Parkin Industries, a U.S. company, acquired a wholly-owned subsidiary, located in Italy, at the beginning of the
Question:
Parkin Industries, a U.S. company, acquired a wholly-owned subsidiary, located in Italy, at the beginning of the current year, for €200,000. The subsidiary's functional currency is the euro. The balance sheet of the subsidiary at the date of acquisition was as follows:
Assets | |
Current assets | € 50,000 |
Plant and equipment, net | 200,000 |
Total assets | €250,000 |
Liabilities and Equity | |
Liabilities | € 160,000 |
Capital stock | 20,000 |
Retained earnings | 70,000 |
Total liabilities and equity | €250,000 |
Appropriate revaluations of the subsidiary's assets at the date of acquisition are as follows:
• | Inventories are undervalued by €1,000. The subsidiary sold the inventory during the current year. |
• | Equipment is undervalued by €15,000. The equipment has a 10-year remaining life, straight-line. |
• | Identifiable indefinite life intangible assets, previously unreported, have a fair value of €40,000. |
During the current year, there was no impairment of either identifiable intangible assets or goodwill. The exchange rate at the beginning of the year was $1.20/€. The average rate for the year was $1.22/€, and the rate at the end of the year was $1.25/€.
Consolidation elimination entry (R), at the date of acquisition, includes a credit to investment in subsidiary in the amount of:
A. | $0 | |
B. | $240,000 | |
C. | $108,000 | |
D. | $132,000 |
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren