The following financial information is for MEBA Company, a non-U.S. firm with shares listed on a U.S.
Question:
The following financial information is for MEBA Company, a non-U.S. firm with shares listed on a U.S. stock exchange.
Net income, computed according to home country GAAP. . . . . . . . . . . . . . . . . . . . . . . . $ 12,000
Stockholders’ equity, computed according to home country GAAP. . . . . . . . . . . . . . . . . 100,000
Goodwill, recorded as a subtraction from equity rather
than as an asset (acquired at the beginning of this year) . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Market value of investment securities acquired this year,
reported at cost of $3,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,700
If MEBA were following U.S.GAAP, goodwill would have been recorded as an asset (not subject to amortization), and the investment securities would have been classified as available for sale and reported in the balance sheet at their current market value. Using the U.S. goodwill impairment test, a goodwill impairment loss of $30,000 would have been recognized at the end of the year.
1. Prepare a reconciliation of MEBA’s stockholders’ equity of $100,000 to U.S. GAAP.
2. Reconcile MEBA’s net income of $12,000 to U.S. GAAP.
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Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen