Afar Jpia

JPIA AFAR Multiple Choice Identify the choice that best completes the statement or answers the question. ____

1. Goodwill represents the excess cost of an acquisition over the a. book value of an acquired company. b. sum of the fair values assigned to intangible assets less liabilities assumed. c. sum of the fair values assigned to tangible and intangible assets acquired less liabilities assumed. d. sum of the fair values assigned to intangibles acquired less liabilities assumed.

____

2. The translation adjustment from translating a foreign subsidiary's financial statements should be shown as a. a component of cash flows from financing activities on the consolidated statement of cash flows b. an asset or liability (depending on the balance) on the consolidated balance sheet c. a component of stockholders' equity on the consolidated balance sheet d. an element of the notes which accompany the consolidated financial statements e. a revenue or expense (depending on the balance) on the consolidated income statement

____

3. When a company purchases another company that has existing goodwill and the transaction is accounted for as a stock acquisition, the goodwill should be treated in the following manner. a. Goodwill is not recorded until all assets are stated at full fair value. b. Goodwill is treated consistent with other tangible assets. c. Goodwill on the books of an acquired company should be disregarded. d. Goodwill is recorded prior to recording fixed assets Jose Inc., a Portugese firm was acquired by a U.S. company on January 1, 2013. Selected account balances are available for the year ended December 31, 2014, and are stated in euro, the local currency: Sales Inventory (bought on February 1, 2014) Equipment (bought on January 1, 2013) Dividends (paid on September 1, 2014) Accumulated depreciation - Equipment 12/31/13 Depreciation expense - Equipment, 2014 Relevant exchange rates are given below: January 1, 2013 January 1, 2014 February 1, 2014 September 1, 2014 December 31, 2014 4th quarter average, 2013 4th quarter average, 2014

€400,000 20,000 90,000 20.000 45,000 9,000 P .91 .93 .94 .97 1.01 .90 .98

Average, 2014

.95

____

4. Assume the functional currency is the euro, compute the restated amount for inventory for 2014 a. 19,600 b. 18,000 c. 18,600 d. 20,200 e. 19,000

____

5. When translating Jose' financial statements, which of the following statements is true? a. There will be a remeasurement loss reported on the consolidated income statement b. There will be a positive cumulative translation adjustment reported on the consolidated balance sheet c. There will be a remeasurement gain reported on the consolidated income statement d. There will be a transaction gain reported on the consolidated income statement e. There will be a positive cumulative translation adjustment reported on the consolidated income statement

____

6. The cash available for distribution to the partners on July 31, 2019 is a. 2,000 b. 11,000 c. 7,000 d. 4,000

____

7. Which method of translating a foreign subsidiary's financial statements is correct? a. Remeasurement b. Working capital method c. Temporal method d. Current rate method e. Historical rate method.

____

8. Which of the following costs of a business combination are included in the value charged to paid-in-capital in excess of par? a. direct and indirect acquisition costs b. direct acquisition costs and stock issue costs if stock is issued as consideration c. direct acquisition costs d. stock issue costs if stock is issued as consideration

____

9. Under the current rate method, how would cost of goods sold be restated? a. Historical rate b. Current rate c. Composite amount d. Beginning of the year rate e. Average rate Certain balance sheet accounts of a foreign subsidiary of Parker Company at December 31, 2014, have been restated into U.S. dollars as follows: Restated at

Cash Accounts receivable Inventory, at market Land Equipment (net) Total

Current rates 47,500 95,000 76,000 57,000 142,500 418,000

Historical rates 45,000 90,000 72,000 54,000 135,000 396,000

____ 10. If the current rate used to restate these balances is P.95, what was the historical rate used to restate the same balances? a. 1.0556 b. .95 c. 1.00 d. .9474 e. .90 ____ 11. Accounting recognition should be given to some or all of the gain realized on a nonmonetary exchange of plant assets except when the exchange has a. no commercial substance and additional cash is received. b. no commercial substance and additional cash is paid. c. commercial substance and additional cash is paid. d. commercial substance and additional cash is received. ____ 12. A net asset balance sheet exposure exists and the foreign currency appreciates. Which of the following statements is true? a. There is a negative translation adjustment b. There is no translation adjustment c. There is a transaction gain d. There is a transaction loss e. There is a positive translation adjustment The following account balances are available for Esposito, an Italian U.S. subsidiary for 2015: Beginning inventory Purchases Ending inventory Relevant exchange rates follow: 4th quarter average, 2014 December 31, 2014 Average 2015 4th quarter average, 2015 December 31, 2015

€ 20,000 400,000 15,000 P.93 = €1 . 94 = 1 .96 = 1 .99 = 1 1.01 = 1

____ 13. Compute ending inventory for 2015 under the temporal method a. 15,150 b. 13,950 c. 14,400 d. 14,850

e. 14,100 ____ 14. Compute the cost of goods sold for 2015 in U.S. dollars using the current rate method a. 400,950 b. 388,800 c. 409,050 d. 376,550 e. 387,750 ____ 15. Compute ending inventory for 2015 under the current rate method a. 14,100 b. 15,150 c. 14,400 d. 13,950 e. 14,850 ____ 16. Corporation X has a number of exporting transactions with companies based in Vietnam. Exporting activities result in receivables. If the settlement currency is the US dollar, which of the following will happen by changes in the direct or indirect exchange rates?

a) b) c) d) a. b. c. d.

Direct Exchange Rate Increase Decreases Loss Gain Loss Gain NA NA Gain Loss

Indirect Exchange Rate Increases Decreases NA NA Gain Loss NA NA Loss Gain

Option A Option D Option C Option B

____ 17. The PQR Partnership is being dissolved. All liabilities have been paid and the remaining assets are being realized gradually. The equity of the partners is as follows:

P Q R

Partners’ Accounts 24,000 36,000 60,000

Loans to (from) partnership 6,000 (10,000)

Profit & Loss ratio 3 3 4

The second cash payment to any partners under a program of priorities shall be made thus: a. To R P8,000 b. To Q P6,000 c. To R P2,000 d. To Q P6,000 and R P8,000

____ 18. Jane Inc. purchased chocolates from Switzerland for 200,000 Swiss francs (SFr) on December 1, 2013. Payment is due on January 30, 2014. On December 1, 2013, the company also entered into a 60-day forward contract to purchase 100,000 Swiss francs. The forward contract is not designated as a hedge. The rates were as follows:

December 1, 2013 December 31, 2013 January 30, 2014

Spot Rate $0.89 0.91 0.92

Forward Rate $0.90 (60 days) 0.93 (30 days)

The entries on January 30, 2014, include a a. Credit to Cash, P180,000 b. Debit to Foreign Currency Transaction Loss, P4,000 c. Credit to Foreign Currency Units (SFr), P184,000 d. Debit to Dollars Payable to Exchange Broker, P184,000 ____ 19. Chris Company was formed on January 1, 2015 as a wholly owned foreign subsidiary of a U.S. corporation. Chris' functional currency was the stickle (§). The following transactions and events occurred during 2013: Jan 1 June 30 Dec. 31

Chris issued common stock for §1,000,000. Chris paid dividends of §20,000. Chris reported net income of §80,000 for the year.

Exchange rates for 2015 were: Jan 1 June 30 Dec. 31 Weighted average rate for the year

P1 = §.48 P1 = §.46 P1 = §.42 P1 = §.44

What exchange rate should have been used in translating Chris’ revenues and expenses for 2015? a. §.46 b. §.48 c. §.45 d. §.42 e. §.44 ____ 20. In a statement of financial affairs, assets are classified a. according to whether they are pledged with particular creditors b. as current or noncurrent c. as operating or nonoperating d. as monetary or nonmonetary e. as direct or indirect

On December 1, 2013, Robert Corporation acquired 100 shares of Paul Corporation at a cost of P40 per share. Robert classifies them as available-for-sale securities. On this same date, it decides to hedge against a possible decline in the value of the securities by purchasing, at a cost of P250, an at-the-money put option to sell the 100 shares at P40 per share. The option expires on February 20, 2014. Selected information concerning the fair values of the investment and the options follow: December 1 2013

December 31 2013

February 20 2014

P40

?

?

P250 0 P250

P400 ? P100

P400 400 ?

Paul Corporation Per Share Put Option (100 shares) Market Value Intrinsic Value Time Value

Assume that Robert exercises the put option and sells Paul shares on February 20, 2014. ____ 21. What is the market price of Paul Corporation stock on December 31, 2013? a. 40 b. 38 c. 37 d. 36 ____ 22. Which of the following journal entries will be made on February 20, 2014? a b

c d

a. b. c. d.

Cash Available-for-sale securities Cash Put Option Available-for-sale securities Loss on Hedge Activity Put Option Loss on Hedge Activity Available-for-sale securities

4,000 4,000 4,000 400 3,600 150 150 400 400

Option B Option A Option C Option D

Jet Company develops and markets organic food products to natural foods retailers. The following information is available for the company for the year 2013 Sales Cost of goods sold Increase in acounts receivable Decrease in inventory

450,000 275,000 25,000 13,000

Decrease in accounts payable

30,000

____ 23. What amount will be reported by the company as cash received from customers during the year? a. 455,000 b. 425,000 c. 475,000 d. 450,000 ____ 24. Earl company entered into a forward contract to speculate in the foreign currency. It sold 100,000 foreign currency units under a contract dated November 1, 2013, for delivery on January 31, 2014:

Spot rates 30-day forward rate 90-day forwad rate

11/1/2013 $0.035 0.034 0.033

12/31/2013 $0.037 0.036 0.035

In its income statement for the year ended December 31, 2013, what amount of loss should Earl report from this forward contract? a. 0 b. 200 c. 300 d. 100 ____ 25. A highly inflationary economy is defined as a. Cumulative 3-year inflation in excess of 90%. b. Cumulative 5-year inflation in excess of 100%. c. Any country designated as a company operating in an underworld economy d. Cumulative 3-year inflation in excess of 100%. e. Cumulative 5-year inflation in excess of 90%. On June 30, 2019, the Garry, Michi, and George partnership had the following fiscal year-end balance sheet: Cash Accounts receivable Inventory Plant assets-net Loan to Garry Total assets

4,000 6,000 14,000 12,000 6,000 42,000

Accounts payable Loan from Michi Garry, capital(20%) Michi, capital(30%) George, capital(50%) Total liab./equity

7,000 5,000 14,000 10,000 6,000 42,000

The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2019,. and began the liquidation process. During July the following events occurred: a b c d

Receivables of P3,000 were collected. The inventory was sold for P4,000. All available cash was distributed on July 31, except for P2,000 that was set aside for contingent expenses.

____ 26. How much cash would Garry receive from the cash that is available for distribution on July 31? a. 0 b. 2,000 c. 600 d. 1,000 ____ 27. On October 1, 2013, Gabriel Company forecasts the purchase of inventory from a British supplier on February 1, 2014, at a price of 100,000 British pounds. On October 1, 2013, Gabriel pays P1,800 for a threemonth call option on 100,000 pounds with a strike price of P2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2013, the option has a fair value of P1,600. The following spot exchange rates apply: Date October 1, 2013 December 31, 2013 February 1, 2014

Spot Rate 2.00 1.97 2.01

What is the 2014 effect on net income as a result of these transactions? a. 201,000 b. 195,000 c. 203,000 d. 202,600 e. 201,600 ____ 28. Jason Corporation about to be liquidated, has the following amounts for its assets and liabilities:

Current assets Land Building Equipment Accounts payable Income taxes payable Mortgage payments Note payable

Book value 200,000 70,000 500,000 300,000 240,000 60,000 510,000 80,000

Net realizable value 140,000 100,000 350,000 160,000 -

The mortgage is secured by the land and building, and the note payable is secured by the equipment. Jason expects that the expenses of administering the liquidation will total P40,000 How much should Jason expect to pay on the accounts payable? a. 120,000 b. 128,000 c. 240,000 d. 96,000 e. 146,000 ____ 29. Which of the following is a potential abuse that may arise when a business combination is accounted for as a pooling of interests?

a. Earnings of the pooled entity may be increased because of the combination only and not as a result of efficient operations. b. An undue amount of cost may be assigned to goodwill, thus potentially allowing an understatement of pooled earnings. c. Liabilities may be undervalued when the price paid by the investor is allocated to specific liabilities. d. Assets of the buyer may be overvalued when the price paid by the investor is allocated among specific assets. Toto Corporation has just finished preparing a consolidated balance sheet, income statement, and statement of changes in retained earnings for 2014. The following items are proposed for inclusion in the consolidated cash flow statement. Decrease in accounts receievable Increase in accounts receievable Increase in inventory Increase in bonds payable Equipment purchased Common stock repurchased Depreciation reported for current period Gain recorded on sale of equipment Book value of equipment sold Goodwill impairment loss Sales Cost of goods sold Dividends paid by parent Dividends paid by subsidiary Consolidated net income for the year Income assigned to the noncontrolling interest

15,000 18,000 20,000 50,000 200,000 40,000 50,000 12,000 58,000 12,000 800,000 350,000 45,000 20,000 400,000 20,000

Toto holds 75 percent of the voting stock of Ven Pharmaceuticals, acquired at book value on June 21, 2006. On the date of the acquisition, the fair value of the noncontrolling interest was equal to 25 percent of the book value of Ven. ____ 30. What was the change in cash balance for the consolidated entity for 2014? a. Increase of P150,000 b. Increase of P293,000 c. Increase of P450,000 d. Decrease of P153,000 ____ 31. Junior Company sold equipment to a Canadian company for 100,000 Canadian dollars (CP) on January 1, 2014 with settlement to be in 60 days. On the same date, Alman entered into a 60-day forward contract to sell 100,000 Canadian dollars at a forward rate of 1 CP = P.94 in order to manage its exposed foreign currency receivable. The forward contract is not designated as a hedge. The spot rates were: January 1 1 CP

0.945

March 1 1 CP

0.930

The entry to revalue foreign currency payable to current U.S. dollar value on March 1 will have: a. a debit to Foreign Currency Transaction Loss for P1,500 b. a debit to Foreign Currency Transaction Loss for P2,500 c. a credit to Foreign Currency Transaction Gain for P1,000 d. a credit to Foreign Currency Transaction Gain for P1,500. ____ 32. On December 5, 2016, Bar Heating and Air Conditioning Service repaired the heating system in the building occupied by Likhalusugan, a voluntary health and welfare organization. An invoice for P 1,500 was received by Likhalusugan for the repairs on December 15, 2016. On December 30, 2016, Bar notified Likhalusugan that the invoice was canceled and that repairs were being donated without charge. For the year ended December 31, 2016 how should Likhalusugan report these contributed services? a. Only in the notes to the financial statements. b. As an increase in unrestricted revenues and as an increase in expenses on the statement of activities. c. No disclosure is required either in the financial statements or in the notes. d. As an increase in temporarily restricted net assets on the statement of activities. ____ 33. The company is a golf course developer that constructs approximately 10 courses per year. Next year the company will buy 10,000 trees in the courses it builds. In recent years, the price of trees has fluctuated wildly. To eliminate this uncertainty, the company has found a reputable financial institution that will enter into a forward contract for 10,000 trees. On January 1, 2016, the company agrees o buy 10,000 trees on January 1, 2017 from the financial institution. The price is set at P500 per tree. Of course, the financial institution doesn’t own any trees. As with most derivative contract, this agreement will be settled by an exchange of cash on January 1, 2017 based on the price of trees on that date. What net amount will the golf course developer pay or receive on January 1, 2017 under the forward contract if the price of each tree on that date is P850. a. 3,500,000 net pay b. 8,500,000net receipt c. 3,500,000 net receipt d. 5,000,000 net pay ____ 34. Gardo and Gordo formed a partnership on July 1, 2010 to operate 2 stores to be managed by each of them. They invested P30,000 and P20,000 and agreed to share earnings 60% and 40% respectively. All their transactions were for cash and all their subsequent transactions were handled through their respective bank accounts as summarized below:

Cash receipts Cash disbursements

Gardo Gordo 79,100 65,245 62,275 70,695

On October 31, 2010, all remaining non cash assets in the 2 stores were sold for cash of P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution of the P60,000 cash, Gardo received? a. 26,000 b. 36,000 c. 24,000 d. 34,000 ____ 35. Which statement is true regarding a foreign currency option? a. A foreign currency option gives the holder the right but not the obligation to buy or sell foreign currency in the future b. A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future c. A foreign currency option gives the holder the obligation only sell foreign currency in the future d. A foreign currency option gives the holder the obligation to only buy foreign currency in the future e. A foreign currency option gives the holder the obligation to buy or sell foreign currency in the future at the spot rate ____ 36. A construction company signed a contract to build a theater over a period of 2 years, and with this contract also signed a maintenance contract for 5 years. Both the contracts are negotiated as a single package and are closely interrelated to each other. The two contracts should be a. Recognized under the completed contracted method. b. Combined and treated as a single contract. c. Treated differently, the building contract under the completed contract method and maintenance contract under the percentage of completion method. d. Segmented and considered 2 separate contracts. ____ 37. In partnership liquidation, how are partner salary allocations treated? a. Salary allocations take precedence over amounts due to partners with respect to their capital interests, but not profits. b. Salary allocations take precedence over creditor payments. c. Salary allocations take precedence over amounts due to partners with respect to their capital profits, but not capital interests. d. Salary allocations are disregarded ____ 38. The cost recovery method of accounting for long-term construction contract is preferable when a. Estimates of costs to complete construction toward completion are reasonably dependable. b. The contract entails relatively long period of construction. c. A contractor is involved in numerous projects. d. Lack of dependable estimates or inherent hazards cause forecasts to be doubtful. ____ 39. The following inventory balances for 2014 in local currency units (LCU) are given: Inventory at cost Inventory at replacement cost Inventory at net realizable value

320,000 LCU 300,000 420,000

Inventory at net realizable value Less normal profit margin The following exchange rates are given for 2014: January 1, 2014 Average, 2014 4th quarter average, 2014 December 31, 2014

400,000 P1.50 = 1 LCU 1.48 = 1 1.43 = 1 1.42 = 1

Compute the December 31, 2014, inventory balance using the lower of cost or market method under the temporal method a. 429,000 b. 473,600 c. 457,600 d. 596,000 e. 568,000 ____ 40. Account Sales Cost of Goods Sold Gross Profit Selling & Admin expenses Net Income Dividends paid

Investor 500,000 230,000 270,000 120,000 150,000 50,000

Investee 300,000 170,000 130,000 100,000 30,000 10,000

Assuming Investor owns 70% of Investee. What is the amount that will be recorded as Net Income for the Controlling Interest? a. 164,000 b. 180,000 c. 171,000 d. 178,000 ____ 41. A construction company signed a contract to build a theater over a period of 2 years, and with this contract also signed a maintenance contract for 5 years. Both the contracts are negotiated as a single package and are closely interrelated to each other. The two contracts should be a. Recognized under the completed contracted method. b. Combined and treated as a single contract. c. Segmented and considered 2 separate contracts. d. Treated differently, the building contract under the completed contract method and maintenance contract under the percentage of completion method. ____ 42. Mel Company issued nonvoting preferred stock with a fair value of P1,500,000 in exchange for all the outstanding common stock of the Bath Corporation. On the date of the exchange, Bath had tangible net assets with a book value of P900,000 and a fair value of P1,400,000. In addition, Mel issued preferred stock valued at P100,000 to an individual as a finder's fee for arranging the transaction. As a result of these transactions, Mel should report an increase in net assets of __________. a. 1,400,000 b. 900,000

