Concept explainers
(a)
Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Dividend: Dividend is the return on investment. It is a part of profit of the company in which investment is made. When subsidiary pays the dividend then parent company reduces the amount of investment by the dividend amount to be received from its investment in subsidiary.
The amount dividend received by P company from S company.
(b)
Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Dividend: Dividend is the return on investment. It is a part of profit of the company in which investment is made. When subsidiary pays the dividend then parent company reduces the amount of investment by the dividend amount to be received from its investment in subsidiary.
The journal entries to record P company’s equity in the net income of S company and parent’s share of translation adjustment.
(c)
Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Calculation for the differential reported on consolidated balance sheet of December 31, 20X8 and the translation adjustment from it.
(d)
Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
Recording the amortization of trademark in P company’s book.
e.
Introduction: Translation is the method used to convert financial results of the business of subsidiary company into the functional currency of parent company.
Re-measurement: It is process to measure the financial results of any other currency into functional currency.
The amount of translation adjustment reported on the statement of comprehensive income as element of other comprehensive income.
Want to see the full answer?
Check out a sample textbook solutionChapter 12 Solutions
Advanced Financial Accounting
- On January 1, 2021, Garcia Co., a U.S. corporation with the U.S. dollar as its functional currency, established Fine Co. as a subsidiary. Fine is located in Special Country, and its functional currency is the LCU. Fine is engaged in the following transactions during 2021: January 1, 2021 Issued common stock for 500,000 LCU July 25, 2021 Sold a patent at a gain of 50,000 LCU October 1, 2021 Paid dividends of 60,000 LCU Fine Co.’s operating revenues and expenses for 2021 were 900,000 LCU and 700,000 LCU, respectively. The appropriate exchange rates were: January 1, 2021: 1 LCU = $2.45 July 25, 2021: 1 LCU = $2.15 October 1, 2021: 1 LCU = $2.54 December 31, 2021: 1 LCU = $2.65 Average for 2021: 1 LCU = $2.41 Required: Calculate the translation adjustment for Fine Co. (Round your answers to the nearest whole dollar.)arrow_forwardOakbrook Travel, Inc. acquired an 80% interest in Island Cruises on December 31 for $485,000. Oakbrook has the ability to exercise significant influence on management decisions. The Island Cruises stock is publically traded. During the year, Island Cruises reported net income of $80,000 and paid cash dividends of $20,000.How should Oakbrook Travel account for its investment in Island Cruises? Select one: A. Apply the equity method and report the investment at market value at year end. B. Account for the investment as a special purpose entity. C. Apply the equity method and perform a full consolidation. D. Apply mark-to-market accounting and consolidate the statements at year end.arrow_forward(TCO F) On January 1, 20X1, Veldon Co., a U.S. corporation with the U.S. dollar as its functional currency, established Malont Co. as a subsidiary. Malont is located in the country of Sorania, and its functional currency is the stickle (§). Malont engaged in the following transactions during 20X1. January 1, 20X1 Issued common stock for §500,000 July 14, 20X1 Sold a patent at a gain of §40,000 October 1, 20X1 Paid dividends of §60,000 Malont's operating revenues and expenses for 20X1 were §800,000 and §650,000, respectively. The appropriate exchange rates were as follows. January 1, 20X1 §1 = $2.50 July 14, 20X1 §1 = $2.10 October 1, 20X1 §1 = $2.60 December 31, 20X1 §1 = $2.70 Average for 20X1 §1 = $2.40 Required:(A) Calculate Malont's net assets in stickles as of December 31, 20X1.(B) Calculate the translation adjustment for Malont, and state whether it is a positive or a negative adjustment (round your answers to the nearest…arrow_forward
- 1. On 1 January 2019, Pitty Ltd purchased 30% of the shares in Annah Ltd for P700, 000. At this date, Annah Ltd's net assets stood at P1, 4m. At 31 December 2019, Annah Ltd has net assets of P1, 5m. Pitty Ltd sold goods worth P160, 000 to Annah Ltd at a margin of 25%. Half of the goods remained in inventory at the year-end. Calculate the value of the investment in associate as at 31 December 2019?arrow_forward1. On January 1, 2010, parent lends 70% owned subsidiary $5,000,000 at 6% annual interest for two years. Subsidiary pays the accrued interest at the end of each year. Answer the following: a. How much interest income is recorded on the Parent's books in 2010. b. How much interest expense is recorded on the subsidiary's books in 2010 2. Apple owns 80% of Pear. Apple had a bond payable outstanding on January 1, 2010 with a book value of $212,000. Pear purchases the bond in openmarket for $199,000. How much is the gain or loss on retirement of the bond.arrow_forwardTOPIC: Contributed Capital (Issuance of Shares, Reacquisition, Reissuance, Retirement, Donation, Conversion, Share Split, etc.) Country: Philippines 1) On December 1, 2018, ABC Company exchanged 40,000 shares of its P10 par value ordinary shares held in treasury for a used machine. The treasury shares were acquired by Ban at a cost of P40 per share and are accounted for under the cost method. On the date of exchange, the ordinary shares had a fair value of P55 per share, but the shares were originally issued at P30 per share. What is the increase in equity as a result of the exchange? 2) ABC Company was organized on January 1, 2022 with 100,000 authorized shares of P100 par value. January 15 -Sold 30,000 shares at P150 per share. February 14 -Issued 2,000 shares for legal services with a fair value of P300,000. The shares on this date are quoted at P160 per share. March 27 -Purchased 5,000 treasury shares at a cost of P12 per share. October 31 -Issued P4,000,000 convertible…arrow_forward
