2023年江西财经大学高级财务会计国际学院新版题库

AdvancedAccounting,11e(Beams/Anthony/Bettinghaus/Smith)Chapter14ForeignCurrencyFinancialStatementsMultipleChoiceQuestions1)AU.S.firmhasaBelgiansubsidiarythatusestheBritishpoundasitsfunctionalcurrency.AccordingtoGAAP,theU.S.dollarfromBelgianunit'spointofviewwillbeA)itsonlyforeigncurrency.B)itslocalcurrency.C)itscurrentratemethodcurrency.D)itsreportingcurrency.Answer:DObjective:LO1Difficulty:Easy2)SelveyInc.isawholly-ownedsubsidiaryofParsfieldIncorporated,aU.S.firm.ThecountrywhereSelveyoperatesisdeterminedtohaveahighlyinflationaryeconomyaccordingtoGAAPdefinitions.Therefore,forpurposesofpreparingconsolidatedfinancialstatements,thefunctionalcurrencyisA)itsreportingcurrency.B)itscurrentratemethodcurrency.C)theUSdollar.D)itslocalcurrency.Answer:CExplanation:C)Selveymustusethefunctionalcurrencyofthereportingentity.Objective:LO3Difficulty:Easy3)Allofthefollowingfactorswouldbeusedtodefineaforeignentity'sfunctionalcurrency,exceptA)highvolumeofintercompanytransactions.B)expensesforforeignentityprimarilydrivenbylocalfactors.C)financingforforeignentitydenominatedinlocalcurrency.D)foreignentity'sstatusasalocaltaxhavenfortransferpricingpurposes.Answer:DObjective:LO1Difficulty:Easy4)TheprimarygoalbehindconsolidatingfinancialstatementsofacontrolledsubsidiaryisA)assuringthatthesubsidiaryfinancialstatementsarethesameunderthetemporalmethodorthecurrentratemethod.B)assuringthattheindividualnatureofthesubsidiaryentityisnotlostintheconsolidation.C)representingtheconversionofstatementsatthehistoricalexchangerate.D)representingthecompany'sunderlyingeconomiccondition.Answer:DObjective:LO2Difficulty:Easy

5)Pelmerhasaforeignsubsidiary,SappCorporationofGermany,whosefunctionalcurrencyistheeuro.Sapp'sbooksaremaintainedineuros.OnDecember31,,SapphasanaccountreceivabledenominatedinBritishpounds.Whichoneofthefollowingstatementsistrue?A)BecauseallaccountsofthesubsidiaryaretranslatedintoU.S.dollarsatthecurrentrate,theAccountReceivableisnotadjustedonthesubsidiary'sbooksbeforetranslation.B)TheAccountReceivableisremeasuredintothefunctionalcurrency,thuseliminatingtheneedfortranslation.C)TheAccountReceivableisfirstadjustedtoreflectthecurrentexchangerateineurosandthentranslatedatthecurrentexchangerateintodollars.D)TheAccountReceivableisadjustedtoeurosatthecurrentexchangerate,andanyresultinggainorlossisincludedasatranslationadjustmentinthestockholders'equitysectionofthesubsidiary'sseparatebalancesheet.Answer:CObjective:LO2Difficulty:Moderate6)PaskinCorporation'swholly-ownedCanadiansubsidiaryhasaCanadiandollarfunctionalcurrency.Intranslatingthesubsidiary'saccountbalancesintoU.S.dollarsforreportingpurposes,whichoneofthefollowingaccountswouldbetranslatedathistoricalexchangerates?A)AccountsReceivableB)NotesPayableC)CapitalStockD)RetainedEarningsAnswer:CObjective:LO2Difficulty:Easy7)AforeignentityisasubsidiaryofaU.S.parentcompanyandhasalwaysusedthecurrentratemethodtotranslateitsforeignfinancialstatementsonbehalfofitsparentcompany.Whichoneofthefollowingstatementsisfalse?A)TheU.S.dollaristhefunctionalcurrencyofthiscompany.B)Changesinexchangeratesbetweenthesubsidiary'scountryandtheparent'scountryarenotexpectedtoaffecttheforeignentity'scashflows.C)Translationadjustmentsareshowninstockholders'equityasincreasesordecreasesinothercomprehensiveincome.D)Translationadjustmentsarenotshownontheincomestatement.Answer:AObjective:LO2Difficulty:Easy

8)AssumethefunctionalcurrencyofaforeignentityistheU.S.dollar,butthebooksarekeptineuros.Theobjectiveofremeasurementofaforeignentity'saccountsistoA)producethesameresultsasiftheforeignentity'sbooksweremaintainedinthecurrencyofthelargestcustomer.B)producethesameresultsasiftheforeignentity'sbooksweremaintainedsolelyinthelocalcurrency.C)producethesameresultsasiftheforeignentity'sbooksweremaintainedsolelyintheU.S.dollar.D)producetheresultsreflectiveoftheforeignentity'seconomicsinthelocalcurrency.Answer:CObjective:LO2Difficulty:Easy9)Whichofthefollowingassetsand/orliabilitiesareconsideredmonetary?A)IntangibleAssetsandPlant,Property,andEquipmentB)BondsPayableandCommonStockC)CashandAccountsPayableD)NotesReceivableandInventoriescarriedatcostAnswer:CObjective:LO2Difficulty:Easy10)WhichofthefollowingstatementsabouttheCurrentRatemethodisfalse?A)Translationinvolvesrestatingthefunctionalcurrencyamountsintothereportingcurrency.B)Allassetsandliabilitiesaretranslatedatthecurrentrate.C)Ifthesubsidiarymaintainstheirbooksintheirfunctionalcurrency,thecurrentratemethodisused.D)Theeffectofexchangeratechangesarereportedontheincomestatementasaforeignexchangegainorloss.Answer:DObjective:LO2Difficulty:Easy11)AccountsrepresentinganallowanceforuncollectibleaccountsareconvertedintoU.S.dollarsatA)historicalrateswhentheU.S.dollaristhefunctionalcurrency.B)currentratesonlywhentheU.S.dollaristhefunctionalcurrency.C)historicalratesregardlessofthefunctionalcurrency.D)currentratesregardlessofthefunctionalcurrency.Answer:DObjective:LO2Difficulty:Easy

12)PalkCorporationhasaforeignsubsidiarylocatedinacountryexperiencinghighratesofinflation.Informationconcerningthiscountry'sinflationrateexperienceisgivenbelow. Change AnnualrateDate Index inindex ofInflationJanuary1, 90January1, 120 30 30/100=30.00%January1, 150 30 30/130=23.08%January1, 210 60 60/160=37.50%TheinflationratethatisusedindeterminingifthesubsidiaryisoperatinginahighlyinflationaryeconomyisA)37.50%.B)90.58%.C)133.33%.D)350.00%.Answer:CExplanation:C)[(210-90)/90]×100%=133%Objective:LO3Difficulty:Moderate13)Atthetimeofabusinessacquisition,A)identifiableassetsandliabilitiesareallocatedtheportionofthetranslationorremeasurementadjustmentthatexistedonthedateofacquisition.B)aforeignentity'sassetsandliabilitiesaretranslatedintoU.S.dollarsusingthecurrentexchangerateineffectonthatdate.C)thedifferencebetweeninvestmentfairvalueandtranslatednetassetsacquiredistreatedasaremeasurementgainorlossontheincomestatement.D)thedifferencebetweeninvestmentfairvalueandtranslatednetassetsacquiredisrecordedasacumulativetranslationadjustmentonthebalancesheet.Answer:BObjective:LO4Difficulty:Easy14)Whentranslatingforeignsubsidiaryincomestatementsusingthecurrentratemethod,whyaresomeaccountstranslatedatanaveragerate?A)Thisapproachimprovesmatching.B)Thisapproachaccentuatestheconservatismprinciple.C)Thisapproachsmoothesouthighlyvolatileexchangeratefluctuations.D)Thisapproachapproximatestheeffectoftransactionswhichoccurcontinuouslyduringtheperiod.Answer:DObjective:LO5Difficulty:Easy

