Babbit, Inc., a multinational corporation based in the United States, owns an 80% interest in Nakima Company, which is located in Sydney, Australia. The acquisition occurred on January 1, 2008. The difference between the implied value of 810,625 Australian dollars and the book value of Nakima equity was attributed to specific assets of Nakima Company as follows:

100% Difference between MV and BV(Australian Dollars)

Equipment that has a 5-year remaining life........73,875

Land......................54,063

Inventories—Nakima uses the FIFO cost flow assumption

in pricing its inventory.................27,187

Amount attributed to patents (10 year remaining life)....150,000

Total difference in Australian dollars...........305,125

Ignore deferred income taxes in the assignment of the difference between implied and book value. The adjusted trial balances for the two companies on December 31, 2008 are presented here:

Additional Information:
1. Sales, purchases, and other expenses were incurred evenly during the year.
2. Dividends of 15,625 Australian dollars were paid on April 30 and October 31.
3. The accounts are presented in conformity with U.S. generally accepted accounting principles.
4. Direct rates of exchange.
1/1/08..........$.7935
4/30/08...........7899
10/31/08...........7910
12/31/08...........7575
Average for 2008.......7962
5. The Australian dollar is identified as the functional currency of Nakima Company.

Required:
A. Prepare a workpaper to translate the trial balance of the subsidiary into U.S. dollars.
B. Prepare a schedule to verify the translation adjustment.
C. Prepare journal entries on the books of the parent company to record the purchase of the 80% interest in the subsidiary and to apply the cost method of accounting.
D. Prepare a consolidated statements work paper at December 31, 2008. Journal entries made in requirement C that are not reflected in the trial balance of Babbit, Inc. are to be made as adjusting entries in the elimination columns of theworkpaper.

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Babbil Inc Nakima Company (Australian Dollars) Debils (U.S. Dollars) Cash Accounts Receivable 12/31 Inventory Investment in Nakima Company Land Buildings and Equipment Cost of Goods Sold Other Expenses Dividends Declared 65.885 150,116 115,000 514,585 59,400 200,000 425,000 75,000 50,000 1,654,986 95,250 106,250 83,250 187,500 250,000 121,500 51,750 31.250 926.750 Totals Credits Accumulated Depreciation Accounts Payable Notes Payable Capital Stock 1/1 Retained Earnings Sales Dividend Income 125,000 14,750 25,000 600,000 325,000 545,475 19,761 1,654,986 93,750 62,500 15,000 340,500 165,000 250,000 Totals 926.750