1. Paris Cosmetics wishes to secure a reliable source of a key component in its eyeshadows and its management is considering two alternative investments. Melonine produces 3 times the supply Paris Cosmetics needs but the only way to guarantee the supply it needs is to purchase the entire ordinary shares of Melonine. They can sell the rest to other manufacturers. JeanPaul produces twice as much of the component that Paris Cosmetics needs and Paris Cosmetics would only have to buy 40% of JeanPaul ordinary shares to insure it could buy 50% of JeanPaul’s output. The table that follows gives the balance sheet information for all 3 companies, prior to the investment by Paris Cosmetics. For the questions below, assume Paris Cosmetics would be able to buy Melonine’s shares at €830,000 and JeanPaul at $240,000. Melonine’s plant assets were appraised at €200,000, with all of its remaining assets and liabilities being appraised at values approximating their book values. Produce consolidated balance sheet for Paris Cosmetics immediately after the acquisition of Melonine and JeanPaul (use the equity method).
Paris Cosmetics Melonine JeanPaul
Plant Assets 400,000 150,000 50,000
Other Noncash Assets 1,750,000 980,000 600,000
Investment
Cash 2,000,000 200,000 100,000
Shareholder’s equity 2,950,000 730,000 600,000
Liabilities 1,200,000 600,000 150,000
Purchase of Melanine
Paris Cosmetics Paris Cosmetics Melanine Consolidating Paris Cosmetics
Before After Entries Consolidated
Purchase of JeanPaul
Paris Cosmetics Paris Cosmetics JeanPaul
Before After
2. On January 1, 2015, Paris Cosmetics buys a shop in London for £350,000. They only intend on owning it 5 years because they hope to move to a larger building which is currently being designed and built. They believe the shop they currently own will be worth £250,000 in 5 years. Every year, they reappraise the building. The building is determined to be worth £310,000 on Jan.1, 2016, £305,000 on Jan. 1, 2017, £300,000 on Jan. 1, 2018, £270,000 on Jan. 1, 2019, and is sold for £250,000 on Jan. 1, 2020. The estimates of the residual value and useful life have never changed over the life of the building. Show the effects of the building on both the balance sheet and income statement using the ReevaluationMethod Model.
Statement of Financial Position
2015 |
2016 |
2017 |
2018 |
2019 |
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PPE |
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Accumulated Depreciation |
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Net PPE |
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Revaluation Surplus |
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Retained Earnings |
Income Statement
2015 |
2016 |
2017 |
2018 |
2019 |
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Depreciation Expense |
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Gain (Loss) on Fair Value |
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Net Income |
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OCI |
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Comprehensive Income |
Overall Effects
Depreciation Expense:
Gain (Loss):
Net Income:
OCI:
Comprehensive Income:
1. Paris Cosmetics wishes to secure a reliable source of a key component in its eyeshadows...
Paris Cosmetics wishes to secure a reliable source of a key component in its eyeshadows and its management is considering two alternative investments. Melonine produces 3 times the supply Paris Cosmetics needs but the only way to guarantee the supply it needs is to purchase the entire ordinary shares of Melonine. They can sell the rest to other manufacturers. JeanPaul produces twice as much of the component that Paris Cosmetics needs and Paris Cosmetics would only have to buy 40%...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. (4 points each) Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about what kind of...
The following information relates to Paris Cosmetics. Ltd. for the year 2017 (1/1/2017). Cash……………………………………. €1,686 Short term investments………………... 1,277 Accounts Payable………………………. 7,840 Accounts Receivable…………………… 2,670 Inventory………………………………. 5,638 Intangible Assets………………………. 2,694 Current borrowings…………………….. 500 Non-current borrowings………………... 1,683 Property Plant and Equipment………… 23,316 Share Capital-Ordinary………………… 24,594 Retained Earnings……………………… ? Instructions: Prepare the journal entries for each of the transactions. (4 points each) Paid mortgages of €686, €252 of which was interest and the remainder of which was repayment of principal.(Hint: think about...
Scottsdale Corp. sponsors a defined benefit pension plan for its employees. On January 1, 2017, the following balances relate to this plan. Plan assets $480,000 Projected benefit obligation 625,000 Accumulated OCI (PSC) 100,000 Dr. Accumulated OCI (Gain/Loss) 85,000 Cr. As a result of the operation of the plan during 2017, the following additional data are provided by the actuary: Service cost for 2017 $90,000 Settlement rate 9% Actual return on plan assets in 2017 57,000 Expected return on plan assets...