c. 1,500,000 d. 1,600,000 ____ 43. On its balance sheet, a company undergoing reorganization should a. report its assets at fair market value, so that financial statement users can estimate whether creditors' claims will be met b. report its assets as pledged or free c. report its assets at current replacement cost d. continue to report its assets at book value e. report its assets at net realizable value because there is reason to doubt that the organization is a going concern ____ 44. On December 5, 2013, Texas based Kit Corporation purchased goods from a Saudi Arabian firm for 100,000 riyals (SAR), to be paid on January 10, 2014. The transaction is denominated in Saudi riyals. Kit's fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are: December 5, 2013 1 riyal December 31, 2013 1 riyal January 10, 2014 1 riyal

.265 .262 .264

What journal entry would Kit make on January 10, 2014, to revalue foreign currency payable to equivalent U.S. dollar value? a Accounts Payable (SAR) 300 Foreign Currency Transaction Gain 300 b Accounts Payable (SAR) 100 Foreign Currency Transaction Gain 100 c Foreign Currency Transaction Loss 100 Accounts Payable (SAR) 100 d Foreign Currency Transaction Loss 200 Accounts Payable (SAR) 200 a. b. c. d.

Option D Option B Option A Option C

____ 45. Consolidated financial statements are designed to provide: a. subsidiary information for the subsidiary shareholders. b. the results of operations, cash flow, and the balance sheet in an understandable and informative manor for creditors. c. informative information to all shareholders. d. the results of operations, cash flow, and the balance sheet as if there was a single entity. ____ 46. Chicago based Corporation X has a number of importing transactions with companies based in UK. Importing activities result in payables. If the settlement currency is the British Pound, which of the following will happen by changes in the direct or indirect exchange rates? Direct Exchange Rate

Indirect Exchange Rate

a) b) c) d)

Increase NA Loss Loss Gain

a. b. c. d.

Option A Option B Option D Option C

Decreases NA Gain Gain Loss

Increases NA Gain NA Loss

Decreases NA Loss NA Gain

____ 47. Which of the following procedures is acceptable when accounting for a deficit balance in a partner’s capital account during partnership liquidation? a. If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances. b. A partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero. c. If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners. d. All of the procedures are acceptable. ____ 48. For a subsidiary to be eligible to be included in a consolidated tax return, at least _____ of its stock must be held by the parent company or another company included in the consolidated return a. 50 percent b. 40 percent c. 80 percent d. 75 percent ____ 49. Under the temporal method, retained earnings would be restated at what rate? a. Historical rate b. Composite amount c. Average rate d. Current rate e. Beginning of the year rate ____ 50. Romeo is trying to decide whether to accept a salary of P40,000 or a salary of P25,000 plus a bonus of 10% of net income after salary and bonus as a means of allocating profit among the partners. Salaries traceable to the other partners are estimated to be P100,000. What amount of income would be necessary so that Romeo would consider the choices equal: a. 305,000 b. 165,000 c. 290,000 d. 265,000

JPIA RMYC Answer Section MULTIPLE CHOICE 1. 2. 3. 4.

ANS: ANS: ANS: ANS:

C C A D

OBJ: Business combination OBJ: Foreign currency transactions and translations OBJ: Business combination

OBJ: Foreign currency transactions and translations 5. ANS: B

OBJ: Foreign currency transactions and translations 6. ANS: A

SOL: Beginning balance Cash collected Inventory sold Accounts payable Expenses Cash available

4,000 3,000 4,000 (7,000) (2,000) 2,000

7. 8. 9. 10.