15)ThefollowingassetsofPooleCorporation'sRomaniansubsidiaryhavebeenconvertedintoU.S.dollarsatthefollowingexchangerates: Current Historical Rates Rates Accountsreceivable $850,000 $875,000Trademark 600,000 575,000Propertyplantandequipment 1,200,000 900,000Totals $2,650,000 $2,350,000AssumethefunctionalcurrencyofthesubsidiaryistheU.S.dollarandthebooksarekeptinadifferentcurrency.TheassetsshouldbereportedintheconsolidatedfinancialstatementsofPooleCorporationandSubsidiaryinthetotalamountofA)$2,325,000.B)$2,350,000.C)$2,375,000.D)$2,650,000.Answer:AExplanation:A)A/R$850,000+Trademark$575,000+Plant$900,000Objective:LO5Difficulty:Moderate16)Whichofthefollowingforeignsubsidiaryaccountswillhavethesamevalueonconsolidatedfinancialstatements,regardlessofwhetherthestatementsareremeasuredortranslated?A)TrademarkB)DeferredIncomeC)AccountsReceivableD)GoodwillAnswer:CObjective:LO2Difficulty:Easy17)ExchangegainsorlossesfromremeasurementappearA)inthecontinuingoperationssectionoftheconsolidatedincomestatement.B)asanextraordinaryitemontheconsolidatedincomestatement.C)asothercomprehensiveincometypicallyreportedinastatementofstockholders'equity.D)asanadjustmenttothebeginningbalanceofretainedearningsontheconsolidatedStatementofretainedearnings.Answer:AObjective:LO6Difficulty:Easy

18)AU.S.parentcorporationloansfundstoaforeignsubsidiarytobeusedtopurchaseequipment.TheloanisdenominatedinU.S.dollarsandthefunctionalcurrencyofthesubsidiaryistheeuro.ThisintercompanytransactionisaforeigncurrencytransactionofA)neitherthesubsidiarynortheparent,asitiseliminatedaspartoftheconsolidationprocedure.B)thesubsidiarybutnottheparent.C)boththesubsidiaryandtheparent.D)theparentbutnotthesubsidiary.Answer:BObjective:LO7Difficulty:Moderate19)Aforeignsubsidiary'saccountsreceivablebalanceshouldbetranslatedfortheconsolidatedfinancialstatementsatA)theappropriatehistoricalrate.B)theprioryear'sforecastrate.C)thefuturerateforthenextyear.D)thespotrateatyear-end.Answer:DObjective:LO8Difficulty:Easy20)IfaU.S.companywantstohedgeaprospectivelossonitsinvestmentinaforeignentitythatmayresultfromaforeigncurrencyfluctuation,theU.S.companyshouldA)purchaseaforwardtoswapcurrencyoftheforeignentity'slocalcountryforU.S.currency.B)purchaseacalloptiontobuycurrencyoftheforeignentity'slocalcountry.C)issuealoanintheforeignentity'slocalcountry.D)borrowmoneyintheforeignentity'slocalcountry.Answer:DObjective:LO9Difficulty:Easy

Exercises1)Foreachofthe12accountslistedinthetablebelow,selectthecorrectexchangeratetousewheneitherremeasuringortranslatingaforeignsubsidiaryforitsU.S.parentcompany.CodesC=CurrentexchangerateH=HistoricalexchangerateA=Averageexchangerate U.S.dollaris Theforeign thefunctional currencyisthe currency functionalcurrency1. Accountsreceivable ________ ________2. Marketabledebtsecurities carriedatcost ________ ________3. Inventoriescarriedatcost ________ ________4. Deferredincome ________ ________5. Goodwill ________ ________6. Otherpaid-incapital ________ ________7. Depreciationexpense ________ ________8. Refundabledeposits ________ ________9. Commonstock ________ ________10. Accumulateddepreciationon buildings ________ ________11. Deferredincometaxliabilities ________ ________12. Accountspayable ________ ________

Answer: U.S.dollaris Theforeign thefunctional currencyisthe currency functionalcurrency1. Accountsreceivable C C2. Marketabledebtsecurities carriedatcost H C3. Inventoriescarriedatcost H C4. Deferredincome H C5. Goodwill H C6. Otherpaid-incapital H H7. Depreciationexpense H C8. Refundabledeposits C C9. Commonstock H H10. Accumulateddepreciationon buildings H C11. Deferredincometaxliabilities C C12. Accountspayable C CObjective:LO2Difficulty:Moderate

2)OnJanuary1,,PlanetCorporation,aU.S.company,acquired100%ofStarCorporationofBulgaria,payinganexcessof90,000BulgarianlevoverthebookvalueofStar'snetassets.Theexcesswasallocatedtoundervaluedequipmentwithathree-yearremainingusefullife.Star'sfunctionalcurrencyistheBulgarianlev.Star'sbooksaremaintainedinthefunctionalcurrency.ExchangeratesforBulgarianlevforare:January1, $.77Averageratefor .75December31, .73Required:1.DeterminethedepreciationexpensestatedinU.S.dollarsontheexcessallocatedtoequipmentfor.2.DeterminetheunamortizedexcessallocatedtoequipmentonDecember31,inU.S.dollars.3.IfStar'sfunctionalcurrencywastheU.S.dollar,whatwouldbethedepreciationexpenseontheexcessallocatedtotheequipmentfor?Answer:Requirement1Depreciationexpensein90,000lev/3years×$.75/lev=$22,500depreciationexpenseRequirement2UnamortizedexcessatDecember31,90,000lev×2/3×$.73/lev=$43,800unamortizedexcessonequipmentRequirement3Remeasureddepreciationexpense90,000lev×$.77/lev=$69,300excess$69,300/3years=$23,100depreciationexpenseObjective:LO5Difficulty:Moderate

3)PanCorporation,aU.S.company,formedaBritishsubsidiaryonJanuary1,byinvesting450,000Britishpounds(£)inexchangeforallofthesubsidiary'sno-parcommonstock.TheBritishsubsidiary,SkilletCorporation,purchasedrealpropertyonApril1,atacostof£500,000,with£100,000allocatedtolandand£400,000allocatedtoabuilding.Thebuildingisdepreciatedovera40-yearestimatedusefullifeonastraight-linebasiswithnosalvagevalue.TheBritishpoundisSkillet'sfunctionalcurrencyanditsreportingcurrency.TheBritisheconomydoesnothavehighratesofinflation.Exchangeratesforthepoundonvariousdateswere:January01, = 1£ = $1.60April01, = 1£ = $1.61December31, = 1£ = $1.68averagerate = 1£ = $1.66Skillet'sadjustedtrialbalanceispresentedbelowfortheyearendedDecember31,. InPoundsDebits:Cash £220,000Accountsreceivable 52,000Inventory 59,000Building 400,000Land 100,000Depreciationexpense 7,500Otherexpenses 110,000Costofgoodssold 220,000Totaldebits £1,168,500CreditsAccumulateddepreciation £7,500Accountspayable 111,000Commonstock 450,000Retainedearnings 0Equityadjustment 0Salesrevenue 600,000Totalcredits £1,168,500Required:PrepareSkillet's:1.Translationworkingpapers;2.Translatedincomestatement;and3.Translatedbalancesheet.

Answer:Requirement1 SkilletCorporation TranslationWorkingPapersDebitsCash 220,000 ×$1.68 = $369,600Accountsreceivable 52,000 ×$1.68 = 87,360Inventory 59,000 ×$1.68 = 99,120Building 400,000 ×$1.68 = 672,000Land 100,000 ×$1.68 = 168,000Depreciationexpense 7,500 ×$1.66 = 12,450Otherexpenses 110,000 ×$1.66 = 182,600Costofgoodssold 220,000 ×$1.66 = 365,200 _________Totaldebits $1,956,330CreditsAccumulateddepreciation 7,500 ×$1.68 = $12,600Accountspayable 111,000 ×$1.68 = 186,480Commonstock 450,000 ×$1.60 = 720,000Salesrevenue 600,000 ×$1.66 = 996,000Retainedearnings 0Totalcredits $1,915,080 Creditdifferential $41,250Requirement2 SkilletCorporation TranslatedIncomeStatement FortheYearEndedDecember31,Salesrevenue $996,000Expenses:Costofgoodssold (365,200)Depreciationexpense (12,450)Otherexpenses (182,600) ________Netincome $435,750

Requirement3 SkilletCorporation TranslatedBalanceSheet December31,Cash $369,600Accountsreceivable 87,360Inventory 99,120Building-net 659,400Land 168,000Totalassets $1,383,480Accountspayable $186,480Commonstock 720,000Retainedearnings 435,750Accumulatedothercomprehensiveincome 41,250Totalliabilities&equities $1,383,480Objective:LO5Difficulty:Moderate

