INTERNATIONAL ACCOUNTING (LL)-W/CONNECT
5th Edition
ISBN: 9781260696219
Author: Doupnik
Publisher: MCG
expand_more
expand_more
format_list_bulleted
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.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 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, 2017, the book and fair values of the subsidiary’s assets and liabilities were:Stephanie prepares consolidated financial statements on December 31, 2017. 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, 2017, 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 2017 consolidated net income, assuming that the U.S. dollar is the functional currency. What is the economic relevance of this…
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…
On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 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, 2017, the book and fair values of the subsidiary’s assets and liabilities were:
Cash . . . . . . . . . . . . . . . CHF 800,000Inventory . . . . . . . . . . . . . . 1,300,000Property, plant & equipment . 4,000,000Notes payable . . . . . . . . . (2,100,000)
Stephanie prepares consolidated financial statements on December 31, 2017. 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, 2017, 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…
Chapter 7 Solutions
INTERNATIONAL ACCOUNTING (LL)-W/CONNECT
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
Knowledge Booster
Similar questions
- On December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 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, 2017, the book and fair values of the subsidiary’s assets and liabilities were: Cash CHF 804,000 Inventory 1,304,000 Property, plant & equipment 4,000,000 Notes payable (2,108,000 ) Stephanie prepares consolidated financial statements on December 31, 2017. 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, 2017, 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 to be…arrow_forwardOn December 18, 2017, Stephanie Corporation acquired 100 percent of a Swiss company for 4.0 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, 2017, the book and fair values of the subsidiary’s assets and liabilities were: Cash CHF 800,000 Inventory 1,300,000 Property, plant & equipment 4,000,000 Notes payable (2,100,000) Stephanie prepares consolidated financial statements on December 31, 2017. 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, 2017, 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 to be reported…arrow_forwardIn order to demonstrate the use of the remeasurement process, assume that at the beginning of the year a U.S. parent company invested 100,000 foreign currency B (FCB) to form a 100% owned subsidiary.The subsidiary immediately invested the foreign currency in land at a cost of 50,000 FCB and inventory with a cost of 50,000 FCB. At midyear, 50% of the inventory was sold for 40,000 FCB. At year-end, assume that the sale is still uncollected. Although FCB is the subsidiary’s functional currency, the subsidiary maintains its books of record in foreign currency A (FCA). Assume the following exchange rates: Beginning of Year Mid Year End of Year1 FCB equals . . . . . . 12.5 FCA 8 FCA 10 FCA1 FCA equals. . . . . . 0.08 FCB 0.125 FCB 0.10 FCB1 FCA equals. . . . . . $0.20 $0.40 $0.301 FCB equals . . . . . . $2.50…arrow_forward
- Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2021, for $410 million.At the date of purchase, the book value of Vancouver's net assets was $780 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $10 million for the inventory and by $15 million for the plant facilities.The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2021.Vancouver reported net income of $150 million for the year ended December 31, 2021. Vancouver paid a cash dividend of $20 million.Required:1. Prepare all appropriate journal entries related to the investment during 2021.2. What amount should Northwest report as its income from its investment in Vancouver for the…arrow_forwardThe ABC Company acquired 90% of the outstanding shares of XYZ Company, a foreign subsidiary, on September 10, 2022. The fair value of the assets of XYZ was the same as their carrying amount except for land whose the fair value was $50,000 greater than its carrying amount of $600,000. Consolidated financial statements are prepared at year-end December 31, 2022. The following rates of exchange have been identified: September 10, 2022 $1.62:P1 December 31, 2022 $1.56:P1 Average rate for the year ended December 31, 2022 $1.60:P1 Average rate for the year ended September 10 to December 31, 2022 $1.58:P1 Round off final answers to the nearest peso. How much is the land to be presented in the consolidated financial statements? Group of answer choices P411,392 P401,235 P406,250 P416,667arrow_forwardBomarks 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…arrow_forward
- 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…arrow_forwardOn 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_forwardNorthwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2021, for $400 million. At the date of purchase, the book value of Vancouver’s net assets was $775 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $20 million for the plant facilities. The estimated useful life of the plant facilities is 16 years. All inventory acquired was sold during 2021. Vancouver reported net income of $140 million for the year ended December 31, 2021. Vancouver paid a cash dividend of $30 million.Required:1. Prepare all appropriate journal entries related to the investment during 2021.2. What amount should Northwest report as its income from its investment in Vancouver for the…arrow_forward
- Malay, Inc., a Philippine company, acquired 100 percent common stock of an Indian companyon January 1, 2020, for P402,000. The Indian subsidiary’s net assets amounted to 300,000rupees on the date of acquisition. On January 1, 2020, the book values of its identifiableassets and liabilities approximated their fair values. On December 31, 2020, the Indiansubsidiary’s adjusted trial balance, translated into Philippine Pesos, contained P12,000 moredebits than credits. The Indian subsidiary reported income of P25,000 rupees for 2020 andpaid a cash dividend of 5,000 rupees on November 30, 2020. Included on the Indiansubsidiary’s income statement was depreciation expense of 2,500 rupees. Malay uses thebasic equity method of accounting for its investment in the Indian subsidiary and determinedthat goodwill in the first year had an impairment loss of 10 percent of its initial amount.Exchange rate at various dates during 2020 are as follows:January 1 1 rupee = P1.20November 30 1 rupee =…arrow_forwardMalay, Inc., a Philippine company, acquired 100 percent common stock of an Indian companyon January 1, 2020, for P402,000. The Indian subsidiary’s net assets amounted to 300,000rupees on the date of acquisition. On January 1, 2020, the book values of its identifiableassets and liabilities approximated their fair values. On December 31, 2020, the Indiansubsidiary’s adjusted trial balance, translated into Philippine Pesos, contained P12,000 moredebits than credits. The Indian subsidiary reported income of P25,000 rupees for 2020 andpaid a cash dividend of 5,000 rupees on November 30, 2020. Included on the Indiansubsidiary’s income statement was depreciation expense of 2,500 rupees. Malay uses thebasic equity method of accounting for its investment in the Indian subsidiary and determinedthat goodwill in the first year had an impairment loss of 10 percent of its initial amount.Exchange rate at various dates during 2020 are as follows:January 1 1 rupee = P1.20November 30 1 rupee =…arrow_forwardMalay, Inc., a Philippine company, acquired 100 percent common stock of an Indian companyon January 1, 2020, for P402,000. The Indian subsidiary’s net assets amounted to 300,000rupees on the date of acquisition. On January 1, 2020, the book values of its identifiableassets and liabilities approximated their fair values. On December 31, 2020, the Indiansubsidiary’s adjusted trial balance, translated into Philippine Pesos, contained P12,000 moredebits than credits. The Indian subsidiary reported income of P25,000 rupees for 2020 andpaid a cash dividend of 5,000 rupees on November 30, 2020. Included on the Indiansubsidiary’s income statement was depreciation expense of 2,500 rupees. Malay uses thebasic equity method of accounting for its investment in the Indian subsidiary and determinedthat goodwill in the first year had an impairment loss of 10 percent of its initial amount.Exchange rate at various dates during 2020 are as follows:January 1 1 rupee = P1.20November 30 1 rupee =…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education