OBJ: ANS: ANS: ANS: ANS:

Partnership D D E E

11. 12. 13. 14. 15.

OBJ: ANS: ANS: ANS: ANS: ANS:

Foreign currency transactions and translations B E OBJ: Foreign currency transactions and translations D OBJ: Foreign currency transactions and translations B OBJ: Foreign currency transactions and translations B

OBJ: Foreign currency transactions and translations OBJ: Business combination OBJ: Foreign currency transactions and translations

OBJ: Foreign currency transactions and translations 16. ANS: C OBJ: Foreign currency transactions and translations

17. ANS: D

SOL: P 6,000 24,000 30,000 3/10 100,000

Loans Capital Total interests Divide by PL ratio Loss absorption facility Priority 1

100,000 Priority 11 100,000

18. 19. 20. 21. 22. 23. 24. 25. 26.

OBJ: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

Partnership A E A C A B C D A

OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ: OBJ:

Q 36,000 36,000 3/10 120,000

R (10,000) 60,000 50,000 4/10 125,000

120,000 (20,000) 100,000

(5,000) 120,000 (20,000) 100,000

P

Q

-

Derivatives Foreign currency transactions and translations Corporate liquidation Derivatives Derivatives Consolidation after acquisition Derivatives Foreign currency transactions and translations

SOL: Equities,Jun 30 Inventory loss Contingency fund Subtotals

Garry 8,000 (2,000) (400) 5,600

Michi 15,000 (3,000) (600) 11,400

George 6,000 (5,000) (1,000) 0

Total 29,000 (10,000) (2,000) 17,000

Possible losses on remaining assets Subtotals

(3,000) 2,600

(4,500) 6,900

(7,500) (7,500)

(15,000) 2,000

Eliminate George’s Deficit Subtotals

(3,000) (400)

(4,500) 2,400

7,500 0

2,000

400 0

(400) 2,000

0

2,000

Eliminate Garry’s Deficit Cash distribution OBJ: Partnership 27. ANS: E

8,000 6,000

OBJ: Derivatives

R

Total

2,000

2,000

6,000 10,000

14,000 16,000

28. ANS: D SOL: Free assets P220,000 - priority claims P100,000 = P120,000 P120,000/P300,000 unsecured = payment of 40% on unsecured dollars. 40% x P240,000 A/P = P96,000

29. 30. 31. 32. 33. 34.

OBJ: ANS: ANS: ANS: ANS: ANS: ANS:

Corporate liquidation A OBJ: Business combination B OBJ: Consolidation after acquisition C OBJ: Derivatives B C A

SOL: Initial investments Investments (personal disbursements) Withdrawals (personal receipts) Balance after Partnership Gain on realization (P60,000-P38,625) Balances before payment to partners Payment to partner

Gardo (60%) 30,000 62,275 (79,100) 13,175 12,825 26,000 (26,000)

Gordo (40%) 20,000 70,695 (65,245) 25,450 8,550 34,000 (34,000)

35. 36. 37. 38. 39.

OBJ: ANS: ANS: ANS: ANS: ANS:

Partnership A B D D A

40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

OBJ: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS: ANS:

Foreign currency transactions and translations C OBJ: Business combination B D OBJ: Business combination D OBJ: Corporate liquidation A OBJ: Foreign currency transactions and translations B OBJ: Business combination B OBJ: Foreign currency transactions and translations A OBJ: Partnership C OBJ: Consolidation after acquisition B OBJ: Foreign currency transactions and translations C

OBJ: Foreign currency transactions and translations OBJ: Partnership

Total 50,000 132,970 (144,345) 38,625 21,375 60,000 (60,000)

SOL: Bonus 15,000 15,000 15,000 29,000/.1 Net income

10% (NI-Salaries-Bonus) 10% (NI-(100,000=25,000)-15,000) 10% (NI-140,000) 10% NI-14,000 NI 290,000

OBJ: Partnership