Parker's chief financial officer (CFO) wishes to determine the effects that a change in the value of the British pound would have on consolidated net income and consolidated stockholders equity. To help assess the foreign currency exposure associated with the investment in Suffolk, the CFO requests assistance in comparing consolidated results under actual exchange rate fluctuations with results that would have occurred had the dollar value of the pound remained constant or declined during the first two years of Parker's ownership. REQUIREDUse Excel to comprete the following four parts:Part 1: Given the relevant exchange rates presented:a. Translate Suffolk's December 31, 2020, trial balance from British pounds to U. S. Dollars. The British pound is Suffolk's functional currency.b. Prepare a schedule that details the change in Suffolk's cumulative translation adjustment (beginning net assets, income, dividents, etc) for 2019 and 2020. C. Prepare the December 31, 2020, consolidation worksheet for Parker and Suffolk.d. Prepare the 2020 consolidated income statement and the December 31, 2020, consolidated balance sheet. Other than paying dividends, no intra-entity transactions occurred between the two companies. Relevant U.S. dollar exchange rates for theBritish pound follow:January 1Average$1.62January 30$ 1.611.65December 31$1.642019$1.6020201.641.661.68The December 31, 2020, financial statements (before consolidation with Suffolk) follow. Dividend income is the U.S. dollar amount ofdividends received from Suffolk translated at the $1.65/£ exchange rate at January 30, 2020. The amounts listed for dividend income andall affected accounts (i.e., net income, December 31 retained earnings, and cash) reflect the $1.65/£ exchange rate at January 30, 2020.Credit balances are in parentheses.ParkerSales$ (70,000,000)34,000,000Cost of goods soldDepreciation20,000,000Other expenses6,000,000Dividend income(2,887,500)Net incRetained earnings, 1/1/20Net income, 2020$ (12,887,500)$ (48,000,000)(12,887,500)4,500,000$ (56,387,500)$ 3,687,500Dividends, 1/30/20Retained earnings, 12/31/20CashAccounts receivable10,000,000Inventory30,000,000Investment in Suffolk83,200,000Plant and equipment (net)105,000,000Accounts payable(25,500,000)Long-term debt(50,000,000)Common stock(100,000,000)Retained earnings, 12/31/20(56,387,500)-0- On January 1, 2019, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of52,000,000 British pounds (£), which was equal to fair value. The excess of fair value over book value is attributable to land (part ofproperty, plant, and equipment) and is not subject to depreciation. Parker accounts for its investment in Suffolk at cost. On January 1,2019, Suffolk reported the following balance sheet:Cash$ 1,000,000Accounts receivableInventory$2,000,000 Accounts payable3,000,000 Long-term debt14,000,000 Common stock40,000,000 Retained earnings$59,000,0008,000,00044,000,0006,000,000Property, plant, and equipment (net)$59,000,000Suffolk's 2019 income was recorded at £2,000,000. It declared and paid no dividends in 2019.On December 31, 2020, two years after the date of acquisition, Suffolk submitted the following trial balance to Parker forconsolidation:Page 537Cash$ 1,500,000Accounts Receivable5,200,000Inventory18,000,000Property, Plant, and Equipment (net)36,000,000Accounts Payable(1,450,000)Long-Term Debt(5,000,000)Common Stock(44,000,000)Retained Earnings, 1/1/20(8,000,000)Sales(28,000,000)Cost of Goods Sold16,000,000Depreciation2,000,000Other Expenses6,000,000Dividends, 1/30/201,750,000-0-

You have posted multiple part question, so as per our policy only first three parts are answered. If…

Answered: Parker's chief financial officer (CFO)…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

See similar textbooks

Related questions

Question

Parker's chief financial officer (CFO) wishes to determine the effects that a change in the value of the British pound would have on consolidated net income and consolidated stockholders equity. To help assess the foreign currency exposure associated with the investment in Suffolk, the CFO requests assistance in comparing consolidated results under actual exchange rate fluctuations with results that would have occurred had the dollar value of the pound remained constant or declined during the first two years of Parker's ownership.

