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 appropriate functional currency. In the stockholders' equity section of Prime's consolidated balance sheet at December 31, 20X1, Prime should report the translation adjustment as a component of other comprehensive income of

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 appropriate functional currency. In the stockholders' equity section of Prime's consolidated balance sheet at December 31, 20X1, Prime should report the translation adjustment as a component of other comprehensive income of

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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