Question: Alamo Inc purchased 80 percent of the outstanding stock of

Alamo Inc. purchased 80 percent of the outstanding stock of Western Ranching Company, located in Australia, on January 1, 20X3. The purchase price in Australian dollars (A$) was A$200,000, and A$40,000 of the differential was allocated to plant and equipment, which is amortized over a 10-year period. The remainder of the differential was attributable to a patent. Alamo Inc. amortizes the patent over 10 years. Western Ranching’s trial balance on December 31, 20X3, in Australian dollars is as follows:

Additional Information
1. Western Ranching uses average cost for cost of goods sold. Inventory increased by A $20,000 during the year. Purchases were made uniformly during 20X3. The ending inventory was acquired at the average exchange rate for the year.
2. Plant and equipment were acquired as follows:
Date Cost
January 20X1 ........A$180,000
January 1, 20X3....... 60,000

3. Plant and equipment are depreciated using the straight-line method and a 10-year life with no residual value.
4. The payable to Alamo is in Australian dollars. Alamo’s books show a receivable from Western Ranching of $6,480.
5. The 10-year bonds were issued on July 1, 20X3, for A$106,000. The premium is amortized on a straight-line basis. The interest is paid on April 1 and October 1.
6. The dividends were declared and paid on April 1.
7. Exchange rates were as follows:
A$ $
January 20X1...... 1 = 0.93
August 20X1 ....... 1 = 0.88
January 1, 20X3 ..... 1 = 0.70
April 1, 20X3 .......1 = 0.67
July 1, 20X3 .........1 = 0.64
December 31, 20X3 ......1 = 0.60
20X3 average .......1 = 0.65

a. Prepare a schedule translating the December 31, 20X3, trial balance of Western Ranching from Australian dollars to U.S. dollars.
b. Prepare a schedule providing a proof of the translationadjustment.
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  • CreatedMay 23, 2014
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