Pak purchased a 40 percent interest in Sco of Germany for $1,080,000 on January 1, 2011. The

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Pak purchased a 40 percent interest in Sco of Germany for $1,080,000 on January 1, 2011. The excess cost over book value is due to a patent with a 10-year amortization period. A summary of Sco's net assets at December 31, 2010, and at December 31, 2011, after translation into U.S. dollars, is as follows:

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Exchange rates for euros were $0.60 on January 1, 2011; $0.62 average for 2011; $0.64 when dividends were declared; and $0.65 at December 31, 2011. Sco had net assets of Eu 4,000,000 at January 1, 2011; net income of Eu 500,000 for 2011; and dividends of Eu 300,000. It ended the year with net assets of Eu 4,200,000. Sco's functional currency is the euro.REQUIRED1. Calculate Pak's income from Sco for 2011.2. Determine the balance of Pak's Investment in Sco account at December 31, 2011.3. Develop a proof of your calculation of the Investment in Sco account balance at December 31,2011.

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Advanced Accounting

ISBN: 9780132568968

11th Edition

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

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