International Accounting
5th Edition
ISBN: 9781260466492
Author: Doupnik, Timothy
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 7, Problem 15EP
a.
To determine
Compute the translation adjustment to be reported on Company T’s December 31, Year 1, consolidated balance sheet, in case the functional currency of subsidiary is different from the parent’s reporting currency.
b.
To determine
Compute the re-measurement gain or loss to be reported on Company T’s Year 1, consolidated income, in case the functional currency of subsidiary and the parent’s reporting currency is same.
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On 12/20/20x1, Sour Company, a U.S.-based entity, acquired all of the outstanding common stock of corn Industries, which is located in Switzerland.
The cost of acquiring corn was 8.2 million Swiss francs. On the acquisition date, the U.S. dollar/Swiss franc exchange rate was $0.52 = SF1.
The assets and liabilities acquired at 12/20/20x1 were:
Assets
Swiss Franc
Liabilities and Equity
Swiss Franc
Cash
500,000
Notes Payable
1,270,500
Inventory
770,500
Shareholders' Equity
3,500,000
Property, plant and equipment
3,500,000
Total Assets
$4,770,500
Total Liabilities and Shareholders’ Equity
$4,770,500
At 12/31/20x1, Sour Company prepares its year-end financial statements. By 12/31/20x1, the U.S. dollar/Swiss franc exchange rate was $0.535 = SF1.
For purposes of this problem, assume that after the 12/20/20x1, corn Industries had no additional transactions that changed their financial position.
Required
Determine the…
On December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for 4.006 million Swiss francs (CHF), which is
indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and
fair values of the subsidiary's assets and liabilities were as follows:
Cash
CHF
Inventory
Property, plant, and equipment
Notes payable
806,000
1,306,000
4,006,000
(2,112,000)
Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the Swiss franc has appreciated to $1.10 =
CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation.
a. Determine the translation adjustment to be reported on Stephanie's December 31, 2020, consolidated balance sheet, assuming that
the Swiss franc is the Swiss subsidiary's functional currency. What is the economic relevance of this translation adjustment?
b. Determine the remeasurement gain or loss to be reported in Stephanie's 2020…
On December 18, 2020, Stephanie Corporation acquired 100 percent of a Swiss company for 4.015 million Swiss francs (CHF), which is indicative of book and fair value. At the acquisition date, the exchange rate was $1.00 = CHF 1. On December 18, 2020, the book and fair values of the subsidiary’s assets and liabilities were as follows:
Cash
CHF
815,000
Inventory
1,315,000
Property, plant, and equipment
4,015,000
Notes payable
(2,130,000
)
Stephanie prepares consolidated financial statements on December 31, 2020. By that date, the Swiss franc has appreciated to $1.10 = CHF 1. Because of the year-end holidays, no transactions took place prior to consolidation.
Determine the translation adjustment to be reported on Stephanie’s December 31, 2020, consolidated balance sheet, assuming that the Swiss franc is the Swiss subsidiary’s functional currency. What is the economic relevance of this translation adjustment?
Determine the remeasurement gain or loss…
Chapter 7 Solutions
International Accounting
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - 6. What are the major differences between IFRS and...Ch. 7 - Prob. 7QCh. 7 - 8. Which translation method does U.S. GAAP require...Ch. 7 - Prob. 9QCh. 7 - 10. How are gains and losses on foreign currency...
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Prob. 1EPCh. 7 - Prob. 2EPCh. 7 - Prob. 3EPCh. 7 - Prob. 4EPCh. 7 - 4. Which of the following best explains how a...Ch. 7 - In the translated financial statements, which...Ch. 7 - Prob. 7EPCh. 7 - Prob. 8EPCh. 7 - Prob. 9EPCh. 7 - Prob. 10EPCh. 7 - The Year 1 financial statements of the Chinese...Ch. 7 -
10. Simga Company's Turkish subsidiary repented...Ch. 7 - Prob. 13EPCh. 7 - Prob. 14EPCh. 7 - Prob. 15EPCh. 7 - Prob. 16EPCh. 7 - Prob. 17EPCh. 7 - Prob. 18EPCh. 7 - 16. Access the most recent annual report for a...Ch. 7 - Prob. 21EPCh. 7 - Prob. 22EPCh. 7 - Prob. 1CCh. 7 - Prob. 2C
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