Multinational Accounting

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Answer question 11-1 and 11-3 and fill out the template given! If you need to make own template that is fine!

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Exercise 11-1 Translated trial balance Accounts Current Assets……… Long lived assets (net) Other Assets Cost of Sales…… Other expenses Current Liabilities…………. Other liabilities Net sales Dividends declared Common Stock Retained earnings (beginning) Cumulative translation adjustment Total………………………… Translation of Retained Earnings Balance, December 31, 2014 2015 Income 2015 Dividends Balance December 31, 2015 Part 2 Debit (Credit) Balance in FC Exchange 12/31/2015 Rate In FC 1 FC= Cumulative Translation Adjustment Traceable to Years Prior to 2015 Year 2015 Translation Adjustment Accounts Current Assets……… Long lived assets (net) Other Assets Cost of Sales…… Other expenses Current Liabilities…………. Other liabilities Net sales Dividends declared Common Stock Retained earnings (beginning) Cumulative translation adjustment Total………………………… Part 4 Debit (Credit) Balance in FC Exchange 12/31/2014 Rate Reduction in 2015 Translation Adjustment due to Hedge Translated into US $ 12/31/2015 in U S $ r to 2015 Debit (Credit) in U S $ Translated into US $ 12/31/2014 Exercise 11-3 Entries Debit Credit Calculation of Investor's Share of Adjusted Equity Income Recomputation of Annual Translation Adjustment Exercise 11-5 in FC Cash Accounts Receivable Inventory Equipment Accumulated Depreciation Patents Accumulated Amortization Accounts Payable Notes Payable Common Stock Retained Earnings Beginning Retained Earnings Dividends Sales Cost of Sales Depreciation and Amortization Expense All Other Expenses Cumulative Translation Adjustment Exchange Rate In US $ 71,000 148,000 105,000 300,000 (50,000) 96,000 (20,000) (80,000) ######### ######### ######### 50,000 ######### 372,000 28,000 120,000 0 100,000 Total Net Income Calculation of cumulative translation as of year end 2015 in FC Cash and Cash Equivalents Accounts Receivable Inventory Equipment Accumulated Depreciation Patents Accumulated Amortization Accounts Payable Notes Payable Common Stock Retained Earnings Beginning Retained Earnings Dividends Sales Cost of Sales Depreciation and Amortization Expense All Other Expenses Exchange Rate In US $ Cumulative Translation Adjustment Total Net Income Analysis of Excess of cost over book value at acquisition expressed in FC Company Parent Value Value NCI Value Fair value of subsidiary Less book value of interest acquired: Common stock Retained earnings Total equity Excess acquired Excess Allocated To Allocation of income to NCI 2014 2015 Problem 11-1 -1 Entries to record transactions—Debit (Credit): In FCA Account Titles Debit Credit Trial balance: Trial Balance: In FCA Debit Receivable………………….. Inventory……………… Land………………….. Common Stock………… Sales…………………… Cost of Sales………………. Exchange (Gain) or Loss…………. Remeasurement (Gain) or Loss……….... Translation Adjustment……………… Total……………..……………. Net Income……………. -2 Remeasurement and translation of trial balance: Credit DR (CR) Trial Balance: In FCA Receivable………………….. Inventory……………… Land………………….. Common Stock………… Sales…………………… Cost of Sales………………. Exchange Gain…………. Remeasurement Loss……….…. Translation Adjustment……. Total…………………. Net Income (Loss)……………. -3 Translation adjustment traceable to the current year: -4 Rate DR (CR) FCB/FCA In FCB In FCB Debit Credit In FCB Debit Credit Rate DR (CR_ U.S.$/FCB In U.S.$ Year A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 B C D Problem 11-3 Sorenson Company Trial Balance Translation 31-Dec-18 Account Cash Accounts Receivable Inventory Fixed Assets Accumulated Depreciation Accounts Payable Long-Term Debt Common Stock Paid-In Capital in Excess of Par Retained Earnings, January 1, 20X8 Sales Cost of Goods Sold Operating Expenses Cumulative Translation Adjustment Totals Relevant Exchange Rate Balance in FC 2,840,000 3,990,000 5,800,000 15,000,000 (6,800,000) (1,580,000) (5,000,000) (3,000,000) (2,000,000) (7,950,000) (10,000,000) 7,500,000 1,200,000 Translate the balance of Retained Earnings below: 0 Balance in Dollars E F G H I A 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 B C D E F G H I Pueblo Corporation and Sorenson Company Worksheet for Consolidated Financial Statements (in dollars) For Year Ended December 31, 2018 Consolidated Cash Accounts Receivable Inventory Investment in Sorenson Fixed Assets Accumulated Depreciation Additional Equipment Accounts Payable Long-Term Debt Common Stock - Parent Common Stock - Subsidiary Paid-In Capital in Excess of Par- Parent Paid-In Capital in Excess of Par - Subsidiary Retained Earnings, 1/1/18- Parent Retained Earnings, 1/1/18 Subsidiary Sales Cost of Goods Sold Operating Expenses Subsidiary Income Total Consolidated Net Income Trial Balance Pueblo Sorenson 4,050,000 5,270,000 5,540,000 20,969,000 Key Eliminations and Adjustments Dr. Key Consolidated Income Cr. Statement Balance Sheet 21,000,000 (12,560,000) (3,450,000) (10,000,000) (4,000,000) (6,500,000) (12,180,000) (26,000,000) 16,380,000 3,210,000 (1,729,000) 0 0 0 0 0 0 Eliminations and Adjustments: A 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 B C D E F G H I Part 2 MULTINATIONAL ACCOUNTING 648 AND OTHER REPORTING CONCERNS PROBLEMS Problem 11-1 (LO 6, 7) Remeasuring a trial balance and analyzing results. In 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: 1 FCB equals . . . . . . 