echno Builders nas
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Qw.14.

Transcribed Image Text:Techno Builders has acquired a 70% interest in the equity of a foreign company, Prefabco, whose functional currency is
the FC. Although Prefabco began operations in June 2008 when 1 FC equaled $1.95, Techno did not acquire its interest
until March 31, 2011, when 1 FC equaled $2.08. Techno paid 400,000 FC for its interest in Prefabco when the subsidiary's
condensed preclosing trial balance was as follower
Debit FC Balances
Current assets
Depreciable assets (net).
Other assets..
Cost of sales..
Other expenses.
Total...
250,000
350,000
125,000
504,000
125,000
1,354,000
Last 9 months of 2011
2012.
2013.
Debit FC Balances
Depreciable assets (net).
Other liabilities
Capital stock
Retained earnings
Sales
Total..
240,000
305,000
420,000
Prefabco had net income and dividends, declared at year-end and paid in the first quarter of
the next year, subsequent to Techno's acquisition as follows along with selected rates of exchange:
Net Income Dividends
Average
Dollar/FC
126,000
194,000
72,000
2.10
91,500
2.25
126,000 2.34
140,000
134,000
720,000
1,314,000
Year-end
Dollar/FC
2.18
2.21
2.40
Prepare a schedule to determine the balance in Techno's account "Investment in Prefabco" as of year-end 2013 and also
prepare all of the entries that would be necessary to eliminate the investment account in a worksheet to consolidate the
parent company and its subsidiary for the year 2013. Techno uses the simple equity method to account for its interest in
the subsidiary.
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