ADDIS ABABA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
ASSIGNMENT II FOR ADVANCED FINANCIAL ACCOUNTING II
SUBMISSION DATE: JUNE 10, 2023
1. Par Corporation acquired a 70 percent interest in Sul Corporation’s outstanding voting common stock on
January 1, 2011, for $490,000 cash. The stockholders’ equity (book value) of Sul on this date consisted of
$500,000 capital stock and $100,000 retained earnings. The differences between the fair value of Sul and the
book value of Sul were assigned $5,000 to Sul’s undervalued inventory, $14,000 to undervalued buildings,
$21,000 to undervalued equipment, and $40,000 to previously unrecorded patents. Any remaining excess is
goodwill.
The undervalued inventory items were sold during 2011, and the undervalued buildings and equipment had
remaining useful lives of seven years and three years, respectively. The patents have a 40-year life.
Depreciation is straight line. At December 31, 2011, Sul’s accounts payable include $10,000 owed to Par. This
$10,000 account payable is due on January 15, 2012. Separate financial statements for Par and Sul for 2011 are
summarized as follows (in thousands):

Par Sul
Combined Income and Retained Earnings
Statements for the Year Ended December 31
Sales $ 800 $700
Income from Sul 59.5 —
Cost of sales (300) (400)
Depreciation expense (154) (60)
Other expenses (160) (140)
Net income 245.5 100
Add: Retained earnings January 1 300 100
Deduct: Dividends (200) (50)
Retained earnings December 31 $ 345.5 $150
Par Sul
Balance Sheet at December 31
Cash $ 86 $ 60
Accounts receivable—net 100 70
Dividends receivable 14 —
Inventories 150 100
Other current assets 70 30
Land 50 100
Buildings—net 140 160
Equipment—net 570 330
Investment in Sul 514.5 —
Total assets $1,694.5 $850
Accounts payable $ 200 $ 85
Dividends payable 100 20
Other liabilities 49 95
Capital stock, $10 par 1,000 500
Retained earnings 345.5 150
Total equities $1,694.5 $850
R E Q U I R E D: Prepare consolidation workpapers for Par Corporation and Subsidiary for the year ended
December 31, 2011. Use an unamortized excess account.
PREPARED BY: HASSEN MUSTEFA
 2. On December 31,2011, the separate-company financial statement for pan corporation and its 70
percent –owned subsidiary , sad corporation, had the following accounting balance related to
dividends ( in thousands ):
Pan Sad
Dividends for 2011 $1,200 $800
Dividends payable at December 31, 2011 600 200
REQUIRED:
A. At what amount will dividends be shown in the consolidated retained earnings statement?
B. At what amount should dividends payable be shown in the consolidated balance sheet?

3. On June 17, 2009, worldwide Corporation, which uses the perpetual inventory system, sold
merchandise with cost of ETB 122,000 to a US customer for USD15, 000, with payment due July
16, 2009.
Spot rates (buying):
Transaction date : ETB12.10
Balance sheet date: ETB12.07
Settlement date : ETB12.075
4. Merchant Company had the following foreign currency transactions:
A. On November 1, 20X6, An American Merchant sold goods to a company located in Munich,
Germany. The receivable was to be settled in European euros on February 1, 20X7, with the
receipt of €250,000 by Merchant Company.
B. On November 1, 20X6, An American Merchant purchased machine parts from a company
located in Berlin, Germany. Merchant is to pay €125,000 on February 1, 20X7.
The direct exchange rates are as follows:
November 1, 20X6 €1 = $0.60
December 31, 20X6 €1 = $0.62
February 1, 20X7 €1 = $0.58
5. Delaney Inc. has, an American Com., several transactions with foreign entities. Each transaction
is denominated in the local currency unit of the country in which the foreign entity is located. For
each of the following independent cases, determine the December 31, 20X2, year-end balance in
the appropriate accounts for the case. Write “NA” for “not applicable” in the space provided in
the following chart if that account is not relevant to the specific case.
Case 1. On November 12, 20X2, Delaney purchased goods from a foreign company at a price of
LCU 40,000 when the direct exchange rate was 1 LCU = $0.45. The account has not been settled
as of December 31, 20X2, when the exchange rate has decreased to 1 LCU = $0.40.
Case 2. On November 28, 20X2, Delaney sold goods to a foreign entity at a price of LCU 20,000
when the direct exchange rate was 1 LCU = $1.80. The account has not been settled as of
December 31, 20X2, when the exchange rate has increased to 1 LCU = $1.90.
Case 3. On December 2, 20X2, Delaney purchased goods from a foreign company at a price of
LCU 30,000 when the direct exchange rate was 1 LCU = $0.80. The account has not been settled
as of December 31, 20X2, when the exchange rate has increased to 1 LCU = $0.90.
Case 4. On December 12, 20X2, Delaney sold goods to a foreign entity at a price of LCU
2,500,000 when the direct exchange rate was 1 LCU = $0.003. The account has not been settled as
of December 31, 20X2, when the exchange rate has decreased to1 LCU = $0.0025.

*Provide the December 31, 20X2, year-end balances on Delaney’s records for each steps

PREPARED BY: HASSEN MUSTEFA