Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson’s equity consisted of the following:Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 FCPaid-in capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,200,000Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200,000 FC On the date of acquisition, equipment with a 10-year life was undervalued by 500,000 FC. Any remaining excess of cost over book value is attributable to additional equipment with a 20-year life.The trial balances for Pueblo and Sorenson as of December 31, 2018, are as follows: Pueblo Corporation Sorenson CompanyCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,050,000 2,840,000 FCAccounts Receivable . . . . . . . . . . . . . . . . .5,270,000 3,990,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,540,000 5,800,000Investment in Sorenson . . . . . . . . . . . . . .20,969,000Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . .21,000,000 15,000,000Accumulated Depreciation . . . . . . . . . . .(12,560,000) (6,800,000)Accounts Payable . . . . . . . . . . . . . . . . . . . (3,450,000) (1,580,000)Long-Term Debt . . . . . . . . . . . . . . . . . . . . (10,000,000) (5,000,000)Common Stock . . . . . . . . . . . . . . . . . . . . . (4,000,000) (3,000,000)Paid-In Capital in Excess of Par . . . . . . . (6,500,000) (2,000,000)Retained Earnings, January 1, 2018. . . (12,180,000) (7,950,000)Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,000,000) (10,000,000)Cost of Goods Sold . . . . . . . . . . . . . . . . . 16,380,000 7,500,000Operating Expenses . . . . . . . . . . . . . . . . . . 3,210,000 1,200,000Subsidiary Income. . . . . . . . . . . . . . . . . . .. (1,729,000)Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 FCThe investment in Sorenson consists of the following:Initial investment (12,000,000 FC x $1.20) . . . . . . . . . . . . . . . . $14,400,0002016 Income (1,750,000 FC x $1.28) . . . . . . . . . . . . . . . . . . . . 2,240,0002017 Income (2,000,000 FC x $1.30) . . . . . . . . . . . . . . . . . . . . 2,600,0002018 Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,729,000Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,969,000 Relevant exchange rates are as follows: 1FC =January 1, 2016 . . . . . . . . . . . . . . . . . . . $1.202016 Average. . . . . . . . . . . . . . . . . . . . . 1.28January 1, 2017 . . . . . . . . . . . . . . . . . . . 1.252017 Average. . . . . . . . . . . . . . . . . . . . . 1.30December 31, 2018 . . . . . . . . . . . . . . . . 1.312018 Average. . . . . . . . . . . . . . . . . . . . . 1.33Assuming the FC is Sorenson’s functional currency, prepare a consolidated worksheet.
Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson’s equity consisted of the following:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 FC
Paid-in capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200,000 FC
On the date of acquisition, equipment with a 10-year life was undervalued by 500,000 FC. Any remaining excess of cost over book value is attributable to additional equipment with a 20-year life.
The
Pueblo Corporation Sorenson Company
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,050,000 2,840,000 FC
Accounts Receivable . . . . . . . . . . . . . . . . .5,270,000 3,990,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,540,000 5,800,000
Investment in Sorenson . . . . . . . . . . . . . .20,969,000
Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . .21,000,000 15,000,000
Accumulated
Accounts Payable . . . . . . . . . . . . . . . . . . . (3,450,000) (1,580,000)
Long-Term Debt . . . . . . . . . . . . . . . . . . . . (10,000,000) (5,000,000)
Common Stock . . . . . . . . . . . . . . . . . . . . . (4,000,000) (3,000,000)
Paid-In Capital in Excess of Par . . . . . . . (6,500,000) (2,000,000)
Retained Earnings, January 1, 2018. . . (12,180,000) (7,950,000)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,000,000) (10,000,000)
Cost of Goods Sold . . . . . . . . . . . . . . . . . 16,380,000 7,500,000
Operating Expenses . . . . . . . . . . . . . . . . . . 3,210,000 1,200,000
Subsidiary Income. . . . . . . . . . . . . . . . . . .. (1,729,000)
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 FC
The investment in Sorenson consists of the following:
Initial investment (12,000,000 FC x $1.20) . . . . . . . . . . . . . . . . $14,400,000
2016 Income (1,750,000 FC x $1.28) . . . . . . . . . . . . . . . . . . . . 2,240,000
2017 Income (2,000,000 FC x $1.30) . . . . . . . . . . . . . . . . . . . . 2,600,000
2018 Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,729,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,969,000
Relevant exchange rates are as follows:
1FC =
January 1, 2016 . . . . . . . . . . . . . . . . . . . $1.20
2016 Average. . . . . . . . . . . . . . . . . . . . . 1.28
January 1, 2017 . . . . . . . . . . . . . . . . . . . 1.25
2017 Average. . . . . . . . . . . . . . . . . . . . . 1.30
December 31, 2018 . . . . . . . . . . . . . . . . 1.31
2018 Average. . . . . . . . . . . . . . . . . . . . . 1.33
Assuming the FC is Sorenson’s functional currency, prepare a consolidated worksheet.
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