REQUIRED

Use Excel to comprete the following four parts:

Part 1: Given the relevant exchange rates presented:

a. Translate Suffolk's December 31, 2020, trial balance from British pounds to U. S. Dollars. The British pound is Suffolk's functional currency.

b. Prepare a schedule that details the change in Suffolk's cumulative translation adjustment (beginning net assets, income, dividents, etc) for 2019 and 2020.

C. Prepare the December 31, 2020, consolidation worksheet for Parker and Suffolk.

d. Prepare the 2020 consolidated income statement and the December 31, 2020, consolidated balance sheet.

Other than paying dividends, no intra-entity transactions occurred between the two companies. Relevant U.S. dollar exchange rates for the
British pound follow:
January 1
Average
$1.62
January 30
$ 1.61
1.65
December 31
$1.64
2019
$1.60
2020
1.64
1.66
1.68
The December 31, 2020, financial statements (before consolidation with Suffolk) follow. Dividend income is the U.S. dollar amount of
dividends received from Suffolk translated at the $1.65/£ exchange rate at January 30, 2020. The amounts listed for dividend income and
all affected accounts (i.e., net income, December 31 retained earnings, and cash) reflect the $1.65/£ exchange rate at January 30, 2020.
Credit balances are in parentheses.
Parker
Sales
$ (70,000,000)
34,000,000
Cost of goods sold
Depreciation
20,000,000
Other expenses
6,000,000
Dividend income
(2,887,500)
Net inc
Retained earnings, 1/1/20
Net income, 2020
$ (12,887,500)
$ (48,000,000)
(12,887,500)
4,500,000
$ (56,387,500)
$ 3,687,500
Dividends, 1/30/20
Retained earnings, 12/31/20
Cash
Accounts receivable
10,000,000
Inventory
30,000,000
Investment in Suffolk
83,200,000
Plant and equipment (net)
105,000,000
Accounts payable
(25,500,000)
Long-term debt
(50,000,000)
Common stock
(100,000,000)
Retained earnings, 12/31/20
(56,387,500)
-0-

On January 1, 2019, Parker, Inc., a U.S.-based firm, acquired 100 percent of Suffolk PLC located in Great Britain for consideration paid of
52,000,000 British pounds (£), which was equal to fair value. The excess of fair value over book value is attributable to land (part of
property, plant, and equipment) and is not subject to depreciation. Parker accounts for its investment in Suffolk at cost. On January 1,
2019, Suffolk reported the following balance sheet:
Cash
$ 1,000,000
Accounts receivable
Inventory
$2,000,000 Accounts payable
3,000,000 Long-term debt
14,000,000 Common stock
40,000,000 Retained earnings
$59,000,000
8,000,000
44,000,000
6,000,000
Property, plant, and equipment (net)
$59,000,000
Suffolk's 2019 income was recorded at £2,000,000. It declared and paid no dividends in 2019.
On December 31, 2020, two years after the date of acquisition, Suffolk submitted the following trial balance to Parker for
consolidation:
Page 537
Cash
$ 1,500,000
Accounts Receivable
5,200,000
Inventory
18,000,000
Property, Plant, and Equipment (net)
36,000,000
Accounts Payable
(1,450,000)
Long-Term Debt
(5,000,000)
Common Stock
(44,000,000)
Retained Earnings, 1/1/20
(8,000,000)
Sales
(28,000,000)
Cost of Goods Sold
16,000,000
Depreciation
2,000,000
Other Expenses
6,000,000
Dividends, 1/30/20
1,750,000
-0-

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Follow-up Questions

Read through expert solutions to related follow-up questions below.

Follow-up Question

b. Prepare a schedule that details the change in Suffolk's cumulative translation adjustment (beginning net assets, income, dividents, etc) for 2019 and 2020.

C. Prepare the December 31, 2020, consolidation worksheet for Parker and Suffolk.

d. Prepare the 2020 consolidated income statement and the December 31, 2020, consolidated balance sheet.

Solution

by Bartleby Expert

SEE SOLUTION

Knowledge Booster

Accounting for Foreign Exchange Transactions

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.