4)NotetoInstructor:ThisexamitemisacontinuationofExercise3andproceedsforwardwithSkillet'ssecondyearofoperations.SkilletCorporation,aBritishsubsidiaryofPanCorporation(aU.S.company)wasformedbyPanonJanuary1,inexchangeforallofthesubsidiary'scommonstock.SkillethasnowendeditssecondyearofoperationsonDecember31,.Relevantexchangeratesare:January01, = 1£ = $1.60December31, = 1£ = $1.75averagerate = 1£ = $1.73Skillet'sadjustedtrialbalanceispresentedbelowforthecalendaryear.Theamountofequityadjustmentcarriedoverfromisacreditbalanceof$41,250(indollars). InPoundsDebits:Cash £75,000Accountsreceivable 362,000Inventory 41,000Building 400,000Land 100,000Depreciationexpense 10,000Otherexpenses 133,000Costofgoodssold 380,000Totaldebits £1,501,000CreditsAccumulateddepreciation £17,500Accountspayable 154,750Commonstock 450,000Retainedearnings 262,500Salesrevenue 616,250Totalcredits £1,501,000Required:ForSkillet'ssecondyearofoperations,preparethe:1.Translationworkingpapers;2.Translatedincomestatement;and3.Translatedbalancesheet.

Answer:Requirement1 SkilletCorporation TranslationWorkingPapersDebitsCash 75,000 ×$1.75 = $131,250Accountsreceivable 362,000 ×$1.75 = 633,500Inventory 41,000 ×$1.75 = 71,750Building 400,000 ×$1.75 = 700,000Land 100,000 ×$1.75 = 175,000Depreciationexpense 10,000 ×$1.73 = 17,300Otherexpenses 133,000 ×$1.73 = 230,090Costofgoodssold 380,000 ×$1.73 = 657,400 Totaldebits $2,616,290CreditsAccumulateddepreciation 17,500 ×$1.75 = $30,625Accountspayable 154,750 ×$1.75 = 270,812Commonstock 450,000 ×$1.60 = 720,000Salesrevenue 616,250 ×$1.73 = 1,066,113Retainedearnings 262,500 435,750Accumulatedothercomprehensiveincome 41,250Totalcredits $2,564,550Creditdifferential $51,740Requirement2 SkilletCorporation TranslatedIncomeStatement fortheyearendedDecember31,Salesrevenue $1,066,113Expenses:Costofgoodssold (657,400)Depreciationexpense (17,300)Otherexpenses (230,090)Netincome $161,323Retainedearnings,January1, 435,750Retainedearnings,December31, $597,073

Requirement3 SkilletCorporation TranslatedBalanceSheet December31,Cash $131,250Accountsreceivable 633,500Inventory 71,750Building-net 669,375Land 175,000Totalassets $1,680,875Accountspayable $270,812Commonstock 720,000Retainedearnings 597,073Accum.othercomprehensiveincome($41,250+$51,740) 92,990Totalliabilities&equities $1,680,875Objective:LO5Difficulty:Moderate

5)NotetoInstructor:ThisexamitemissimilartoExercise3exceptthattheexchangerateshavebeenchangedandthetemporalmethodisusedinsteadofthecurrentratemethod.ThePolkaCorporation,aU.S.corporation,formedaBritishsubsidiaryonJanuary1,byinvesting550,000Britishpounds(£)inexchangeforallofthesubsidiary'sno-parcommonstock.TheBritishsubsidiary,StripeCorporation,purchasedrealpropertyonApril1,atacostof£500,000,with£100,000allocatedtolandand£400,000allocatedtothebuilding.Thebuildingisdepreciatedovera40-yearestimatedusefullifeonastraight-linebasiswithnosalvagevalue.TheU.S.dollarisStripe'sfunctionalcurrency,butitkeepsitsrecordsinpounds.TheBritisheconomydoesnotexperiencehighratesofinflation.Exchangeratesforthepoundonvariousdatesare:January01, = 1£ = $1.60April01, = 1£ = $1.62December31, = 1£ = $1.65averagerate = 1£ = $1.64Stripe'sadjustedtrialbalanceispresentedbelowfortheyearendedDecember31,. InPoundsDebits:Cash £200,000Accountsreceivable 72,000Notesreceivable 99,000Building 400,000Land 100,000Depreciationexpense 7,500Otherexpenses 115,000Salaryexpense 208,000Totaldebits £1,201,500CreditsAccumulateddepreciation £7,500Accountspayable 100,000Commonstock 550,000Retainedearnings 0Equityadjustment 0Salesrevenue 544,000Totalcredits £1,201,500Required:PrepareStripe's:1.Remeasurementworkingpapers;2.Remeasuredincomestatement;and3.Remeasuredbalancesheet.

