Advanced Financial Accounting
Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 12.25P

a

To determine

Introduction: Translation adjustment is the method used to convert the local currency into the parents' functional currency when the local currency is the foreign entity’s functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.

The elimination entries required for comprehensive consolidation worksheet for December 31, 20X3.

a

Expert Solution
Check Mark

Explanation of Solution

    ParticularsAmount $Amount $
    1.
    Income from subsidiary39,416
    Dividends declared4,824
    Investment in subsidiary34,592
    (Income from subsidiary eliminated)
    2.
    Income to non-controlling interest11,414
    Dividends declared1,206
    Non-controlling interest10,208
    (Assignment of income to non-controlling interest)
    3.
    Investment in SR 13,408
    Other comprehensive income translation adjustment13,408
    (Elimination of comprehensive income from subsidiary that had been recorded by parent)
    4.
    Non-controlling interest3,352
    Other comprehensive income to non-controlling interest3,352
    (Assignment of proportionate share of the subsidiary other comprehensive income to non-controlling interest)
    5.
    Common stock63,000
    Retained earnings January 128,000
    Differential 67,200
    Investment in subsidiary140,000
    Non-controlling interest18,200
    (Elimination of beginning investment in subsidiary)
    6.
    Investment in subsidiary9,120
    Differential9,120
    (Elimination of differential translation adjustment)
    7.
    Plant and equipment24,200
    Patient33,880
    Differential58,080
    (Assignment of differential adjustment to plant and equipment, patient)
    8.
    Depreciation expenses2,600
    Amortization expenses3,640
    Accumulated depreciation2,600
    Patient3,640
    (Amortization of differential)
    9.
    Payable to P6,480
    Receivable from SR6,480
    (Elimination of intercompany receivable and payable)
  1. Elimination of income from subsidiary, dividends declared $4,824=$6,030×.80 by reversal
  2. Assignment of income to non-controlling interest $11,414=$57,070×.20
  3. Dividends declared $1,206=$6,030×.20
  4. Elimination of other comprehensive from subsidiary that had been recorded by the parent $13,408=$16.760×.80
  5. Assignment of proportionate share of the subsidiary’s other comprehensive income to the non-controlling interest $3,352=$16.760×.20
  6. Elimination of beginning investment, investment in subsidiary $140,000=$67,200+($63,000+28,000)×.80
  7. Non-controlling interest $18,200=($63,000+28,000)×.20
  8. Amount of differential translation adjustment in investment in subsidiary eliminated
  9. Amount of differential in Plant and Equipment, and patients assigned Plantandequipment$24,200=$28,000$3,800
  10. Patient$33,880=$39,200$5,320
  11. Amortization of differential on depreciation and patient
  12. Elimination of intercompany receivable and payable by setoff.

b

To determine

Introduction: Translation adjustment is the method used to convert the local currency into the parents' functional currency when the local currency is the foreign entity’s functional currency. The current rate is used to translate the financial statements that are the exchange rate on the balance sheet date. The average rate is used to translate revenue and expenses as it is assumed that it occurs uniformly over the period. Any gain or loss on account of translation adjustment is recognized in the comprehensive income statement.

The comprehensive consolidation worksheet as of December 31, 20X3.

b

Expert Solution
Check Mark

Answer to Problem 12.25P

The trial balance total after transaction adjustment December 31 20X4 $1,148,228

Explanation of Solution

P. Inc. and Subsidiary

Consolidation Worksheet

For the year ended December 31, 20X2

    Eliminations
    ItemP $SR $Debit $Credit $Consolidation $
    Sales1,000,000376,3501,376,350
    Income from subsidiary39,41639,416
    Less:
    Cost of sales(600,000)(241,500)(814,500)
    Depreciation expenses(28,000)(15,600)2,600(46,200)
    Amortization expenses3,640(3,640)
    Operating expenses(204,000)(85,475)(289,475)
    Interest expenses(2,000)(3,705)(5,705)
    Net income216,830
    Non-controlling interest11,414(11,414)
    Net income C/F205,41657,07057,0700205,416
    Retained earnings Jan 1179,65628,00028,000179,656
    Net income B/F205,41657,07057,0700205,416
    Less: Dividends declared(50,000)(6,030)4,824
    1,206(50,000)
    Retained earnings335,07279,04085,0706,030335,072
    Cash38,00026,46064,460
    Accounts receivable140,00043,200183,200
    Receivable from SR6,4806,480
    Inventory128,00051,600179,600
    Plant and equipment500,000144,00024,000668,200
    Investment in subsidiary152,06413,40834,592
    9,120140,000
    Differential67,2009,120
    58,080
    Patient33,8803,64030,240
    Accumulated other comprehensive income22,52816,76016,76022,528
    Total Assets987,072282,0201,148,228
    Accumulated depreciation90,00036,0002,600128,600
    Accounts payable60,00032,28092,280
    Payable to P6,4806,480
    Interest payable2,0001,8003,800
    Bonds payable60,00060,000
    Premium on bonds3,4203,420
    Common stock500,00063,00063,000500,000
    Retained earnings335,07279,04085,0706,030335,072
    Non-controlling interest3,35210,208
    18,20025,056
    Total Liability and equity987,072282,020305,710305,7101,148,228

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