Prepare a re-measured trial balance and entries to eliminate excess of cost over book value. On July

Question:

Prepare a re-measured trial balance and entries to eliminate excess of cost over book value. On July 1, 2016, Spencer International acquired an 80% interest in the net assets of Quatro Corporation, which is a foreign company, for $6,260,000.
At that time, the net assets of Quatro in foreign currency (FC) were as follows:
Common stock. . .. .... .. . . .. . .. .... .. .. .. . . 8,000,000FC
Paid-in capital in excess of par . . . . .. .. .. .. ... . 1,000,000
Retained earnings . .. .. .. . . . . .. . .. .. .. .... . . 3,000,000
Any excess paid over book value was attributed to the fair value of certain licensing agreements that were held by Quatro. The agreements had an original useful life of 10 years, have a remaining life of five years, and are amortized using the straight-line method.
Spencer€™s investment in Quatro was designed to provide Spencer with additional manufacturing capacity for its product line and a system that would allow for expanded sales in foreign markets. In order to implement these goals, Spencer loaned Quatro $5,940,000 in 2016 for the purpose of improving the manufacturing capacity. For the next five years, only interest payments at the rate of 8% would be made on a monthly basis. The loan originated on October 1, 2016, and the proceeds were disbursed at that time as follows:
Purchase of additional machinery.. .. ... . . .. .. . . .. . $3,410,000
Purchase of additional tooling. .... .. .. . . . .. . . . . .. . 992,000
Purchase of additional inventory... .. .. . . . .. . . . . .. . 1,538,000
On July 1, 2016, depreciable asset balances were as follows:
Machinery and Equipment . .. .. . .. . . . . .. . . ... .. .... .. . 17,450,000 FC
Accumulated Depreciation €”Machinery and Equipment .. .. . 2,617,500
Tooling . . . .. . . . .. .. .... .. . . . . . .. . . . . .. . .. .. .. . . . . . 4,400,000
Accumulated Depreciation €”Tooling . . .. . . .. . .. .... .. .. . 660,000
All depreciable assets are depreciated using the straight-line method, and s are ignored. Machinery is depreciated over a 10-year useful life, and tooling is depreciated over 10 years. No other additions or dispositions of depreciable assets have occurred since Spencer€™s acquisition of Quatro.
The manufacturing lead time for Quatro€™s products is such that the inventory typically turns over approximately four times a year; however, production costs are incurred fairly uniformly throughout the year. Virtually all material costs are denominated in U.S. dollars, although labor costs are denominated in FC. The company employs the FIFO inventory method, and 2017 and cost of sales details are as follows:

2,200,000 FC acquired in the last quarter of 2017 when on average.... .. .. .. . . . . . 1 FC = $0.55
1,500,000 FC acquired in the third quarter of2017 when on average... .. .. .. . . . . . 1 FC = 0.56
Cost of Sales
800,000 FC acquired in the third quarter of 2016 when on average .. .. .... . . . . . . .. .1 FC = $0.61
1,200,000 FC acquired in the fourth quarter of 2016 when on average.. .... .. . . . . . .. .1 FC = 0.62
3,200,000 FC acquired in the first quarter of2017 when on average . .... .. . . . . . .. . . .1 FC = 0.60
4,100,000 FC acquired in the second quarter of 2017 when on average .. .. .. . . . . . .. .1 FC = 0.57
3,400,000 FC acquired in the third quarter of 2017when on average. .... .. . . .. . .. . . . 1 FC = 0.56

The retained earnings balance as of December 31, 2017, reflects net income for the last half of 2016 of 1,300,000 FC (which had a translated value of $806,000) and dividend declarations in the amount of 300,000 FC each on both August 1, 2016, and August 1, 2017.
Additional exchange rates are as follows:
July 1,2016 . . ... .. ... .. .. . . 1FC = $0.60
October 1,2016.. .. ... .. .. . . 1FC = 0.62
August 1, 2016. .. .. .. ... .. . . 1FC = 0.61
Last half of 2016 average .. .. .. 1FC = 0.62
2017 Average.. .. . .. . . .. . . 1 FC = $0.57
August 1, 2017. .. . . . . . .. . . 1 FC = 0.55
December 31, 2017 .. . . . . .. 1 FC = 0.54
1. Prepare a re-measured trial balance in dollars as of December 31, 2017, assuming that Quatro€™s functional currency is the dollar.
2. Prepare all of the necessary elimination entries to account for the acquisition price being in excess of the book value of net assets.

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