Question: On October 1 2009 Kemper International acquired a 90 interest

On October 1, 2009, 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 = $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:
On December 31, 2011, when 1 FC = $1.22, Spruco reported total assets of 13,890,000 FC and liabilities of 5,030,000 FC.
Prepare the necessary entries to eliminate Kemper’s investment in Spruco account at year-end 2011 and to record the depreciation/amortization on the relevant items of cost in excess of book value.

Sale on SolutionInn
  • CreatedApril 13, 2015
  • Files Included
Post your question