Pew Corporation (a U.S.corporation)acquired all of the stock of Skunk Company (a Brazilian company)on January 1,2014 for $9,300,000 when Skunk had 10,000,000 Brazilian real (BR)capital stock and 5,000,000 BR retained earnings.The book value of Skunk's net assets equaled the fair value on this date,and any cost/book value differential is due to a patent with a 5-year remaining useful life.Skunk's functional currency is the BR.Skunk's books are maintained in the functional currency.The exchange rates for BR's for 2014 are shown below:
1.Calculate the patent value from the business combination on January 1,2014 in U.S.dollars.
2.Calculate the patent amortization in U.S.dollars for 2014.
3.Prepare the journal entry (in U.S.dollars)required on Pew's books to record the patent amortization for 2014,assuming that Pew accounts for Skunk using the equity method.
Plato Corporation,a U.S.company,purchases all of the outstanding stock of Socrates Company,which operates outside the U.S.on January 1,2014.Socrates' net assets have fair values that equal their book values with the exception of land that has a fair value of 200,000 foreign currency units and equipment with a fair value of 100,000 foreign currency units.Plato paid $180,000 for this acquisition.The balance sheets for Plato and Socrates are shown below just before the business combination.Socrates' functional currency is the foreign currency unit (fcu)and the exchange rate at the date of acquisition was $.40 per fcu.Socrates uses the fcu for record-keeping purposes.
Prepare a consolidated balance sheet for Plato and subsidiary at January 1,2014 immediately following the business combination.
On January 1,2014,Psalm Corporation purchased all the stock of Solomon Corporation for $481,400 when Solomon had capital stock of 180,000 pounds (£)and retained earnings of 90,000£.The book value of Solomon's assets and liabilities represented the fair value,except for equipment with a 5-year life that was undervalued by 15,000£.Any remaining excess is due to a patent with a useful life of 6 years.Solomon's functional currency is the pound.Solomon's books are kept in pounds.Relevant exchange rates for a pound follow:
1.Determine the equity adjustment on translation of the excess differential assigned to equipment at December 31,2014.
2.Determine the equity adjustment on translation of the excess differential assigned to patent at December 31,2014.
Par Industries,a U.S.Corporation,purchased Slice Company of New Zealand for $1,411,800 on January 1,2014.Slice's functional currency is the New Zealand dollar (NZ$).Slice's books are kept in NZ$.The book values of Slice's assets and liabilities were equal to fair values,with the exception of land which was valued at NZ$1,300,000.Slice's balance sheet appears below:
Relevant exchange rates are shown below:
January 1,2014 1 NZ$ = $0.78
Average rate 2014 1 NZ$ = $0.79
December 31,2014 1 NZ$ = $0.80
Determine the unrealized translation gain or loss at December 31,2014 relating to the excess allocated to the undervalued land.