ACC-1A Lecture Notes - Lecture 18: Cash Flow Statement, Retained Earnings, Financial Statement
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Sendelbach Corporation is a U.S.âbased organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary maintains a ledger denominated in Mexican pesos (Ps) and a general ledger in Canadian dollars (C$). As of December 31, 2015, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows: |
Main OperationâCanada | ||
Debit | Credit | |
Accounts payable | C$ 39,605 | |
Accumulated depreciation | 41,000 | |
Buildings and equipment | C$ 181,000 | |
Cash | 40,000 | |
Common stock | 64,000 | |
Cost of goods sold | 217,000 | |
Depreciation expense | 8,300 | |
Dividends, 4/1/15 | 33,000 | |
Gain on sale of equipment, 6/1/15 | 6,400 | |
Inventory | 93,000 | |
Notes payableâdue in 2018 | 83,000 | |
Receivables | 82,000 | |
Retained earnings, 1/1/15 | 149,590 | |
Salary expense | 37,000 | |
Sales | 326,000 | |
Utility expense | 10,400 | |
Branch operation | 7,895 | |
Totals | C$ 709,595 | C$ 709,595 |
Branch OperationâMexico | ||
Debit | Credit | |
Accounts payable | Ps 64,900 | |
Accumulated depreciation | 39,900 | |
Building and equipment | Ps 54,000 | |
Cash | 66,000 | |
Depreciation expense | 3,400 | |
Inventory (beginningâincome statement) | 37,000 | |
Inventory (endingâincome statement) | 35,000 | |
Inventory (endingâbalance sheet) | 35,000 | |
Purchases | 71,000 | |
Receivables | 35,000 | |
Salary expense | 10,400 | |
Sales | 138,000 | |
Main office | 34,000 | |
Totals | Ps 311,800 | Ps 311,800 |
Additional Information |
⢠| The Canadian subsidiaryâs functional currency is the Canadian dollar, and Sendelbachâs reporting currency is the U.S. dollar. The Canadian and Mexican operations are not viewed as separate accounting entities. |
⢠| The building and equipment used in the Mexican operation were acquired in 2005 when the currency exchange rate was C$0.22 = Ps 1. |
⢠| Purchases should be assumed as having been made evenly throughout the fiscal year. |
⢠| Beginning inventory was acquired evenly throughout 2014; ending inventory was acquired evenly throughout 2015. |
⢠| The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,895 on December 31, 2015. |
⢠| Currency exchange rates for 1 Ps applicable to the Mexican operation follow: |
Weighted average, 2014 | C$ | 0.27 |
January 1, 2015 | 0.29 | |
Weighted average rate for 2015 | 0.31 | |
December 31, 2015 | 0.32 | |
⢠| The December 31, 2014, consolidated balance sheet reported a cumulative translation adjustment with a $50,950 credit (positive) balance. |
⢠| The subsidiaryâs common stock was issued in 2004 when the exchange rate was $0.43 = C$1. |
⢠| The subsidiaryâs December 31, 2014, Retained Earnings balance was C$149,590.00, a figure that has been translated into US$71,043. |
⢠| The applicable currency exchange rates for 1 C$ for translation purposes are as follows: |
January 1, 2015 | US$ | 0.70 |
April 1, 2015 | 0.69 | |
June 1, 2015 | 0.68 | |
Weighted average rate for 2015 | 0.67 | |
December 31, 2015 | 0.65 | |
a. | Remeasure the Mexican operationâs figures into Canadian dollars. (Hint: Back into the beginning net monetary asset or liability position.) (Input all amounts as positive values.)
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QUESTION 1
The ownership of a corporation is represented by:
shares of stock. | ||
the owner's capital account. | ||
the revenue account. | ||
cash in bank account. |
QUESTION 2
How many classifications does a Capital Stock Account have?
One | ||
Two | ||
Three | ||
Four |
QUESTION 3
The equity contributed by stockholders and equity earned throughbusiness profits represent the stockholders' equity for a:
partnership firm. | ||
sole proprietorship. | ||
corporation. | ||
none of these. |
QUESTION 4
Retained earnings are a part of a/an:
asset account. | ||
permanent account. | ||
stockholders' equity account. | ||
temporary account. |
QUESTION 5
How many sections does an Income Statement have?
Two | ||
Three | ||
Four | ||
Five |
QUESTION 6
Net sales are related to the:
net income section. | ||
gross profit on sales section. | ||
revenue section. | ||
cost of merchandise sold section. |
QUESTION 7
Sales discount and sales return and allowance are:
revenue accounts. | ||
contra revenue accounts. | ||
permanent accounts. | ||
contra expenses accounts. |
QUESTION 8
The total cost related to merchandise purchases during anaccounting period is the:
net purchase. | ||
cost of merchandise sold. | ||
cost of merchandise available for sale. | ||
beginning merchandise inventory. |
QUESTION 9
The gross profit on sale is $65,000, and operating expenses is$35,000. What will be the operating profit?
$65,000 | ||
$35,000 | ||
$100,000 | ||
$30,000 |
QUESTION 10
A balance sheet has the following sections:
Assets, liabilities, and stockholders' equity. | ||
Income, expenses, and stockholders' equity. | ||
Assets, liabilities, and income. | ||
Operating income, operating expenses, and stockholders'equity. |
QUESTION 11
A cash flow statement is used to assess the:
net increase or decrease of cash. | ||
net increases of cash only. | ||
net decrease of cash only. | ||
net profit or loss of business. |