ACCTG311 Lecture Notes - Software
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Consider the following balance sheet:
BestCare HMO
Balance Sheet
June 30, 2011
(in thousands)
Assets
Current Assets:
Cash $2,737
Net premiums receivable 821
Supplies 387
Total current assets $3,945
Net property and equipment $5,924
Total assets $9,869
Liabilities and Net Assets
Accounts payableâmedical
Services $2,145
Accrued expenses 929
Notes payable 382
Total current liabilities $3,456
Long-term debt $4,295
Total liabilities $7,751
Net assetsâunrestricted
(equity) $2,118
Total liabilities and net
Assets $9,869
Consider the following financial statements for Green Valley Nursing Home, Inc. a for profit long-term care facility:
Green Valley Nursing Home Inc.
Balance Sheet
December 31, 2011
Assets
Current assets:
Cash $105,737
Marketable securities 200,000
Net patient accounts receivables 215,600
Supplies 87,655
Total current assets $608,992
Property and equipment $2,250,000
Less accumulated depreciation 356,000
Net property and equipment $1,894,000
Total assets $2,502,992
Liabilities and Shareholder?s Equity
Current liabilities:
Accounts payable $72,250
Accrued expenses 192,900
Notes payable 100,000
Current portion of long-term debt 80,000
Total current liabilities $445,150
Long term debt $1,700,000
Shareholders? Equity:
Common stock, $10 par value $100,000
Retained earnings 257,842
Total shareholder?s equity $357,842
Total liabilities and shareholders? equity $2,502,992
A. WHAT IS THE PRIMARY DIFFERENCE BETWEEN THESE 2 STATEMENTS
c. What was Green Valley's total debt ratio?************************************* | |
Current liabilities | |
LT liabilities | |
Total liabilities (debt) | |
Total assets | |
Total debt ratio |
On January 1, 2017, Lamar Corp. (CAD) purchased 80% of Martin Inc, an American company, for US$50,000. Martin's book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years. A goodwill impairment loss of US$1,000 occurred during 2017. Martin's January 1, 2017 Balance Sheet is shown below (in U.S. dollars):
Current Monetary Assets | $50,000 |
Inventory | $40,000 |
Plant and Equipment | $25,000 |
Total Assets | $115,000 |
Current Liabilities | $45,000 |
Bonds Payable (maturity: January 1, 2022) | $20,000 |
Common Shares | $30,000 |
Retained Earnings | $20,000 |
Total Liabilities and Equity | $115,000 |
The following exchange rates were in effect during 2017:
January 1, 2017: | US $1 = CDN $1.3250 |
Average for 2017: | US $1 = CDN $1.3350 |
Date when Inventory Purchased: | US $1 = CDN $1.34 |
December 31, 2017: | US $1 = CDN $1.35 |
Dividends declared and paid December 31, 2017. The financial statements of Lamar (in Canadian dollars) and Martin (in U.S. dollars) are shown below:
Current Monetary Assets | LAMAR $42,050 | MARTIN $65,000 |
Inventory | $60,000 | $50,000 |
Plant and Equipment | $23,500 | $20,000 |
Investment in Martin (at Cost) | $66,250 | - |
Assets | $191,800 | $135,000 |
Current Liabilities | $50,000 | $48,000 |
Bonds Payable (maturity: January 1, 2022) | $35,000 | $20,000 |
Common Shares | $60,000 | $30,000 |
Retained Earnings | $30,000 | $20,000 |
Net Income | $28,800 | $27,000 |
Dividends | ($12,000) | ($10,000) |
Liabilities and Equity | $191,800 | $135,000 |
1) Compute Martin's exchange gain or loss for 2017 if Martin is considered to be a self-sustaining foreign subsidiary.
2) Translate Martin's 2017 Income Statement into Canadian dollars if Martin is considered to be a self-sustaining foreign subsidiary.
3) Calculate Lamarâs Consolidated Net Income for 2017 if Martin is considered to be a self-sustaining foreign subsidiary.
4) Compute Martin's exchange gain or loss for 2017 if Martin is considered to be an integrated foreign subsidiary.
5) Translate Martin's 2017 Income Statement into Canadian dollars if Martin is considered to be an integrated foreign subsidiary.
6) Translate Martin's December 31, 2017 Balance Sheet into Canadian dollars if Martin is considered to be an integrated foreign subsidiary.
Review of pre-consolidation equity method (controlling investment in affiliate, fair value differs from book value)
Assume an investee has the following financial statement information for the three years ending December 31, 2013:
(At December 31) | 2011 | 2012 | 2013 |
---|---|---|---|
Current assets | $310,500 | $416,550 | $428,205 |
Tangible fixed assets | 844,500 | 861,450 | 992,595 |
Intangible assets | 75,000 | 67,500 | 60,000 |
Total assets | $1,230,000 | $1,345,500 | $1,480,800 |
Current liabilities | $150,000 | $165,000 | $181,500 |
Noncurrent liabilities | 330,000 | 363,000 | 399,300 |
Common stock | 150,000 | 150,000 | 150,000 |
Additional paid-in capital | 150,000 | 150,000 | 150,000 |
Retained earnings | 450,000 | 517,500 | 600,000 |
Total liabilities and equity | $1,230,000 | $1,345,500 | $1,480,800 |
(For they year ended December 31) | 2011 | 2012 | 2013 |
---|---|---|---|
Revenues | $1,275,000 | $1,380,000 | $1,455,000 |
Expenses | 1,162,500 | 1,260,000 | 1,314,000 |
Net income | $112,500 | $120,000 | $141,000 |
Dividends | $37,500 | $52,500 | $58,500 |
Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the equity method to account for its investment in the investee, what is the balance in the "investment in investee" account in the investor company's preconsolidation balance sheet on December 31, 2013?
A. $900,000
B. $750,000
C. $675,000
D. $1,480,800
Assume that on January 1, 2011, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values. In addition, the acquisition resulted in no goodwill or bargain purchase gain recognized in the consolidated financial statements of the investor company. Assuming that the investor company uses the equity method to account for its investment in the investee, what is the balance in the "income from investee" account in the investor company's preconsolidation income statement for the year ended December 31, 2013?
A. $58,500
B. $141,000
C. $112,500
D. $82,500