Answer:Requirement1 StripeCorporation RemeasurementWorkingPapersDebitsCash 200,000 ×$1.65 = $330,000Accountsreceivable 72,000 ×$1.65 = 118,800Notesreceivable 99,000 ×$1.65 = 163,350Building 400,000 ×$1.62 = 648,000Land 100,000 ×$1.62 = 162,000Depreciationexpense 7,500 x$1.62 = 12,150Otherexpenses 115,000 ×$1.64 = 188,600Salaryexpense 208,000 ×$1.64 = 341,120 _________Totaldebits $1,964,020CreditsAccumulateddepreciation 7,500 ×$1.62 = $12,150Accountspayable 100,000 ×$1.65 = 165,000Commonstock 550,000 ×$1.60 = 880,000Salesrevenue 544,000 ×$1.64 = 892,160Retainedearnings 0 0Totalcredits $1,949,310Creditdifferential $14,710Requirement2 StripeCorporation RemeasuredIncomeStatement FortheYearEndedDecember31,Salesrevenue $892,160Expenses:Salaryexpense (341,120)Depreciationexpense (12,150)Otherexpenses (188,600)Incomebeforeexchangegainsorlosses $350,290Exchangegains 14,710Netincome $365,000Retainedearnings,January1, 0Retainedearnings,December31, $365,000

Requirement3 StripeCorporation RemeasuredBalanceSheet December31,Cash $330,000Accountsreceivable 118,800Notesreceivable 163,350Building-net 635,850Land 162,000Totalassets $1,410,000Accountspayable $165,000Commonstock 880,000Retainedearnings 365,000Totalliabilities&equities $1,410,000Objective:LO5Difficulty:Moderate

6)NotetoInstructor:ThisexamitemisacontinuationofExercise5andproceedsforwardwithStripe'ssecondyearofoperations.StripeCorporation,aBritishsubsidiaryofPolkaCorporation(aU.S.company)wasformedbyPolkaonJanuary1,inexchangeforallofthesubsidiary'scommonstock.StripehasnowendeditssecondyearofoperationsonDecember31,.Relevantexchangeratesare:January01,=1£=$1.60April01,=1£=$1.62December31,=1£=$1.57averagerate=1£=$1.56Stripe'sadjustedtrialbalanceispresentedbelowforthecalendaryear. InPoundsDebits:Cash £172,000Accountsreceivable 308,000Notesreceivable 98,000Building 400,000Land 100,000Depreciationexpense 10,000Otherexpenses 117,000Salaryexpense 376,000Totaldebits £1,581,000CreditsAccumulateddepreciation £17,500Accountspayable 200,000Commonstock 550,000Retainedearnings 213,500Salesrevenue 600,000Totalcredits £1,581,000Required:PrepareStripe's:1.Remeasurementworkingpapers;2.Remeasuredincomestatement;and3.Remeasuredbalancesheet.

Answer:Requirement1 StripeCorporation RemeasurementWorkingPapersDebitsCash 172,000 ×$1.57 = $270,040Accountsreceivable 308,000 ×$1.57 = 483,560Notesreceivable 98,000 ×$1.57 = 153,860Building 400,000 ×$1.62 = 648,000Land 100,000 ×$1.62 = 162,000Depreciationexpense 10,000 ×$1.62 = 16,200Otherexpenses 117,000 ×$1.56 = 182,520Salaryexpense 376,000 ×$1.56 = 586,560 _________Totaldebits $2,502,740CreditsAccumulateddepreciation 17,500 ×$1.62 = $28,350Accountspayable 200,000 ×$1.57 = 314,000Commonstock 550,000 ×$1.60 = 880,000Salesrevenue 600,000 ×$1.56 = 936,000Retainedearnings 213,500 365,000Totalcredits $2,523,350Debitdifferential $20,610Requirement2 StripeCorporation TranslatedIncomeStatement FortheYearEndedDecember31,Salesrevenue $936,000Expenses:Salaryexpense (586,560)Depreciationexpense (16,200)Otherexpenses 182,520)Incomebeforeexchangegainsorlosses $150,720Exchangeloss (20,610)Netincome $130,110Retainedearnings,January1, 365,000Retainedearnings,December31, $495,110

Requirement3 StripeCorporation TranslatedBalanceSheet December31,Cash $270,040Accountsreceivable 483,560Notesreceivable 153,860Building-net 619,650Land 162,000Totalassets $1,689,110Accountspayable $314,000Commonstock 880,000Retainedearnings 495,110Totalliabilities&equities $1,689,110Objective:LO5Difficulty:Moderate