- Campione Manufacturing acquired an 80% interest in DaLuca Distributors, a foreign corporation established on November 1, 2010, for 650,000 foreign currency units (FC). Campione acquired its 80% interest on June 30, 2012, when DaLuca’s shareholders’ equity consisted of capital stock, paid-in capital in excess of par, and retained earnings in the amounts of 100,000 FC, 210,000 FC, and 300,000 FC, respectively. The excess of cost over book value was allocated to goodwill and depreciable assets in the amounts of 120,000 FC and 42,000 FC, respectively. The goodwill is annually tested for impairment, and no impairment in the value has been suggested. The depreciable assets are to be depreciated over 10 years assuming the straight-line method. DaLuca’s income and dividends over the period from July 1, 2012, through the end of 2014 were as follows: FC Net Income FC DividendsLast half of 2012 . . . . . . . . . . . . . . . . . . .75,000…arrow_forwardTechno Builders has acquired a 70% interest in the equity of a foreign company, Prefabco, whose functional currency is the FC. Although Prefabco began operations in June 2012 when 1 FC equaled $1.95, Techno did not acquire its interest until March 31, 2013, when 1 FC equaled $2.08. Techno paid 400,000 FC for its interest in Prefabco when the subsidiary’s condensed preclosing trial balance was as follows:(attached)Prepare a schedule to determine the balance in Techno’s account ‘‘Investment in Prefabco’’ as of year-end 2015 and also prepare all of the entries that would be necessary to eliminate the investment account in a worksheet to consolidate the parent company and its subsidiary for the year 2015. Techno uses the simple equity method to account for its interest in the subsidiary.arrow_forwardDunbrook Travel, Inc. acquired an 80% interest in Ocean Cruises on December 31 for $970,000. Dunbrook has the ability to exercise significant influence on management decisions. The Ocean Cruises stock is publically traded. During the year, Ocean Cruises reported net income of $160,000 and paid cash dividends of $40,000. How should DunbrookTravel account for its investment in Ocean Cruises? A. Apply the equity method and report the investment at market value at year end. B. Apply the equity method and perform a full consolidation. C. Apply mark-to-market accounting and consolidate the statements at year end. D. Account for the investment as a special purpose entity.arrow_forward
- Available-For-Sale Investments With Known Market Value Porter Inc. is a Canadian public company with a December 31 year end. On January 1, 2007, the company acquires 5,000 shares of Santin Ltd. at a cost of $23 per share. Transaction costs total $1,150 and Porter chooses to include them in the cost of the investment. The investment does not give Porter influence over, or control of, Santin. Porter classifies these shares as available for sale. During the year ending December 31, 2007, Santin Ltd. declares and of $0.90 per share. The Santin shares have a quoted market price that is established in an active market. On December 31, 2007, the fair value of the Santin shares has declined to $19 per share. pays dividends On March 1, 2008, Porter sells all of the Santin shares for $25 per share. Transaction costs for the disposal are $1,250. Provide the journal entries to record the preceding information on the books of Porter Inc. and a summary of the effect of the investment in Santin on…arrow_forwardYang Corporation starts a foreign subsidiary on January 1 by investing 20,000 rand. Yang owns all of the shares of the subsidiary’s common stock. The foreign subsidiary generates 40,000 rand of net income throughout the year and pays no dividends. The rand is the foreign subsidiary’s functional currency. Currency exchange rates for 1 rand are as follows: January 1. . . . . . . . . . $0.25 = 1 randAverage for the year. . . 0.28 = 1December 31. . . . . .. . . 0.31 = 1 In preparing consolidated financial statements, what translation adjustment will Yang report at the end of the current year? Choose the correct.a. $400 positive (credit).b. $1,000 positive (credit).c. $1,400 positive (credit).d. $2,400 positive (credit).arrow_forwardAvailable-For-Sale Investments With Known Market Value Subject: Porter Inc. is a Canadian public company with a December 31 year end. On January 1, 2007, the company acquires 5,000 shares of Santin Ltd. at a cost of $23 Transaction costs total $1,150 and Porter chooses to include them in the cost of the investment. The investment does not give Porter influence over, or control of, Santin. Porter classifies these shares as available for sale. per share. During the year ending December 31, 2007, Santin Ltd. declares and pays dividends of $0.90 per share. The Santin shares have a quoted market price that is established in an active market. On December 31, 2007, the fair value of the Santin shares has declined to $19 per share. On March 1, 2008, Porter sells all of the Santin shares for $25 per share. Transaction costs for the disposal are $1,250. Provide the journal entries to record the preceding information on the books of Porter Inc. and a summary of the effect of the investment in…arrow_forward