12th Edition

ISBN: 9781259916977

Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy

Publisher: Mcgraw-hill Education,

See similar textbooks

Videos

Textbook Question

Chapter 12, Problem 12.23P

Translation
Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, located in Australia, on January 1, 20X3. The purchase price in Australian dollars (AS) was A$200,000, and A$40,000 of the differential was allocated lo plant and equipment, which is amortized over a 10-year period. The remainder of the differential was attributable to a Patent. Palermo Inc. amortizes the patent over 10 years. Salina Ranching’s trial balance on December 31, 20X3, in Australian dollars is as follow:

Chapter 12, Problem 12.23P, Translation Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, , example 1

Additional Information
1. Salina Ranching uses average cost for cost of goods sold. Inventory increased by A$20,000 during the year. Purchases were made uniformly during 20X3. The ending inventory was acquired at the average exchange rate for the year.
2. Plain and equipment were acquired as follows:

Chapter 12, Problem 12.23P, Translation Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, , example 2

3. Plant and equipment are depreciated using the straight−line method and a 10−year life with no residual value.
4. The payable to Palermo is in Australian dollars. Palermo’s books show a receivable from Salina Ranching of $6,480.
5. The 10−year bonds were issued on July 1, 20X3, for A$106,000. The premium is amortized on a straight−line basis. The interest is paid on April 1 and October 1,
6. The dividends were declared arid paid on April 1.
7. Exchange rates were as follows:

Chapter 12, Problem 12.23P, Translation Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, , example 3

Required
a. Prepare a schedule translating the December 31, 20X3, trial balance of Salina Ranching from Australian dollars to U.S. dollars.
b. Prepare a schedule providing a proof of the translation adjustment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 12, Problem 12.22P

Chapter 12, Problem 12.24P

Students have asked these similar questions

Shames Company is located in London, England. The local currency is the British pound (£). On January 1, 20X8, Pit Company purchased an 80 percent interest in Shames for $410,000, which resulted in an excess of cost-over-book value of $32,000 due solely to a trademark having a remaining life of 10 years. Pit uses the equity method to account for its investment.Shames’s December 31, 20X8, trial balance has been translated into U.S. dollars, requiring a translation adjustment debit of $7,200. Shames’s net income translated into U.S. dollars is $71,000. It declared and paid a £23,000 dividend on May 1, 20X8.Relevant exchange rates are as follows: € $ January 1, 20X8 1 = 1.60 May 1, 20X8 1 = 1.64 December 31, 20X8 1 = 1.65 Average for 20X8 1 = 1.63 a Record the dividend received by Pit from Shames, make entries for Pit’s equity in the net income of Shames and the parent’s share of the translation adjustment and also record amortization of the trademark on Pit’s…

Bomarks acquires an equipment from a foreign supplier on credit for $6 million on 31 March 2022, when the exchange rate was $1 = GH¢ 5. The entity incurred other direct costs of GH¢1.5 million in installing the equipment. The estimated useful life of the equipment is 10 years and the entity has obligation to restore the location to its original state after usage. The estimated cost of dismantling and restoration in 10 years is GH¢3.5 million and the entity’s cost of capital is 8%. Although the equipment was available for use from 1 May 2022, the entity did not bring it into use until 1 July, 2022. Bomarks also sold goods to a foreign customer for $3.5 million on 30 April 2022, when the exchange rate was $1 = GH¢5.75. The customer paid $1 million on 1 July when the rates were $1 = GH¢5.60. On that date, Bomarks paid half of the amount owed for the equipment. At the entity’s year-end of 31 December 2022, the closing exchange rate was $1 = GH¢5.9. The entity’s functional currency is the…

Panama Company acquired 60% of Samoa Corporation on 1/2018. Fair values of Samoa's assets and liabilities approximated book values on that date. Panama uses the initial value method to account for its investment in Samoa. On 1/2019, Panama bought equipment from Samoa for $60,000 that had originally cost Samoa $120,000 and had $ 110,000of Accumulated depreciation at the time. The equipment had a five-year remaining life and was being depreciated using the straight-line method. You are preparing the worksheet for the 2020 fiscal year. a. Was this equipment sale upstream or downstream?b. How much unrealized net gain from the equipment transfer remains at the beginning of 2020? (this is the amount you will need for the *TA entry at 1/2020.)c. Which company's Retained earnings account will be adjusted in the *TA entry in part a? (Which company was the "initiator" of the transaction?)d. How much excess depreciation will there be in each of the first five years after the transfer?e. Panama's…

Chapter 12 Solutions

Advanced Financial Accounting

Ch. 12 - Prob. 12.1Q Ch. 12 - Prob. 12.2Q Ch. 12 - Prob. 12.3Q Ch. 12 - How widely used are IFRS? Can IFRS be used for...Ch. 12 - Prob. 12.5Q Ch. 12 - Prob. 12.6Q Ch. 12 - Prob. 12.7Q Ch. 12 - Prob. 12.8Q Ch. 12 - Prob. 12.9Q Ch. 12 - Prob. 12.10Q

Knowledge Booster

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.

Solution Summary: The author explains translation adjustment as the most common method used when the local currency is the foreign entity's functional currency.

Videos

Want to see the full answer?

Chapter 12 Solutions