Midterm 2 - Winter 2012+Sol

Midterm 2 - Winter 2012+Sol - First nan — Fri 11:30 —...

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Unformatted text preview: First nan. — Fri. 11:30 — Fri. 16:00 — Sat. 8:30 Last name (surname). Student ID#: Section: Sign-In Number (to be filled when you sign in only): YORK UNIVERSITY Atkinson School of Administrative Studies ADMS4520 3.0 Midterm Exam 2, Winter 2012, All Sections Instructor: Patrice Gélinas Instructions This is a closed book examination and no collaboration is allowed. There is a total of 50 marks Put your name and student number at the top of the page. Answer each question on the examination paper, and on the back of a page if necessary. You may write with a pencil or pen. Three hour are allowed to complete the exam. If you leave early, please respect your fellow students by leaving quietly. Place photo identification on your desk during the examination to facilitate verification. Answer all questions as per current IFRS. Good luck. Question 1 Question 2 Question 3 TOTAL [If 6 I Question 1 (32 marks) — IMAGINE YOU ARE IN APRIL 2013,33. ._ Pony Corp. pmchased 70% of mngggandmg shares of Sandy Ltd. on January 12 2013, at a cost of 70"»: $400,000. Pony has always used the cost method to account for its investments. On January 1, 2013, Sandy had common shares of $250,000 and retained earnings of $150,000 and fair values were equal to carrying values for all its net assets except inventory (fair value was $45,000 less than book value) and equipment (‘3 >756 (fair value was $120,000 greater than book value). The equipment had an estimated remaining life of Lg- ‘50 6years onJanuary 1,2013. The follong are the financial statements for Pony Corp. and its subsidiary Sandy Ltd. as at N! > '45 December31,2016: MWS (Gm TWP “20 Balance Sheet Sheets (Statements of Financial Position) (011$ December 31, 2016 Pony Corp. Sandy Ltd. Cash $ - $ 50,000 Accounts receivable 200,000 150,000 Note receivable - 200,000 Inventory ~-~-~—~~—-M..~_-__.___“§§0,000- 220,000 Equipment — net 1,100,000 ' 380,000 Land 750,000 150,000 Investment in Sandy Ltd. 400,000 - $ 2,780,000 $ 1,150,000 Bank indebtness $ 450,000 $ - Accounts payable 250,000 300,000 Notes payable _~—— ’ ---—'—"—_"" _ “‘ '— 200,000 - Common shares 750,000 250,000 Retained earnings 1,130,000 600,000 $ 2,780,000 $ 1,150,000 Statements of Retained Earnings year ended December 31, 2016 Retained earnings, January 1, 2016 $ 530,000 $ 460,000 Net income 600,000 240,000 Dividends - £( 10%; Retained earnings, December 31, 2016 $ 1,130,000 $ 600,000 .r \\ , \QJ; . MMM Income Statements year ended December 31, 2016 Sales 3 3,990,000 $ 1,500,000 Management fee revenue 120,000 - Investment income 70,000 18,000 Gain on sale of land - 100,000 4,180,000 1,618,000 Cost of sales 2,400,000 1,000,000 Amortization . 200,000 60,000 Interest expense 50,000 - Miscellaneous expenses 530,000 158,000 Income taxes 400,000 160,000 3,580,000 1,378,000 $ 600,000 $ 240,000 Additional Information [10,000 ~ TM“ M“ I“? ' During 2016, Sandy made a cash payment of $10,000 per month to Pony for nnnagement fees, which is included in Sandy's "M'Bcellaneous expenses". These payments had started immediately afier acqu'sin'on. 2. During 2016, Pony made intercompany sales of$50010/00 to Sandy. The December 31, 2016 inventory yandy contiained goods purchased fi'om Pony amounting to $150,000. These sales had a gross profit of35%. . k> end K 395' l' \ 3. On 2016, Pony acquired land fi'o Sandy for $290,000. This land had been recorded on Sandy’s \D‘ré . booksat an net book value of $100 . Pony paid for the land by‘signing a $200,000 notes payable to ' $9 S - y, bearing yearly interest at 8%. Interest for 2016 was paid b ‘Pon ' _ n x December 31, 2016. This land wasstill being held by Pony on December 31 , 2016. o? , 4. The filflhflflnmolflfieigoodnfllremhgdmhanged fi'omJanuaiy 1, 2013 to July 1, 2016. On /,Iuly.1‘, 2016, a valuation was performed, indicating that the fair value of consolidated goodwill was @W (000 5. Pony and Sandy pay taxes at a 40% rate. Assume that none of the gains or losses were capital gains or losses. Ignore fiiture income taxes for all transactiom related to the purchase price discrepancy and goodwill. Required (32 marks): a. Prepare, in good form, a calculation of goodwill and any ' d purchase price diserepancy as of Decerrlpgfiltblmfi. (7 marks) QUfC‘HCASL- Prim (JOIN 11094 009 Hughd cube U001» 57\IH;C\. ML cow 0* M‘v-MS‘ Wen—W Won-— _ so __ _ vflemmflx 89th J a 50, MW Aqms‘th Osmmflphu WW?) l 7 ‘ .HZ q aficwk’fi *6. \nmerd'o‘s ($430003 :— IZOIQOO 75' o O EO‘U\pmr‘ / (qu goodwrm Pg mu *‘slmr‘sm C)" ' ' GNU-hm 1 (Mum " Da‘n 3‘: ‘20”! ~ {'53 QCCLv'xsx ’f'ww ao‘a,;ow 30W BMW-cc .‘erWU “4 54 0°03 (H6900 \ w W EQVI‘DNT‘? 130,000 (00,000 Wtwl ‘L\ 5ND, L; )q "" ,‘HIHZq \5.00C> M%LM‘T {m Jw‘ooo [gm (0 500,006 (BMW? 92»: a N 6% Pasaw Mg; .100, 000 (EA Q? o P; Jr—g Asmmfim mug M o: M Ws‘rcecwx khu CLOSE/‘3 ((Scw as) 52 560 SM§ sou l 0M +535!“ \%000 \d Q9941! Mk Megs/w? M,..,.NW_—..a.., m.mmm.m.mw «IW mm...” mm - m. pmbg Nu \vxccwxm M4) dividwnw {Venn mm?) “Qua pwokx— \n CXC/Sxfl5 \A‘W’tQng 30wa3 NM \vxmme, 112M) \XVP’CO)H a“ mhtmhon 0" “9 WA floodw'W‘ Can smegma; N\ O‘H’N‘OVHQ 4'0 Pants NCA b/U’C’ 1—- Riv +6va dam swmm \/ \/ VA. MAW «a ( kwwmme » cos x qA2 aamooo/V b. Prepare Pony's consolidated income statement for the year ended December 31, 2016. (18 marks) £- 9 Camacho/1g on mac 0.6 9,61%.“ {0.3/1.2 5 0185mm: )(koac \nt an ta WQ-wrs in indegw‘wM Mch —-~—-*~--- ~--~—~‘~~- ----~-~w- m MM-.. _.__ Qcmudflned‘ \w- Cm~-~..s\. S1Wfl¥ \lem ended D420 ’31. 80W) (01- / Sam‘s C’Mfio * \Soo — 5003 $ “@510 (000 (m up (glooo/ \Mfiervnenk \Nome (jéy ‘8 -70 42) ’1}:me 4.0,an oo 0 (CA “A Code} a? SQWES (Z‘Ltccn (coo ~51»... 5Z5) Prmm hw’fim L300 Heb drzo \ ( \hlreq {s ’9‘ erpmse (eom 12. W\\g¢. Cflmo‘arw k5 Wm“ wwpawman 1' chwwfo\ Q \) an '3 \ \Ymome W4 9% [H00 +\LQO ‘94 *‘40 } km 30+\58 ' \ 7,0) MMLQ gmflw COAQOVx (Md—cc) 105k Mme a {'1 Y‘\ 139; am?“ am _ pomi‘ 5 Shear-e. Mm ‘ An alternative solution (which your initial mark was based on, would be to adjust the Parent and Sub net income for management fees and interest expense/revenues before calculating the NCl/Parent proportion of Net Income. 