Advance Account – ACCT 302

Advance Account – ACCT 302

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College of Administrative and Financial Sciences

Assignment 3

For Instructor’s Use only

Instructions – PLEASE READ THEM CAREFULLY

· The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.

· Assignments submitted through email will not be accepted.

· 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.

· Students must mention question number clearly in their answer.

· Late submission will NOT be accepted.

· 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.

· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

· Submissions without this cover page will NOT be accepted.

Q1. Distinguish between an upstream sale of inventory and a downstream sale. Why is it important to know whether a sale is upstream or downstream?

Q2. What factors are used to determine a reporting entity’s functional currency? Provide at least one example for which a company’s local currency may not be its functional currency.

Q3. On December 1, 20X1, Rone Imports, a U.S. company, purchased clocks from Switzerland for 15,000 francs (SFr), to be paid on January 15, 20X2. Rone’s fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are:

December 1, 20X1 1 SFr = $0.70

December 31, 20X1 1 SFr = 0.66

January 15, 20X2 1 SFr = 0.68

Required:

1. In which currency is the transaction denominated?

2. Prepare journal entries for Rone to record the purchase, the adjustment on December 31, and the settlement.

Q4. Debra and Merina sell electronic equipment and supplies through their partnership. They wish to expand their computer lines and decide to admit Wayne to the partnership. Debra’s capital is $200,000, Merina’s capital is $160,000, and they share income in a ratio of 3:2, respectively.

Required:

Record Wayne’s admission for each of the following independent situations:

a. Wayne directly purchases half of Merina’s investment in the partnership.

b. Wayne invests the amount needed to give him a one-third interest in the capital of the partnership if no goodwill or bonus is recorded.

c. Wayne invests $110,000 for a one-fourth interest if Goodwill is to be recorded.

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