Pet acquired 80 percent of the common stock of Sul for $4,000,000 on January 2, 2016, when

Question:

Pet acquired 80 percent of the common stock of Sul for $4,000,000 on January 2, 2016, when the stockholders' equity of Sul consisted of 5,000,000 euros capital stock and 2,000,000 euros retained earnings.

The spot rate for euros on this date was $0.50. Any cost/book value difference attributable to a patent is to be amortized over a 10-year period, and Sul's functional currency is the euro.

Accounts from Sul's adjusted trial balance in euros at December 31, 2016, are as follows:

Debits

Cash ............................................ €1,000,000

Accounts receivable .......................... 2,000,000

Inventories .................................... 4,000,000

Equipment .................................... 8,000,000

Cost of sales .................................. 4,000,000

Depreciation expense ....................... 800,000

Operating expenses ......................... 2,700,000

Dividends ..................................... 500,000

..................................................€23,000,000

Credits

Accumulated depreciation-equipment .... €2,400,000

Accounts payable ............................. 3,600,000

Capital stock ............................... 5,000,000

Retained earnings January 1 ............... 2,000,000

Sales .......................................... 10,000,000

..................................................€23,000,000

Relevant exchange rates in U.S. dollars for euros are as follows:

Current exchange rate December 31, 2016 ..........$0.60

Average exchange rate 2016 ........................... 0.55

Exchange rate applicable to dividends ................ 0.54

REQUIRED

1. Prepare a translation worksheet for Sul at December 31, 2016.

2. Calculate Pet's income from Sul for 2016 on the basis of a one-line consolidation.

3. Determine the correct balance of Pet's investment in Sul at December 31, 2016.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...