Assignment 7 (Chapter 9)

Selected accounts from the financial statements for Yemellas Inc. under three different methods of accounting for its 40% interest in Wawa Ltd. are presented below. There was no acquisition differential and were no intercompany transactions.

	Equity Method			Proportionate Consolidation			Full Consolidation
Revenues	$	1,740		$	4,780		$	9,340
Equity method income		80
Expenses		1,670			4,630			9,070
Net income attributed to Yemellas		150			150			150
Net income attributed to NCI								120
Current assets		320			896			1,760
Investment in Wawa		800
Other assets		590			2,894			6,350
Total assets	$	1,710		$	3,790		$	8,110
Current liabilities	$	190		$	670		$	1,390
Long-term liabilities		850			2,450			4,850
Common shares		100			100			100
Retained earnings		570			570			570
Non-controlling interest		0			0			1,200
Total liabilities & equity	$	1,710		$	3,790		$	8,110

Required:
(a) This part of the question is not part of your Connect assignment.

(b) Calculate the return on total shareholders’ equity, current ratio and debt-to-equity ratio for each of the three financial statements. (Omit % sign in your response. Round return on equity to 1 decimal place and current ratio and debt to equity ratio to 2 decimal places.)

(c) This part of the question is not part of your Connect assignment.

(d) Calculate the current ratio for Wawa’s separate entity financial statements. (Round your answer to 1 decimal place.)

Question 2

The following information has been assembled about Casbar Corp. as at December 31, Year 5 (amounts are in thousands):

Operating segment	Revenues	Profit	Asset
A	12,000	3,100	24,000
B	9,600	2,680	21,000
C	7,200	(1,440	15,000
D	3,600	660	9,000
E	5,100	810	8,400
F	1,800	(270	3,600

Required:

Determine which operating segments require separate disclosures. (Round the intermediate calculations to nearest percentage.)

Related Assignment Solution: (Solution) MOS4465 Assignment 8 (Chapter 10)

100% Correct Solution – Assignment 7 (Chapter 9)

Here is the correct answer for question 1 part b

Question 1 (b) Answer Explanation

			Equity Method		Proportionate Consolidation		Full Consolidation
Return on equity =	Net income		$150	= 22.4%	$150	= 22.4%	$150 + 120	= 14.4%
	Shareholders’ equity		$670		$670		$670 + 1,200
Current ratio =	Current assets		$320	= 1.68	$896	= 1.34	$1,760	= 1.27
	Current liabilities		$190		$670		$1,390
Debt-to-equity =	Total liabilities		$1,040	= 1.55	$3,120	= 4.66	$6,240	= 3.34
	Total equity		$670		$670		$1,870

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