7)OnJanuary1,,PilgrimCorporation,aU.S.firm,acquiredownershipofSettlementCorporation,aforeigncompany,for$168,000,whenSettlement'sstockholders'equityconsistedof300,000localcurrencyunits(LCU)andretainedearningsof100,000LCU.Atthetimeoftheacquisition,Settlement'sassetsandliabilitieswerefairlyvaluedexceptforapatentthatdidnothaveanyrecordedbookvalue.Allexcesspurchasecostwasattributedtothepatent,whichhadanestimatedeconomiclifeof10yearsatthedateofacquisition.TheexchangerateforLCUsonJanuary1,was$.40.ThefunctionalcurrencyforSettlementisLCU.Settlement'sbooksaremaintainedinLCU.AsummaryofchangesinSettlement'sstockholders'equityduringandtheexchangeratesforLCUsisasfollows: LCU Rates DollarsStockholders'equity 1/1/11 400,000 $.40H $160,000Netincome 100,000 .42A 42,000Dividends12/1/11 (50,000) .43H (21,500)Equityadjustment 17,500Stockholders'equity _______ ________ 12/31/11 450,000 .44C $198,000Required:Determinethefollowing:1.FairvalueofthepatentfromPilgrim'sinvestmentinSettlementonJanuary1,inU.S.dollars.2.PatentamortizationforinU.S.dollars.3.UnamortizedpatentatDecember31,inU.S.dollars.4.EquityadjustmentfromthepatentinU.S.dollars.5.IncomefromSettlementforinU.S.dollars.6.InvestmentinSettlementbalanceatDecember31,inU.S.dollars.

Answer:Requirement1PatentFairValue:Costofinvestment $168,000Bookvalueacquired400,000LCU×$.40= (160,000)Patentindollars $8,000PatentinLCU=$8,000/$.40perLCU= 20,000Requirement2Patentamortizationfor:Patent:20,000LCU/10years=2,000LCUperyear2,000LCUperyear×$.42equalsamortizationof: $840Requirement3Unamortizedpatent:Patent(20,000LCU-2,000LCU)×$.44= $7,920Requirement4Equityadjustmentfrompatent:Beginningpatent(fromReq.1) $8,000Patentamortization(fromReq.2) (840)Subtotal 7,160Endingpatent(fromReq.3) 7,920Equityadjustment $760Requirement5IncomefromSettlement:Equityinincome $42,000Less:Patentamortization (840)IncomefromSettlement $41,160Requirement6InvestmentinSettlementbalanceat12/31/11:Cost,January1, $168,000Add:Incomefor(fromReq.5) 41,160Less:Dividends (21,500)Add:Equityadjustmentfrompatent(fromReq.4) 760Add:Equityadjustmentfromtranslation 17,500Investmentbalance,December31, $205,920Check:Bookvalue: $198,000Unamortizedpatent(fromReq.3) 7,920Investmentbalance $205,920Objective:LO7Difficulty:Moderate8)PlateCorporation,aUScompany,acquiredownershipofSaucerCorporationofSwitzerlandonJanuary1,for$1,500,000whenSaucer'sstockholders'equityinSwissfrancs(SF)consistedof700,000SFCapitalStockand300,000SFRetainedEarnings.TheexchangerateforSwissfrancswas$1.20onJanuary1.AllexcesspurchasecostwasattributedtoaTrademarkthatdidnothavearecordedbookvalue.Thetrademarkistobeamortizedover20years.Saucer'sfunctionalcurrencyisSwissfrancsandtherecordsarekeptinthesamecurrency.AsummaryofchangesinSaucer'sstockholders'equityduringandrelevantexchangeratesareasfollows: In Exchange In Francs Rates DollarsStockholders'equity 1/1/11 £1,000,000 $1.20H $1,200,000Netincome 250,000 1.15A 287,500Dividends11/1/11 (100,000) 1.10H (110,000)Equityadjustment (170,000)Stockholders'equity _________ _________ 12/31/11 £1,150,000 1.05C $1,207,500Required:Determinethefollowing:1.FairvalueoftheTrademarkfromPlate'sinvestmentinSauceronJanuary1,inU.S.dollars.2.TrademarkamortizationforinU