ury On January 1, 2023, the Phillips Company acquired all of the outstanding shares of Standard,...
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ury On January 1, 2023, the Phillips Company acquired all of the outstanding shares of Standard, Ltd., a U.K. firm, for 8,000,000 in cash. At the end of 2023, the two companies presented the condensed trial balances below. (in thousands) Cash and receivables.. Inventory... Property, plant and equipment, net. Investment in Standard.. Current liabilities... Long-term debt.. Capital stock.. Retained earnings, beginning. Dividends. Sales... Cost of goods sold Depreciation... Other operating expenses Total. Phillips Standard $ 2,100 3,000 4,000 3,000 15,710 5,000 10,190 (8,000) (4,000) (4,000) (1,000) (10,000) (2,000) (8,000) (3,500) 2,000 1,000 (30,000) (10,000) 20,000 6,000 1,000 500 5,000 2,000 0 At date of acquisition, the exchange rate was $1.45/. Standard's inventory and buildings were undervalued by 100,000 and 500,000, respectively. All of the undervalued inventory was sold during the year, and the buildings are depreciated over a 10-year life, straight-line. Other relevant information is as follows: 1. The exchange rate at the end of 2023 was $1.40/. The average exchange rate for 2023 was $1.42/. 2. Goodwill impairment during 2023 was 200,000. 3. Phillips reports its Investment in Standard using the complete equity method. However, neither equity in net income of Standard nor Phillips' share of the translation gain or loss for 2023 has been booked. Intercompany dividends, declared when the exchange rate was $1.41/, were credited to the investment account. Required Assuming the pound is Standard's functional currency, prepare a consolidated December 31, 2023 bal- ance sheet and a 2023 consolidated statement of comprehensive income for Phillips and Standard. All supporting schedules and computations should be in good form. Focus: Consolidated Financial Statements with an International Subsidiary Step 1: Translation of Standard's December 31, 2023 trial balance: Account $/ Cash and receivables 3,000 1.40 $ 4,200 Inventory 3,000 1.40 4,200 Property, plant & equipment, net 5,000 1.40 7,000 Current liabilities (4,000) 1.40 (5,600) Long-term debt (1,000) 1.40 (1,400) Capital stock (2,000) 1.45 (2,900) Retained earnings, January 1 (3,500) 1.45 (5,075) Dividends 1,000 1.41 1,410 Sales (10,000) 1.42 (14,200) Cost of goods sold 6,000 1.42 8,520 Depreciation expense 500 1.42 710 Other operating expenses 2,000 1.42 2,840 Translation loss (OCL) 295 $ Good Job! Good Job! Calculation of Translation Adjustment for 2023 $/ Net assets, January 1, 2023 6,000 1.45 $ 8,700 Inventory Revaluation (100) 1.40 (140) Building Revaluation (500) 1.41 (705) 7,855 Net assets, December 31, 2023 5,400 1.40 7,560 Translation loss (OCL) 295 Please Retry! Step 2: Adjust Investment for 2023 Equity in Net Income and Other Comprehensive Income Calculation of Revaluations Price paid Book value $/ 8,000 1.45 $ 11,600 5,500 1.45 7,975 Step 2: Adjust Investment for 2023 Equity in Net Income and Other Comprehensive Income Calculation of Revaluations $/ Price paid 8,000 1.45 11,600 Book value 5,500 1.45 7,975 Excess of cost over book value 2,500 3,625 Inventories revaluation (100) 1.45 (145) PP&E revaluation Goodwill 1 (500) 1,900 1.45 (725) $ 2,755 Good Job! Good Job! Calculation of translation adjustment on revaluations for 2023: $/ Revaluations, January 1, 2023 2,500 1.45 3,625 Inventory write-off (100) 1.42 (142) PP&E write-off (50) 1.42 Goodwill write-off (200) 1.42 (71) (284) 3,128 Revaluations, December 31,2023 2,150 1.40 3,010 Translation loss (OCL) 118 Good Job! Calculation of Equity in Net Income for 2023 $/ $ Standard's reported net income 1,500 1.42 2,130 Revaluation write-offs: Cost of goods sold (100) 1.42 (142) Depreciation expense (50) 1.42 Goodwill impairment (200) 1.42 (71) (284) Equity in net income 1,150 $ 1,633 Good Job! Good Job! Phillips' entry to update the investment for 2023 equity in net income and its share of Standard's translation gain: Description Investment in Standard Equity in OCL of Standard Debit Credit 413 Equity in net income of Standard Phillips' entry to update the investment for 2023 equity in net income and its share of Standard's translation gain: Description Debit Investment in Standard Equity in OCL of Standard Equity in net income of Standard Phillips' entry to update the investment for 2023 by recording 413 Credit dividends: Description Debit Credit Dividends Investment in Dtandard Step 3: Consolidation working paper entries ef. Description Debit Credit C) E) Equity in OCL of Standard To reverse equity method entries for 2023. R) To eliminate Standard's stockholders' equity as of January 1. 