Examination card № 21

on the discipline “Financial Accounting II”

for the 3rd year students

What is zero coupon bond?
Determine the present value of the following single amounts:

Arnold Industries has pretax accounting income of $33 million for the year ended December 31, 2013. The tax rate is 40%. The only difference between accounting income and taxable income relates to an operating lease in which Arnold is the lessee. The inception of the lease was December 28, 2013. An $8 million advance rent payment at the inception of the lease is tax-deductible in 2013 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term.

Required:

1. Determine the amounts necessary to record Arnold’s income taxes for 2013 and prepare the appropriate journal entry.

2. Determine the amounts necessary to record Arnold’s income taxes for 2014 and prepare the appropriate journal entry. Pretax accounting income was $50 million for the year ended December 31, 2014.

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 № 22

on the discipline “Financial Accounting II”

for the 3rd year students

How are deferred tax assets and deferred tax liabilities reported in a classified balance sheet?

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.

FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&T’s investment activities during the last two months of 2013. At November 1, FF&T held $48 million of 20-year, 10% bonds of Convenience, Inc., purchased May 1, 2013, at face value. Management has the positive intent and ability to hold the bonds until maturity. FF&T’s fiscal year ends on December 31.

Nov. 1 Received semiannual interest of $2.4 million from the Convenience, Inc., bonds.
Dec. 1 Purchased 12% bonds of Facsimile Enterprises at their $30 million face value, to be held until they mature in 2026. Semiannual interest is payable May 31 and November 30.
Purchased U.S. Treasury bills that mature in two months for $8.9 million.
31 Recorded any necessary adjusting entry(s) relating to the investments. The fair values of the investments at December 31 were: Convenience bonds $44.7 million Facsimile Enterprises bonds 30.9 million U.S. Treasury bills 8.9 million.