Exam 12: Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements

On January 1,20X8,Pullman Corporation acquired 75 percent interest in Steamship Company for $300,000.Steamship is a Norwegian company.The recording currency is the Norwegian kroner (NKr).The acquisition resulted in an excess of cost-over-book value of $25,000 due solely to a patent having a remaining life of 5 years.Pullman uses the fully adjusted equity method to account for its investment.Steamship's December 31,20X8,trial balance has been translated into U.S.dollars,requiring a translation adjustment debit of $8,000.Steamship's net income translated into U.S.dollars is $35,000.It declared and paid an NKr 20,000 dividend on June 1,20X8.Relevant exchange rates are as follows: Assume the kroner is the functional currency. -Based on the preceding information,in the journal entry to record the amortization of the patent for 20X8 on the parent's books,Investment in Steamship Company will be debited for:

When the local currency of a foreign subsidiary is the functional currency,the foreign subsidiary's inventory carried at cost would be converted to U.S.dollars by:

Which of the following defines a foreign-based entity that uses a functional currency different from the recording currency? I.A U.S.subsidiary in Britain maintains its accounting records in pounds sterling,with the majority of its transactions denominated in pounds sterling. II.A U.S.subsidiary in Peru conducts virtually all of its business in Latin America,records transactions in the respective local currencies,and uses the U.S.dollar as its major currency.

On January 2,20X8,Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Ski's balance sheet contained the following information: Ski's income statement for 20X8 is as follows: The balance sheet of Ski at December 31,20X8,is as follows: Ski declared and paid a dividend of 20,000 FCU on October 1,20X8.Spot rates at various dates for 20X8 follow: Assume Ski's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is the amount of Ski's cost of goods sold remeasured in U.S.dollars?

Which combination of accounts and exchange rates is correct for the remeasurement of a foreign entity's financial statements from its recording currency to U.S.dollars?

Barcode Corporation acquired 70% of the common stock of a Russian company on January 1,20X6.The goodwill associated with this acquisition was $12,520.Exchange rates at various dates during 20X6 follow: Goodwill suffered an impairment of 25 percent during the year.If the functional currency is the Russian ruble,how much goodwill impairment loss should be reported on Barcode's consolidated statement of income for 20X6?