.

1.Change from FIFO to LIFO method for inventory valuation purposes.

2.Charge for failure to record depreciation in a previous period.

3.Litigation won in current year, related to prior period.

4.Change in the realizability of certain receivables.

5.Writeoff of receivables.

6.Change



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

On January 1, 20X1, Pep Company acquired 80% of the common stock of Sky Company for $195,000



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

On January 1, 20X1, Pep Company acquired 80% of the common stock of Sky Company for $195,000. On this date Sky had total owners’ equity of $200,000 (common stock, other paid-in capital, and retained earnings of $10,000, $90,000, and $100,000 respectively).

Any excess of cost over book value is attributable to inventory (worth $6,250 more than cost), to equipment (worth $12,500 more than book value), and to patents. FIFO is used for inventories. The equipment has a remaining life of five years and straight-line depreciation is used. The excess attributable to the patents is to be amortized over 20 years.

During 20X1 and 20X2, Pep has appropriately accounted for its investment in Sky using the simple equity method.

On January 1, 20X2, Pep held merchandise acquired from Sky for $10,000. During 20X2, Sky sold merchandise to Pep for $50,000, $20,000 of which is still held by Pep on December 31, 20X2. Sky’s usual gross profit on affiliated sales is 50%.

On December 31, 20X1, Pep sold equipment to Sky at a gain of $10,000. During 20X2, the equipment was used by Sky. Depreciation is being computed using the straight-line method, a five-year life, and no salvage value.

Required:

  1. Using the information above or on the Figure 4-6 worksheet, prepare a determination and distribution of excess schedule.
  2. Complete the Figure 4-6 worksheet for consolidated financial statements for the year ended December 31, 20X2.


Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

On January 1, 20×1, Peanut acquired 80% of Salt for $ 200,000



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service

On January 1, 20×1, Peanut acquired 80% of Salt for $ 200,000. On this date, Salt had owners’ equity of $ 200,000 (including Retained earnings of $ 100,000). Any excess cost over book value is attributable to inventory (worth $ 12,500 over book value) equipment (worth $ 25,000 over book value, with a remaining life of 4 years) and to goodwill.

On January 1, 20×2, Peanut held merchandise acquired from Salt for $ 20,000. During 20×2, Salt sold merchandise to Peanut for $ 40,000, $ 10,000 of which is still held by Peanut on December 31, 20×2. Salt’s usual gross profit is 50%

On January 1, 20×1, Peanut sold equipment to Salt at a gain of $ 15,000. Depreciation is computed using the straight line method over 5 years.

This is the trial balance for the two companies on December 31, 20×2

Peanut Salt

Inventory 130,000 50,000

Other Current Assets 241,000 235,000

Investment in Salt 200,000

Other Investments 20,000

Land 140,000 80,000

Bldg and Equip (net) 255,000 170,000

Other intangible assets 20,000

Current Liabilities 150,000 70,000

Bonds Payable 100,000

Other Long term Liabilities 200,000 50,000

Common Stock 200,000 50,000

APIC 100,000 50,000

RE (1/1) 280,000 150,000

Sales 600,000 315,000

COGS 350,000 150,000

Operating expenses 150,000 60,000

Income from Salt 16,000

Dividends declared 60,000 20,000

Provide consolidated financial statements for 20×2.



Click here to order this paper @Superbwriters.com. The Ultimate Custom Paper Writing Service