On 12/20/20x1, Sigma Company, a U.S.-based entity, acquired all of the outstanding common stock of Pooma...

  

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On 12/20/20x1, Sigma Company, a U.S.-based entity, acquired all of the outstanding common stock of Pooma Industries, which is located in Switzerland. The cost of acquiring Pooma was 8.2 million Swiss francs. On the acquisition date, the U.S. dollar/Swiss franc exchange rate was $0.70 = SF1. The assets and liabilities acquired at 12/20/20x1 were: Pooma Industries Balance Sheet @12/20/20x1 Assets Swiss franc Liabilities and Equity Swiss franc 1,000,000 Notes Payable 2,000,000 Shareholders' Equity Cash 1,800,000 8,200,000 Inventory Property, plant and equipment 7,000,000 Total Assets 10,000.000 Total Liabilities and Shareholders' Equity 10.000.000 At 12/31/20x1, Sigma Company prepares its year-end financial statements. By 12/31/20x1, the U.S. dollar/Swiss franc exchange rate was $0.75 = SF1. For purposes of this problem, assume that after the 12/20/20x1, Pooma Industries had no additional transactions that changed their financial position. Required A. Determine the resulting adjustment to be reported in consolidation, assuming the Swiss Franc is Pooma Industries' functional currency. Please show your work. Additionally, explain how the company would account for/report the adjustment in their financial statements. B. Determine the resulting adjustment to be reported in consolidation, assuming the U.S. dollar is Pooma Industries' functional currency. Please show your work. Additionally, explain how the company would account for/report the adjustment in their financial statements. C. Briefly, i.e. no more than 3 sentences, explain what is meant by the term "functional currency". D. Briefly, discuss the similarities and differences between the U.S. and the international accounting standards criteria for identifying a foreign subsidiary's functional currency. On 12/20/20x1, Sigma Company, a U.S.-based entity, acquired all of the outstanding common stock of Pooma Industries, which is located in Switzerland. The cost of acquiring Pooma was 8.2 million Swiss francs. On the acquisition date, the U.S. dollar/Swiss franc exchange rate was $0.70 = SF1. The assets and liabilities acquired at 12/20/20x1 were: Pooma Industries Balance Sheet @12/20/20x1 Assets Swiss franc Liabilities and Equity Swiss franc 1,000,000 Notes Payable 2,000,000 Shareholders' Equity Cash 1,800,000 8,200,000 Inventory Property, plant and equipment 7,000,000 Total Assets 10,000.000 Total Liabilities and Shareholders' Equity 10.000.000 At 12/31/20x1, Sigma Company prepares its year-end financial statements. By 12/31/20x1, the U.S. dollar/Swiss franc exchange rate was $0.75 = SF1. For purposes of this problem, assume that after the 12/20/20x1, Pooma Industries had no additional transactions that changed their financial position. Required A. Determine the resulting adjustment to be reported in consolidation, assuming the Swiss Franc is Pooma Industries' functional currency. Please show your work. Additionally, explain how the company would account for/report the adjustment in their financial statements. B. Determine the resulting adjustment to be reported in consolidation, assuming the U.S. dollar is Pooma Industries' functional currency. Please show your work. Additionally, explain how the company would account for/report the adjustment in their financial statements. C. Briefly, i.e. no more than 3 sentences, explain what is meant by the term "functional currency". D. Briefly, discuss the similarities and differences between the U.S. and the international accounting standards criteria for identifying a foreign subsidiary's functional currency.

Answer rating: 100% (QA)

Answer Answees given below AJ IF Swiss Feane is feinctin... View the full answer