Examination card №5

on the discipline “Financial Accounting II”

for the 3rd year students

1. What is a bargain purchase option?

2. On December 31, 2011, the separate-company financial statements for Pan Corporation and its 70 percent-owned subsidiary, Sad Corporation, had the following account balances related to dividends (in thousands).

	Pan	Sad
Dividends for 2011	1200	800
Dividends payable at December 31,2011	600	200

Required:

1. At what amount will dividends be shown in the consolidated retained earnings statement?

2. At what amount should dividends payable be shown in the consolidated balance sheet?

3. American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton completed construction of the machine on January 1, 2013. In payment for the $4 million machine, American Food Services issued a four-year installment note to be paid in four equal payments at the end of each year. The payments include interest at the rate of 10%.

Required:

1. Prepare the journal entry for American Food Services’ purchase of the machine on January 1, 2013.

2. Prepare an amortization schedule for the four-year term of the installment note.

3. Prepare the journal entry for the first installment payment on December 31, 2013.

4. Prepare the journal entry for the third installment payment on December 31, 2015.

Lecturer A. Kaldarova ______________________

Confirmed at the meeting of the department of "Socio-Economic Disciplines"

Minute №____ from ____ of 2015.

The dean of the faculty "International Educational Programs"

Ronald Voogdt _____________

^{name signature}

Examination card №6

on the discipline “Financial Accounting II”

for the 3rd year students

1. What is a deferred annuity?

2. Dixon Development began operations in December 2013. When lots for industrial development are sold, Dixon recognizes income for financial reporting purposes in the year of the sale. For some lots, Dixon recognizes income for tax purposes when collected. Income recognized for financial reporting purposes in 2013 for lots sold this way was $12 million, which will be collected over the next three years. Scheduled collections for 2014–2016 are as follows:

2014 4 million

2015 5 million

2016 3 million

= $12 million

Pretax accounting income for 2013 was $16 million. The enacted tax rate is 40%.

Required:

1. Assuming no differences between accounting income and taxable income other than those described above, prepare the journal entry to record income taxes in 2013.

2. Suppose a new tax law, revising the tax rate from 40% to 35%, beginning in 2015, is enacted in 2014, when pretax accounting income was $15 million. Prepare the appropriate journal entry to record income taxes in 2014.

3. Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense.

Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2013 before the bonus and income tax was $150,000. The tax rate is 30%.

Required:

1. Express the bonus formula as one or more algebraic equation(s). *

2. Using these formulas calculate the amount of the bonus.

3. Prepare the adjusting entry to record the bonus compensation.

Lecturer A. Kaldarova ______________________

Confirmed at the meeting of the department of "Socio-Economic Disciplines"

Minute №____ from ____ of 2015.

The dean of the faculty "International Educational Programs"

Ronald Voogdt _____________

^{name signature}