ACCT 302 Saudi Electronic University Intercompany Transactions Worksheet

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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.
1. The following intercompany transactions occurred during the year:
• Parent loaned $12500 to Sub. To keep things simple, assume that there is
no interest revenue or interest expense associated with this loan.
• Parent made a sale to Sub for $13000 cash. The inventory had originally
cost Parent $12220. Sub then sold that same inventory to an outsider for
$14000.
• Parent made a sale to Sub for $15000 cash. The inventory had originally
cost Parent $11280. Sub has not yet sold that same inventory to an
outsider. (Don’t forget equity method entry!)
Based on our “conceptual discussion,” what consolidation worksheet entries
would you make?
(2 Marks)
2. Give two examples of Arm’s Length Transactions and Three Examples of Non
Arm’s Length Transactions.
(1 Mark)
3. Find the indirect exchange rates on the two dates and show the impact of
changes in exchange rates on Imports and Exports.
Direct Exchange Rate
(2 Marks)
January, 2010
January 2011
SAR 3.75
SAR 3.50
(SAR/$)
4-
Describe the followings in your own words: (2marks)
A
What is Fair Value Accounting?
B
What Is Fair Market Value Accounting? How the FASB is going to standardize the
calculation of financial instruments by looking at their historical cost?
5-
What do you mean by loan loss provision? Why Does a Loan Loss Provision Matter? And
how does a loan loss provision work? (1.5 mark)
6-
How to differentiate liquid risk and Credit Risk with reference to the financial economics
sector and how the interest rate risk make an impact on the economy? (1.5mark)

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