ADV.FIN.ACCT. CONNECT+PROCTORIO PLUS
ADV.FIN.ACCT. CONNECT+PROCTORIO PLUS
12th Edition
ISBN: 9781266379017
Author: Christensen
Publisher: INTER MCG
Question
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Chapter 12, Problem 12.18P

a

To determine

Introduction: Re-measurement is redrafting the financial statement of foreign entities from the local currency to the functional currency of the foreign entity. Re-measurement is necessary when the functional currency is different from the local currency used to maintain the books of a foreign entity.

Preparation of a schedule re-measuring the December 31, 20X5 trial balance from Norwegian kroner to U.S dollars.

a

Expert Solution
Check Mark

Answer to Problem 12.18P

Total of trial balance after re measurement to U.S dollar for December 31, 20X5 is $349,800

Explanation of Solution

Trial balance re measurement

For the year ended December 31, 20X5

    ItemKronerexchange rateU.S. Dollars
    Cash150,000.2131,500
    Accounts receivable200,000.2142,000
    Inventory270,000.20555,350
    Property plant and equipment600,000.18108,000
    Cost of goods sold410,000(a)75,450
    Depreciation expense50,000.189,000
    Operating expense`100,000.2020,000
    Dividends paid40,000.197,600
    Total debitNKr 1,820,000348,900
    Re measurement loss900
    349,800
    Accumulated depreciation150,000.1827,000
    Accounts payable90,000.2118,900
    notes payable190,000.1839,900
    Common stock450,000.1881,000
    Retained earnings250,000.1845,000
    Sales690,000.20138,000
    1,820,000349,800

(a) Cost of goods sold:

    ItemsKronerexchange rateU.S. Dollars
    Beginning inventory260,000.1846,800
    Purchases420,000.2084,000
    Less: Ending inventory(270,000).205(55,350)
    Cost of goods sold410,00075,450

  Cost of goods sold=Beginning inventory+Purchases-Closing inventory=NKr260,000+NKr420,000-NKr270,000=NKr410,000

b

To determine

Introduction: Re-measurement is redrafting the financial statement of foreign entities from the local currency to the functional currency of the foreign entity. Re-measurement is necessary when the functional currency is different from the local currency used to maintain the books of a foreign entity.

The journal entries related to investment in Norwegian subsidiary assuming P uses fully adjusted equity method.

b

Expert Solution
Check Mark

Explanation of Solution

    DateParticularsDebit $Credit $
    Jan 1Investment in S company Stock151,200
    Cash151,200
    (Cash paid for purchase of investment from S)
    July 1Cash7,600
    Investment in S company7,600
    (Cash received on account of dividends)
    Dec 31Investment in S common stock32,650
    Income from subsidiary32,650
    (Income from subsidiary recognized)
    Income from subsidiary3,240
    Investment in S company stock3,240
    (Amortization of differential recognized)
  1. Cash paid for purchase of investment in S company stock
  2. Received cash on account of dividends from S $7,600=NKr40,000×$.19
  3. Investment in S company recognized
  4. Income from Norwegian subsidiary
      ItemsAmount $
      Sales138,000
      Less:
      Cost of goods sold(75,450)
      Operating expenses(20,000)
      Depreciation Expenses(9,000)
      Income33,550
      Less: Re-measurement loss(900)
      Income recorded by P32,650
  5. Amortization of differential recognized

Schedule 1amortization of differential

    ItemsAmount $
    Investment at January 1, 20X5151,200
    Less: Book value of net assets acquired January 1 NKr700,000×$.18(126,000)
    Differential25,200
    Allocation of differential
    Property, plant and equipment18,000
    Patient7,200
    Total25,200
    Amortization for 20X5
    Property, plant and equipment $18,000÷10years1,800
    Patients $7,200÷5years1,440
    Total3,240

c

To determine

Introduction: Re-measurement is redrafting the financial statement of foreign entities from the local currency to the functional currency of the foreign entity. Re-measurement is necessary when the functional currency is different from the local currency used to maintain the books of a foreign entity.

Preparation of schedule for consolidation of net income for 20X5

c

Expert Solution
Check Mark

Answer to Problem 12.18P

Consolidated net income for 20X5 $304,410

Explanation of Solution

Consolidated net income

For the year ended December 31, 20X1

    ItemsAmount $
    Income from P’s operation 275,000
    Add: Income from the Norwegian subsidiary32,650
    Less: Amortization of differential for 20X5(3,240)
    Consolidated net income204,410

d

To determine

Introduction: Re-measurement is redrafting the financial statement of foreign entities from the local currency to the functional currency of the foreign entity. Re-measurement is necessary when the functional currency is different from the local currency used to maintain the books of a foreign entity.

The consolidated stockholders’ equity for P at December 31, 20X5.

d

Expert Solution
Check Mark

Answer to Problem 12.18P

Consolidated stockholder’s equity as at December 31, 20X5 $3,704,410

Explanation of Solution

Computation of stockholders’ equity

    ItemsAmount $
    P’s stockholders’ equity at January 1, 20X5 3,500,000
    Add: Consolidated net income for 20X5304,410
    Less: Dividends declared by P during 20X5(100,000)
    Consolidated stockholders’ equity December 31, 20X53,704,410

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Chapter 12 Solutions

ADV.FIN.ACCT. CONNECT+PROCTORIO PLUS

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