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pentagon [3]
3 years ago
6

Multiple-Choice Questions on Consolidation Overview [AICPA Adapted]

Business
1 answer:
boyakko [2]3 years ago
4 0

Answer: 1. D. Economic entity

2. C. Circumstances prevent the exercise of control.

3. B. Consolidation used for both Sell and Vane.

4. B. In form, the companies are separate; in substance, they are one entity

Explanation:

1. When a parent–subsidiary relationship exists, it can be infered that consolidated financial statements will be prepared in recognition of the accounting concept of economic entity.

2. Consolidated financial statements are prepared when one company has a controlling interest in another unless the circumstances prevent the exercise of control.

3. Based on the information given, in Penn’s consolidated financial statements, it should be noted that Sell and Vane should be consolidated. Therefore, the correct option is B.

4. The best theoretical justification for consolidated financial statements is that in form, the companies are separate while in substance, they are regarded as one entity.

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Edington Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104. The calculators sell for $14 a
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Answer:

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Sales Budget fist 2 quarters of the year

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XQ-103     $14             22,590    27,710      $704,200

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Income Statement (in Millions of Dollars) Net sales $100.0 Cost of sales 60.0 Selling, general, and administrative expenses 20.0
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Answer:

the balance sheet is missing:

Balance Sheet  (In millions of Dollars)

ASSETS

Cash                                     $6.0

Accounts Receivable              14.0

Average Inventory                   12.0

Fixed Assets, net                  40.0

TOTAL ASSETS                 $72.0

LIABILITIES AND EQUITY

Accounts Payable                $10.0

Salaries and Benefits Payable   2.0

Other current Liabilities            10.0

Long-term debt                         12.0

Equity                                     38.0

TOTAL LIABILITIES AND EQUITY                     $72.0

a. Determine the length of the inventory conversion period.

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b. Determine the length of the receivables conversion period.

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c. Determine the length of the operating cycle.

  • length of operating cycle = 73 + 51.1 = 124.1 days

d. Determine the length of the payables deferral period.

  • length of the payables deferral period = accounts payables / (COGS/365) = 60.83 days

e. Determine the length of the cash conversion cycle.

  • cash conversion cycle = 73 + 51.1 - 60.83 = 63.27 days

f. What is the meaning of the number you calculated in Part e?

  • How long does it take to turn inventories into cash, it is a measure of asset liquidity.
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Sheffield Corp. took a physical inventory on December 31 and determined that goods costing $165,000 were on hand. Not included i
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Answer: $272,570

Explanation:

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