Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Niagara Company is contemplating to acquire Toronto, Inc. on January 1, 2020. The information
on Toronto's profit and net assets for the last five years is as follows:
Net Assets
P20,200,000
Profit
2019
P 4,000,000
2018
3,200,000
3,000,000
3,800,000
20,000,000
2017
18,500,000
2016
17,900,000
2015
2,500,000
15,600,000
It is agreed that Niagara is willing to pay for goodwill measured by capitalizing at 40% excess of
the average profits over normal return on net assets. The normal return on average net assets for
the industry to which Toronto belongs is 10%.
How much should Niagara Company pay to Toronto, Inc. in the acquisition of the latter's net
assets?
Jackson Inc. purchased 30,000 shares of common stock of the Pixel Corporation for
$10 per share on January 2, 2020. During 2020, Pixel had 100,000 shares of
common stock outstanding, reported net income of $200,000, and paid cash
dividends of $100,000. The fair value of Pixel stock on December 31, 2020 is $12
per share.
On December 31, 2020, what will Jackson report on its Balance Sheet for its
investment in Pixel?
How much revenue should Jackson report for 2020 on its investment in Pixel?
Round your answers to the nearest whole number. Dot not use dollar signs($) or
commas(,).
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Blank # 2
Jack, chief finance officer for sitcom products, convinced the president of the company to enter in to a 90days, forward contract to sell 500,000 kronas as a speculative venture. When the forward contract was acquired on November 1, 2019, the spot rate for the krona was OMR .8041 and the 90days future rate was OMR .8321. At December 31 2019, the end of the firm’s fiscal year, the spot rate was $.9483 and the future rate for kronas to be sold on January 30, 2020, was $.9948. On January 30, 2020, the spot rate was $.9830.Required: Prepare all necessary journal entries in regard to the forward contract.
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