Assignment Question(s):(10.0 Marks)

1. Write down in front of each item in the table below the appropriate exchange rate required under both current rate method and temporal method using current rate, historical rate, and average rate.(2.5 marks)

Account title	Required Exchange Rate under current rate method	Required Exchange Rate under temporal method
Cash
Accounts receivable
Inventory
Notes receivable
Plant assets
dividends
Cost of goods sold
Depreciation expense
Other expenses
Sales
Accumulated depreciation
Accounts payable
Notes payable
Common stocks
Retained earnings

Answer:

2. On December 31, 2020, Parent company (A) acquired 80% of Subsidiary (B) outstanding common stocks for SR 368,000, Subsidiarys fair value of net asserts was SR 460,000. During 2021,subsidiary net income and dividends declared were 100,000 and 50,000 respectively. Begging balance for Accumulated depreciation of subsidiarys equipment amounted to SR 50,000. Parent uses non-pushdown accounting and equity method .Subsidiarys fair value of net assets were as follows (5 marks)

Book Value Element	Amount in SR
Common Stock	150,000
Retained Earning	120,000
Total		270,000
Under Or Over Valuation
Inventory	(10,000)		2 Months
Land	50,000		No Useful Life
Equipment	100,000		4 Years
Total Under Or Over Valuation		140,000
Good Will		50,000	No Useful Life
Total Under Or Over Valuation		490,000

Required:

1. Pass journal entries to record basic elimination entries.

2. Pass journal entries to record the excess value reclassification entry

3. Pass journal entries to record the amortized excess value reclassification entry

4. .Pass journal entries to record the depreciation elimination entry if accumulated depreciation account based on book value of assets is 25,000.

Answer:

3. Compare Arms Length Transactions vs Non-Arms Length Transactions and explain the necessityof eliminating intercompany transactions (2.5 marks)

Answer:

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