1 have checked and the Book Solutions ignore this (which can also be OK if the numbers are relatively small and since it does not change total consolidated net income anyway, it only changes the NCI/Parent proportions). So I will accept this. As a result, the maximum mark achievable was 46/50 in the 2nd midterm exam. Consequently, the exam will be calculated out of 46, not 50. O Calculate the following balances that would appear on Pony's consolidated statement of financial position as at December 31, 2016. (7 marks) i) Inventory (1 mark) POOW$ endins MMHRJZ \\ " «4.144 mmme (omfvfir "h Swan‘s (mmxdawd gnaw:7 mwmw ii) Land (1 mark) Pang": Law} HCLOW‘A’ Sandals (Wt. 41me Lima cmrfaAJLA‘ Sam M Q‘mi‘sfitc’r Cc‘nvxg‘xkdokd LON} Mon/M" iii) Notes payable (1 mark) (Pam‘s NOR» ‘Qafiow. Sadfi-s Mm @130“) Moo Mwmpmb NW pogflw cowl a Mad Molar: Quad-9L6 iv) Noncontrolling interest (3 marks) Somme OxakGLvh-ed mamss (003,000 QWM/fl Shwm 8'60. c906 Srwma anus Ego-k6- 57 ' - - M23 I500 QM WCNwoahLefll “00“; 3 me am,“ on Madam 904%le Rawsleo‘x W W3 etha gum! 500 UCA“: OWM§NY° N C\ M EQLQNM Wt iv) Common shares (1 mark) Com-(non {33%}.hkv‘; W4» mm? W ("l m pew; 5 Jo Cartwy (jalxcflfll warmth Question 2 (5 marks) --- SHOW YOUR WORK Bremer Inc. has operations in several international regions. These regions reported the following information: Segment Revenues Profit Assets A 1500/“ 600 “ 9,000 V B 4,000‘ 300 1 6,000 / C 1,100 <200> \I. 2,400 V D 2,800/ 300 x/ 10,400 E 1,400 /, 100 gggg 12,800 1,100 29,800 Which of these segments are reportable? Fully document all supporting calculations. Tova SLQVQJAKALQ :- 11,930 QQQrNK-O‘OH, Sacémemm (“0% m Z‘l,2%0 1 Haunt/1M4 :‘ 0.03, 121,12 m Meow/M Tokd procflf ‘~' lboo low/Q loss = gyg/ aapujmlol-e Mg m 1 S136 m “\oéoklrfi Q1 .1; “'3‘ C.) D are. Toma 11392. 12:; =il¢1fé<4>0 / Q‘Q, vi a 0.9 \A . E” D 1 fiaggc} am 0&9 01‘) lie» 9,01,)» €3me $ rm ,0 A \“<. 1%,, 3+ Question 3 (13 marks) Gosh Corp. owns 80% of Horooz Corp. The W Financial Statements of Gosh Corp. for 20X9 and 20X8 are shown below: Gosh Corp. Consolidated Balance Sheet, December 31, 20Xx. 20x9 20xs MM Cash $180,000 $40,000 at “40 .000 O U(ccounts Receivable $300,000 $100,000 ~--~“**°=e 4‘ 9001000 0 Mntory $400,000 $100,000 M 1 gas ,occj a Md $160,000 $200,000 5, “0 .000 g 1:121: and Equipment $1,650,000 $1,170,000 1\ u go ,0007 mat—(450,“ f, ccumulated Depreciation ($800,000) ($770,000) ’1‘ 30,000 Goodwill $60,000 $60,000 Total Assets $1,950,000 $900,000 0 Mounts Payable $326,000 $40,000 M [l 9‘8 (9' 00:) 0 Med Liabilities $350,000 $140,000 ’1‘ <1 ‘0 t°° e Bonds Payable $400,000 $100,000 It 30°10” W4 3W,” e Less Bond Discount 2 . ($40,000) ' ($50,000) a, u 0 9°" Non-Controlling Interest $214,000 $200,000 ’1‘ 1911000 Common Shares $350,000 $350,000 Retained Earnings $350,000 _ $120,000 Total Liabilities and Equity $1,950,000 $900,000 Gosh Corp. Consolidated Income Statement, For the year ended December 31, 20X9 Sales $500,000 Cost of Sales $1 15,000 Wreciation @9100 ,Interest Expense $50,000 $185,000) $0109.00» Net Income - Entity < $315,00(?\) Non-Controlling Interest (1 5,000) Net Income $300,000 Other Information: Gosh purchased its interest in Horooz on January 1, 20x5 for $360,000 when the company’s net assets were valued at $300,000. The acquisition differential was allocated equally between goodwill and equipment, which was estimated to have a remaining useful life of ten years from the acquisition date. \ _ 10 , \ . - SsflwwmgL/*Wb ‘, Horooz reported a net Income of $75,000 and paid dividends of $5E000 during 20x9. ‘ / Gosh issued $300,000__in___129n.ds duringtheyear, Gosh reported an equity method net Income of $300,000 and paid $702000 in dividends to its shareholders. Q15; v..- Required: ‘9 Prepare a Consolidated Statement of Cash Flows for Gosh Corp. for 20x9. ‘ . . 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