Examination card № 13

on the discipline “Financial Accounting II”

for the 3rd year students

1. Describe three types of company combination with examples.

2. PJ Corporation pays $5,400,000 for an 80 percent interest in Sof Corporation on January 1, 2011, at which time the book value and fair value of Sof’s net assets are as follows (in thousands):

	Book value	Fair value
Current assets	2000	3000
Equipment – net	4000	6000
Other plant assets – net	2000	2000
Liabilities	(3000)	(3000)
Net assets	5000	8000

REQUIRED: Prepare a schedule to allocate the fair value/book value differentials to Sof’s net assets.

3. Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2013:

Common shares outstanding throughout the year - 100 millon

Convertible preferred shares

(convertible into 32 million shares of common) - $60 million

Convertible 10% bonds

(convertible into 13.5 million shares of common) -$900 million

Henderson-Niles’ net income for the year ended December 31, 2013, is $520 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2013.

Required:

Compute basic and diluted earnings per share for the year ended December 31, 2013.

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 № 14

on the discipline “Financial Accounting II”

for the 3rd year students

1. How the equity method relates to consolidated financial statements?

2. The following selected transactions relate to liabilities of United Insulation Corporation. United’s fiscal year ends on December 31.

Required:

Prepare the appropriate journal entries through the maturity of each liability.

2013

Jan. 13 Negotiated a revolving credit agreement with Parish Bank that can be renewed annually upon bank approval. The amount available under the line of credit is $20 million at the bank’s prime rate.

Feb. 1 Arranged a three-month bank loan of $5 million with Parish Bank under the line of credit agreement. Interest at the prime rate of 10% was payable at maturity.

May 1 Paid the 10% note at maturity.

Dec. 1 Supported by the credit line, issued $10 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 9% discount rate.

31 Recorded any necessary adjusting entry(s).

2014

Sept. 1 Paid the commercial paper at maturity.

3. Book values and fair values of Sli Corporation’s assets and liabilities on December 31, 2010, are as follows (in thousands):

	Book value	Fair value
Cash	140	140
AR-net	160	160
Inventories	160	200
Land	300	400
Buildings- net	700	1000
Equipment – net	440	600
	1900	2500
AP	200	200
Note payable	280
Capital stock	1000
Retained earnings	420
	1900

On January 1, 2011, Por Corporation acquires all of Sli’s capital stock for $2,500,000 cash. The acquisition is recorded using push-down accounting.

REQUIRED

1. Prepare the January 1 journal entry on Sli’s books to record push-down values.

2. Prepare a balance sheet for Sli Corporation immediately after the acquisition on January 1 under push down accounting.

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}