5) Other comprehensive loss To record the beginning-of-year revaluations. Other comprehensive loss To write off the revaluations for 2023. 413 Hint: Re December 31, 2023 Consolidation Working Paper in thousands Cash and receivables Inventory Property, plant and equipment, net Investment in Standard Goodwill Consolidated Dr (Cr) Phillips Standard Dr (Cr) Dr (Cr) Debit Credit $ 2,100 $ 4,000 15,710 Current liabilities (8,000) Long-term debt (4,000) Capital stock (10,000) Retained earnings, January 1 (8,000) Dividends 2,000 Sales (30,000) Equity in net income Equity in OCI Cost of goods sold Depreciation expense Other operating expenses Goodwill impairment Other comprehensive income 20,000 1,000 5,000 2,100 4,000 15,710 (8,000) (4,000) (10,000) (8,000) 2,000 (30,000) 20,000 1,000 5,000 $ (10,190) $ $ $ Please Retry! Good Job! Please Retry! Please Retry! (10,190) Please Retry! Phillips Company and Subsidiary Standard, Ltd. Consolidated Statement of Comprehensive Income For the Year Ended December 31, 2023 Sales Cost of goods sold Depreciation expense Other operating expenses Goodwill impairment Total expenses Net income Other comprehensive loss Comprehensive income $ Please Retry! Phillips Company and Subsidiary Standard, Ltd. Consolidated Balance Sheet December 31, 2023 Assets Cash and receivables Inventory Property, plant & equipment, net Goodwill Total assets Liabilities and Stockholders' Equity Current liabilities Long-term debt Capital stock Retained earnings Accumulated other comprehensive income Total liabilities and stockholders' equity $ Please Retry! $ Please Retry! ury On January 1, 2023, the Phillips Company acquired all of the outstanding shares of Standard, Ltd., a U.K. firm, for 8,000,000 in cash. At the end of 2023, the two companies presented the condensed trial balances below. (in thousands) Cash and receivables.. Inventory... Property, plant and equipment, net. Investment in Standard.. Current liabilities... Long-term debt.. Capital stock.. Retained earnings, beginning. Dividends. Sales... Cost of goods sold Depreciation... Other operating expenses Total. Phillips Standard $ 2,100 3,000 4,000 3,000 15,710 5,000 10,190 (8,000) (4,000) (4,000) (1,000) (10,000) (2,000) (8,000) (3,500) 2,000 1,000 (30,000) (10,000) 20,000 6,000 1,000 500 5,000 2,000 0 At date of acquisition, the exchange rate was $1.45/. Standard's inventory and buildings were undervalued by 100,000 and 500,000, respectively. All of the undervalued inventory was sold during the year, and the buildings are depreciated over a 10-year life, straight-line. Other relevant information is as follows: 1. The exchange rate at the end of 2023 was $1.40/. The average exchange rate for 2023 was $1.42/. 2. Goodwill impairment during 2023 was 200,000. 3. Phillips reports its Investment in Standard using the complete equity method. However, neither equity in net income of Standard nor Phillips' share of the translation gain or loss for 2023 has been booked. Intercompany dividends, declared when the exchange rate was $1.41/, were credited to the investment account. Required Assuming the pound is Standard's functional currency, prepare a consolidated December 31, 2023 bal- ance sheet and a 2023 consolidated statement of comprehensive income for Phillips and Standard. All supporting schedules and computations should be in good form. Focus: Consolidated Financial Statements with an International Subsidiary Step 1: Translation of Standard's December 31, 2023 trial balance: Account $/ Cash and receivables 3,000 1.40 $ 4,200 Inventory 3,000 1.40 4,200 Property, plant & equipment, net 5,000 1.40 7,000 Current liabilities (4,000) 1.40 (5,600) Long-term debt (1,000) 1.40 (1,400) Capital stock (2,000) 1.45 (2,900) Retained earnings, January 1 (3,500) 1.45 (5,075) Dividends 1,000 1.41 1,410 Sales (10,000) 1.42 (14,200) Cost of goods sold 6,000 1.42 8,520 Depreciation expense 500 1.42 710 Other operating expenses 2,000 1.42 2,840 Translation loss (OCL) 295 $ Good Job! Good Job! Calculation of Translation Adjustment for 2023 $/ Net assets, January 1, 2023 6,000 1.45 $ 8,700 Inventory Revaluation (100) 1.40 (140) Building Revaluation (500) 1.41 (705) 7,855 Net assets, December 31, 2023 5,400 1.40 7,560 Translation loss (OCL) 295 Please Retry! Step 2: Adjust Investment for 2023 Equity in Net Income and Other Comprehensive Income Calculation of Revaluations Price paid Book value $/ 8,000 1.45 $ 11,600 5,500 1.45 7,975 Step 2: Adjust Investment for 2023 Equity in Net Income and Other Comprehensive Income Calculation of Revaluations $/ Price paid 8,000 1.45 11,600 Book value 5,500 1.45 7,975 Excess of cost over book value 2,500 3,625 Inventories revaluation (100) 1.45 (145) PP&E revaluation Goodwill 1 (500) 1,900 1.45 (725) $ 2,755 Good Job! Good Job! Calculation of translation adjustment on revaluations for 2023: $/ Revaluations, January 1, 2023 2,500 1.45 3,625 Inventory write-off (100) 1.42 (142) PP&E write-off (50) 1.42 Goodwill write-off (200) 1.42 (71) (284) 3,128 Revaluations, December 31,2023 2,150 1.40 3,010 Translation loss (OCL) 118 Good Job! Calculation of Equity in Net Income for 2023 $/ $ Standard's reported net income 1,500 1.42 2,130 Revaluation write-offs: Cost of goods sold (100) 1.42 (142) Depreciation expense (50) 1.42 Goodwill impairment (200) 1.42 (71) (284) Equity in net income 1,150 $ 1,633 Good Job! Good Job! Phillips' entry to update the investment for 2023 equity in net income and its share of Standard's translation gain: Description Investment in Standard Equity in OCL of Standard Debit Credit 413 Equity in net income of Standard Phillips' entry to update the investment for 2023 equity in net income and its share of Standard's translation gain: Description Debit Investment in Standard Equity in OCL of Standard Equity in net income of Standard Phillips' entry to update the investment for 2023 by recording 413 Credit dividends: Description Debit Credit Dividends Investment in Dtandard Step 3: Consolidation working paper entries ef. Description Debit Credit C) E) Equity in OCL of Standard To reverse equity method entries for 2023. R) To eliminate Standard's stockholders' equity as of January 1. 5) Other comprehensive loss To record the beginning-of-year revaluations. Other comprehensive loss To write off the revaluations for 2023. 413 Hint: Re December 31, 2023 Consolidation Working Paper in thousands Cash and receivables Inventory Property, plant and equipment, net Investment in Standard Goodwill Consolidated Dr (Cr) Phillips Standard Dr (Cr) Dr (Cr) Debit Credit $ 2,100 $ 4,000 15,710 Current liabilities (8,000) Long-term debt (4,000) Capital stock (10,000) Retained earnings, January 1 (8,000) Dividends 2,000 Sales (30,000) Equity in net income Equity in OCI Cost of goods sold Depreciation expense Other operating expenses Goodwill impairment Other comprehensive income 20,000 1,000 5,000 2,100 4,000 15,710 (8,000) (4,000) (10,000) (8,000) 2,000 (30,000) 20,000 1,000 5,000 $ (10,190) $ $ $ Please Retry! Good Job! Please Retry! Please Retry! (10,190) Please Retry! Phillips Company and Subsidiary Standard, Ltd. Consolidated Statement of Comprehensive Income For the Year Ended December 31, 2023 Sales Cost of goods sold Depreciation expense Other operating expenses Goodwill impairment Total expenses Net income Other comprehensive loss Comprehensive income $ Please Retry! Phillips Company and Subsidiary Standard, Ltd. Consolidated Balance Sheet December 31, 2023 Assets Cash and receivables Inventory Property, plant & equipment, net Goodwill Total assets Liabilities and Stockholders' Equity Current liabilities Long-term debt Capital stock Retained earnings Accumulated other comprehensive income Total liabilities and stockholders' equity $ Please Retry! $ Please Retry!
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Related Book For
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
Posted Date:
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