Write down in front of each item in the table below the appropriate exchange rate required under both current rate method and temporal method using current rate, historical rate, and average rate
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1. Write down in front of each item in the table below the appropriate exchange rate required under both current rate method and temporal method using current rate, historical rate, and average rate.(2.5 marks)
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Account title |
Required Exchange Rate under current rate method |
Required Exchange Rate under temporal method |
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Cash |
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Accounts receivable |
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Inventory |
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Notes receivable |
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Plant assets |
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dividends |
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Cost of goods sold |
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Depreciation expense |
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Other expenses |
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Sales |
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Accumulated depreciation |
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Accounts payable |
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Notes payable |
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Common stocks |
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Retained earnings |
Answer:
2. On December 31, 2020, Parent company (A) acquired 80% of Subsidiary (B) outstanding common stocks for SR 368,000, Subsidiary’s fair value of net asserts was SR 460,000. During 2021,subsidiary net income and dividends declared were 100,000 and 50,000 respectively. Begging balance for Accumulated depreciation of subsidiary‘s equipment amounted to SR 50,000. Parent uses non-pushdown accounting and equity method .Subsidiary‘s fair value of net assets were as follows (5 marks)
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Book Value Element |
Amount in SR |
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Common Stock |
150,000 |
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Retained Earning |
120,000 |
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Total |
270,000 |
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Under –Or Over Valuation |
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Inventory |
(10,000) |
2 Months |
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Land |
50,000 |
No Useful Life |
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Equipment |
100,000 |
4 Years |
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Total Under –Or Over Valuation |
140,000 |
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Good Will |
50,000 |
No Useful Life |
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Total Under –Or Over Valuation |
490,000 |
Required:
1. Pass journal entries to record basic elimination entries.
2. Pass journal entries to record the excess value reclassification entry
3. Pass journal entries to record the amortized excess value reclassification entry
4. .Pass journal entries to record the depreciation elimination entry if accumulated depreciation account based on book value of assets is 25,000.
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