Acct302 Advanced Accounting A3 Saudi electronic Advanced Financial Accounting

College of Administration and Finance SciencesAssignment (2)
Deadline: May 4, 2024 @ 23:59
Course Name: Advanced Financial
Student’s Name: SEU ELITE
Accounting
Course Code: ACCT 302
Student’s ID Number:
Semester: Second Semester
CRN: 24922
Academic Year: 1445 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/15
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
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Assignments submitted through email will not be accepted.
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Students are advised to make their work clear and well presented, marks may be reduced for
poor presentation. This includes filling your information on the cover page.
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Students must mention question number clearly in their answer.
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Late submission will NOT be accepted.
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Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
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All answers must be typed using Times New Roman (size 12, double-spaced) font. No pictures
containing text will be accepted and will be considered plagiarism.
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Submissions without this cover page will NOT be accepted.
1
SEU ELITE
College of Administration and Finance Sciences
Assignment Question(s):
Three Questions Each Carries 5 Marks) (total Marks 15)
Q1. The following information extracted from the parent company
a. Parent company loaned $1000 to Subsidiary with an interest rate of 5%.
b. Parent company made a sale to Subsidiary for $500 cash. The inventory had originally cost
Parent company $200. Subsidiary then sold that same inventory to an outsider for $700.
c. Parent company made a sale to Sub for $800 cash. The inventory had originally cost Parent
$300. Subsidiary has not yet sold that same inventory to an outsider.
Required:
Pass the elimination entries for the intercompany transactions.
Answer:
a. Loan Payable
1000
Loan Receivable
1000
Interest Revenue -Parent
Interest Expense (sub)
50
50
b. Sales 500
COGS
500
c. Sales
800
COGS
300
Inventory
500
Q2. Explain the differences between translation and remeasurement of financial statements of a foreign
subsidiary.
Answer:
Translation and remeasurement are relevant in case the parent company has subsidiaries in foreign
country. These two terms are used regarding the conversion of the currency of the country in which the
subsidiary is located.
2
SEU ELITE
College of Administration and Finance Sciences
Translation: is used to convert the functional currency of the subsidiary into the reporting currency of
the parent company.
Translation converts the items of financial statements of the subsidiary using current rate method.
Remeasurement: is used to convert the foreign currency into the functional currency of the subsidiary.
Remeasurement converts the items of financial statements of the subsidiary using temporal method.
Adjustments relating to translation are done by adjusting stockholders’ equity.
Q3. The partnership of Ibrahim and Rawan has the following provisions:
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Ibrahim and Rawan receive salary allowances of SAR 50,000 and SAR 15,000, respectively.
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Interest is imputed at 5% on the average capital investment.
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Any remaining profit or loss is shared between Ibrahim and Rawan in a 3:1 ratio, respectively.
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Average Capital investments: Ibrahim, SAR 300,000; Rawan, SAR 150, 000
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Net income SAR 300,000
Required: pass journal entry to allocate the profit between Ibrahim and Rawan
A popular reason for forming a partnership is to operate a business, though there are other reasons as
well. In order to accomplish a shared objective, partners might pool their resources, talents, and
experience.
Interest on average capital balance for person I is calculated as follows:
Interest on average capital balance – Average capital investment * interest rate
= 300,000 × 5%
= 15,000
3
SEU ELITE
College of Administration and Finance Sciences
Interest on average capital balance for person R is calculated as follows:
Interest on average capital balance – Average capital investment * interest rate
= 150,000× 5%
= 7,500
Balance of profit for persons I and R is calculated as follows:
Balance of profit = Net Income – Total Salary allowance – Total interest on capital
300,000 – 65,000 – 22,500
= 212,500
The share of profit for persons I is calculated as follows:
Share of person I – Total balance * share of i/ total share
= 212,500 x
= 159,375
The share of profit for persons R is calculated as follows:
Share of person R – Total balance * share of i/total share
= 212,500 x
= 53,125
I
R
Total
Salary allowances
50,000
15,000
65,000
Interest on average capital balance
15,000
7,500
22,500
Balance of profit
159,375
53,125
212,500
224,375
75,625
300,000
Particulars
4
SEU ELITE
College of Administration and Finance Sciences
The journal entries to allocate the profit between Peron I and R is prepared as follows:
Account
Dr
Income summary
Cr
300,000
I’s capital
224,375
R’s capital
75,625
5
SEU ELITE