1 FCA equals . . . . . . 1 FCA equals . . . . . . 1 FCB equals . . . . . . Required Beginning of Year Mid Year End of Year 12.5 FCA 0.08 FCB $0.20 $2.50 8 FCA 0.125 FCB $0.40 $3.20 10 FCA 0.10 FCB $0.30 $3.00 1. Prepare the entries to record the above transactions: (a) as they would have been recorded on the books of the subsidiary and (b) as they would have been recorded had they been recorded in terms of FCB. Also, prepare the trial balance that would have resulted under each of the recording models. 2. Prepare a schedule to remeasure the FCA trial balance into an FCB trial balance and then translate into U.S. dollars. 3. Prepare a schedule to directly calculate the translation adjustment to be reported in other comprehensive income. 4. Compare the remeasured FCB trial balance to the FCB trial balance in part (1) and comment regarding whether the objectives of translation have been achieved. Problem 11-2 (LO 6) Remeasure equity accounts and determine noncontrolling interest values. WTC Manufacturing, Inc., has an 80% interest in a foreign subsidiary, Mofoco Manufacturing. Relevant details regarding WTC’s investment in Mofoco are as follows: Date of acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 30, 2016 Price paid for an 80% interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,600,000 Mofoco credit balances as of June 30, 2016, in foreign currency (FC): Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 FC Contributed capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800,000 FC Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 FC Excess of cost over book value traceable to: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equipment with a remaining useful life of 8 1/3 years . . . . . . . . . . . . . . . . . . . . . 100,000 FC Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The balance Although Mofoco maintains its books of record in the foreign currency (FC), its functional currency is the U.S. dollar. The partial preclosing trial balance for the year ended 2017 as it relates to shareholders’ equity of Mofoco is as follows: Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributed Capital in Excess of Par Value . . . . . . . . . . . . . . . . . . . . . . . . Retained Earnings as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of Inventory Sold (excluding depreciation) . . . . . . . . . . . . . . . . . . . . Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Patent Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on Disposal of Depreciable Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Debit (Credit) (1,200,000) FC (1,800,000) (1,000,000)* (3,100,000) 2,200,000 179,500 20,000 294,500 1,500 *The remeasured value of retained earnings on December 31, 2016, was $1,390,000. Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 07/21/2018 - RS0000000000000000000001059680 (Jackie Cohen) - Advanced Accounting Chapter 11 TRANSLATION OF FOREIGN FINANCIAL STATEMENTS 649 Mofoco employs the FIFO inventory method, and inventory available for sale during 2017 consisted of a beginning balance of 300,000 FC, acquired in the fourth quarter of 2016, and purchases during quarters 1 through 4 of 2017 of 400,000 FC, 620,000 FC, 700,000 FC, and 380,000 FC, respectively. Depreciation expense is based on a 10-year useful life, no residual or salvage values, and the straight-line method. The 2017 depreciation expense is traceable to depreciable assets acquired as follows: January 1, 2015, acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2016, acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 31, 2017, acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,060,000 FC 450,000 600,000 When the depreciable assets were acquired on March 31, 2017, Mofoco also disposed of depreciable assets with historical costs as follows: 160,000 FC acquired on January 1, 2015, and 60,000 FC acquired on June 30, 2016. The sales proceeds from the disposition of assets were 120,000 FC for the assets acquired on January 1, 2015 and 58,000 FC for the assets acquired on June 30, 2016. The patent amortization is traceable to a patent that was acquired on June 30, 2016, and is being amortized over 12 years by the straight-line method. Relevant exchange rates are as follows: January 1, 2015 . . . April 30, 2016 . . . . June 30, 2016. . . . . March 31, 2017 . . . 2016 Average. . . . . 2017 Average. . . . . 1 FC ¼ $1.40 1 FC ¼ 1.41 1 FC ¼ 1.38 1 FC ¼ 1.36 1 FC ¼ 1.42 1 FC ¼ 1.35 December 31, 2017 . . . . . . . . . . . . Fourth quarter 2016 average . . . . . First quarter 2017 average . . . . . . . Second quarter 2017 average . . . . Third quarter 2017 average . . . . . . Fourth quarter 2017 average . . . . . 1 FC ¼ $1.32 1 FC ¼ 1.35 1 FC ¼ 1.34 1 FC ¼ 1.35 1 FC ¼ 1.32 1 FC ¼ 1.31 1. Given the preclosing trial balance for the year ended 2017 as it relates to shareholders’ equity of Mofoco, calculate the remeasured U.S. dollar values. 2. Calculate the amount of 2017 consolidated net income that is traceable to the noncontrolling interest. Required Problem 11-3 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet with excess of cost over book value traceable to equipment. Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson’s equity consisted of the following: Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paid-in capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 FC 2,000,000 4,200,000 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200,000 FC On the date of acquisition, equipment with a 10-year life was undervalued by 500,000 FC. Any remaining excess of cost over book value is attributable to additional equipment with a 20-year life. The trial balances for Pueblo and Sorenson as of December 31, 2018, are as follows: Pueblo Corporation Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in Sorenson . . . . . . . . . . . . . . . . . . . . . . . . . Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paid-In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . Retained Earnings, January 1, 2018. . . . . . . . . . . . . . . 4,050,000 5,270,000 5,540,000 20,969,000 21,000,000 (12,560,000) (3,450,000) (10,000,000) (4,000,000) (6,500,000) (12,180,000) Sorenson Company 2,840,000 FC 3,990,000 5,800,000 15,000,000 (6,800,000) (1,580,000) (5,000,000) (3,000,000) (2,000,000) (7,950,000) Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 07/21/2018 - RS0000000000000000000001059680 (Jackie Cohen) - Advanced Accounting Part 2 MULTINATIONAL ACCOUNTING 650 AND Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Subsidiary Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26,000,000) 16,380,000 3,210,000 (1,729,000) Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 OTHER REPORTING CONCERNS (10,000,000) 7,500,000 1,200,000 0 FC The investment in Sorenson consists of the following: Initial investment (12,000,000 FC  $1.20) . . . . . . . . . . . . . . . . 2016 Income (1,750,000 FC  $1.28) . . . . . . . . . . . . . . . . . . . . 2017 Income (2,000,000 FC  $1.30) . . . . . . . . . . . . . . . . . . . . 2018 Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,400,000 2,240,000 2,600,000 1,729,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,969,000 Relevant exchange rates are as follows: January 1, 2016 . . . . . . . . . . . . . . . . . . . 2016 Average. . . . . . . . . . . . . . . . . . . . . January 1, 2017 . . . . . . . . . . . . . . . . . . . 2017 Average. . . . . . . . . . . . . . . . . . . . . December 31, 2018 . . . . . . . . . . . . . . . . 2018 Average. . . . . . . . . . . . . . . . . . . . . Required 1FC ¼ $1.20 1.28 1.25 1.30 1.31 1.33 Assuming the FC is Sorenson’s functional currency, prepare a consolidated worksheet. Problem 11-4 (LO 3, 5) Translation and elimination entries. On October 1, 2013, Kemper International acquired a 90% interest in the equity of Spruco Manufacturing when the subsidiary’s equity was 8,000,000 foreign currency (FC), including retained earnings with a balance of 3,000,000 FC. Kemper paid 8,100,000 FC, when 1 FC ¼ $1.18, for its 90% interest. The excess over book value was allocated to a patent in the amount of 360,000 FC with the balance being traceable to goodwill. It was estimated that the patent had a remaining useful life of 10 years and was to be amortized using the straight-line method. Spruco’s functional currency is the FC, and Kemper records its investment in the subsidiary under the simple equity method. Since its acquisition, relevant information regarding Spruco’s net income and dividends is as follows: Net income: Amount in FC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average exchange rate for period (1 FC ¼) . . . . . Dividends declared: Amount in FC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange rate at date of declaration (1 FC ¼) . . . Remainder of 2013 2014 2015 350,000 $1.20 920,000 $1.30 740,000 $1.25 500,000 $1.25 350,000 $1.32 300,000 $1.24 On December 31, 2015, when 1 FC ¼ $1.22, Spruco reported total assets of 13,890,000 FC and liabilities of 5,030,000 FC. Required Prepare the necessary entries to eliminate Kemper’s investment in Spruco account at year-end 2015 and to record the depreciation/amortization on the relevant items of cost in excess of book value. Problem 11-5 (LO 4, 6) Remeasurement and subsequent translation of financial statements and hedging against a translation adjustment. Moser International, a U.S. corporation, acquired a 100% interest in Gilmore Enterprises, a foreign corporation, which manufactures avionic components. Although Gilmore accounts for its activity using foreign currency A (FCA), it has been determined that its function currency is foreign currency B (FCB). A forecasted condensed trial balance as of Gilmore’s year-end December 31, 2015, expressed in FCA, is as follows: Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 07/21/2018 - RS0000000000000000000001059680 (Jackie Cohen) - Advanced Accounting
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