Indigo Inc. is a large multinational corporation with a number of subsidiaries located in countries all over the world. One of Indigo's subsidiaries, Sweet Ltd., sold a piece of manufacturing equipment to another one of Indigo's subsidiaries, Pharoah Inc. Indigo owned 80% of Sweet and 65% of Pharoah. The equipment had been on Sweet's books at a carrying value of $128,000, and had a fair market value of $153,850. Pharoah paid $132,800 for the equipment. Both Sweet and Pharoah were in the business of selling manufactured products to their customers; the sale of the equipment was considered to be outside the normal course of both businesses. Identify what value should be used by both Sweet and Pharoah to record the sale/purchase of the equipment. Sweet to record the sale/purchase of the equipment at Pharoah to record the sale/purchase of the equipment at 2$

Indigo Inc. is a large multinational corporation with a number of subsidiaries located in countries all over the world. One of Indigo's subsidiaries, Sweet Ltd., sold a piece of manufacturing equipment to another one of Indigo's subsidiaries, Pharoah Inc. Indigo owned 80% of Sweet and 65% of Pharoah. The equipment had been on Sweet's books at a carrying value of $128,000, and had a fair market value of $153,850. Pharoah paid $132,800 for the equipment. Both Sweet and Pharoah were in the business of selling manufactured products to their customers; the sale of the equipment was considered to be outside the normal course of both businesses. Identify what value should be used by both Sweet and Pharoah to record the sale/purchase of the equipment. Sweet to record the sale/purchase of the equipment at Pharoah to record the sale/purchase of the equipment at 2$

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

unc.1
On 12/20/20x1, Sour Company, a U.S.-based entity, acquired all of the outstanding common stock of corn Industries, which is located in Switzerland. The cost of acquiring corn was 8.2 million Swiss francs. On the acquisition date, the U.S. dollar/Swiss franc exchange rate was $0.52 = SF1. The assets and liabilities acquired at 12/20/20x1 were: Assets Swiss Franc Liabilities and Equity Swiss Franc Cash 500,000 Notes Payable 1,270,500 Inventory 770,500 Shareholders' Equity 3,500,000 Property, plant and equipment 3,500,000 Total Assets $4,770,500 Total Liabilities and Shareholders’ Equity $4,770,500 At 12/31/20x1, Sour Company prepares its year-end financial statements. By 12/31/20x1, the U.S. dollar/Swiss franc exchange rate was $0.535 = SF1. For purposes of this problem, assume that after the 12/20/20x1, corn Industries had no additional transactions that changed their financial position. Required Determine the…
On January 1, 20X1, Prime Company purchased all the outstanding stock of Spring Company, located in Canada, for $137,700. On January 1, 20X1, the direct exchange rate for the Canadian dollar (C$) was C$1 = $0.81. Spring's book value on January 1, 20X1, was C$96,000. On January 1, 20X1, the book value of the Spring's identifiable assets and liabilities approximated their fair values except for property, plant, and equipment. The remaining useful life of Spring's property, plant and equipment at January 1, 20X1, was 10 years. During 20X1, Spring earned C$24,000 in income and declared and paid C$7,400 in dividends. The dividends were declared and paid in Canadian dollars when the exchange rate was C$1 = $0.75. On December 31, 20X1, Prime continues to hold the Canadian currency received from the dividend. On December 31, 20X1, the direct exchange rate is C$1 = $0.64. The average exchange rate during 20X1 was C$1 = $0.76. Management has determined that the Canadian dollar is Spring's…
Creative Sound Systems sold investments, land, and its own common stock for $35.0 million, $15.5 million, and $41.0 million, respectively. Creative Sound Systems also purchased treasury stock, equipment, and a patent for $21.5 million, $25.5 million, and $12.5 million, respectively.
Par Corporation, a Canadian company, purchased 80% of the outstanding shares of Sub Company of Germany on December 31, Year 5 for €3,000,000 Euros. At that date, the carrying values of Sub’s assets and liabilities were equal to fair values. There was a goodwill impairment loss in Year 6 of €10,000. The fiscal Year 5 financial statements of Sub were as follows: Sub Company Balance Sheet December 31, Year 5 Cash € 500,000 Accounts receivable 900,000 Inventory 1,200,000 Capital assets (net) 3,250,000 € 5,850,000 Accounts payable € 650,000 Bonds payable 1,700,000 Common shares 2,000,000 Retained earnings 1,500,000 € 5,850,000 Par anticipated that there would be a high volume of intercompany transactions with Sub, because Par provides the raw materials to Sub and sales are global. Also Sub obtained most of its financing thru banks in Canada. Par uses the cost method to account for its investment in Sub. The fiscal Year 6 financial statements of Par and Sub were as follows: Balance Sheets…
Subject: accounting
A U.S. company owns an 80% interest in a company located on Mars. Martian currency is called the Martian Credit. During the year the parent company sold inventory that had cost $24,000 to the subsidiary on account for $30,800 when the exchange rate was $0.5192. The subsidiary still held one-half of the inventory and had not paid the parent company for the purchase at the end of the fiscal period. The unsettled account is denominated in dollars. The exchange rate at the fiscal year-end was $0.4994. Assuming that the transaction had been denominated in 47,004 Martian Credits rather than dollars, compute the transaction gain or loss that would be reported by the parent company.
Chang Ltd owns 40% of Tweet Ltd. The CFO of Chang Ltd is a member of the pard of directors of Tweet Ltd. The remaining 60% ownership is spread across a large number of shareholders. These shareholders live in various geographical locations such as India, USA and Japan. They rarely attend AGMS. Tweet Ltd has entered into a fixed 10-year binding contract with Chang Ltd, which requires Tweet Ltd to purchase 90% of its inventories from Chang Ltd. This isa beneficial arrangement for Tweet Ltd, as the selling price is always highly discounted. Required: Using the facts provided and references to AASB10, discuss whether Chang Ltd is required to prepare consolidated financial statements.