Use the following information for questions 1, 2, and 3.

Bartell Inc., a U.S. company, acquired 90 percent of the common stock of a French company on January 1,20X5, for \(\$ 160,000\). The net assets of the French subsidiary amounted to 680,000 francs on the date of acquisition. On January 1, 20X5, the book values of the French subsidiary's identifiable assets and liabilities approximated their fair values. Exchange rates at various dates during 20X5 follow:

1. Refer to the above information. On January 1, 20X5, how much goodwill was acquired by Bartell?

a. \(\$ 17,200\).

b. \(\$ 31,480\).

c. \(\$ 11,400\).

d. \(\$ 25,360\).
2. Refer to the above information. Assume that Bartell acquired \(\$ 10,500\) of goodwill on January 1. 20X5, and the goodwill suffered a 10 percent impairment loss in 20X5. If the functional currency is the French franc, then how much goodwill impairment loss should be reported on Bartell's consolidated statement of income for 20X5?

a. \(\$ 1,050\).

b. \(\$ 1,200\).

c. \(\$ 1,100\)

d. \(\$ 1,175\).
3. Assume the same facts that were given in the above information, except that the U.S. dollar is the functional currency. How much goodwill impairment loss should be reported on Bartell's consolidated statement of income in this situation?

a. \(\$ 1,050\).

b. \(\$ 1,200\).

c. \(\$ 1,100\).

d. \(\$ 1,175\)
Use the following information for questions \(4,5,6\), and 7 .
Mondell Inc., a U.S. company, acquired 100 percent of the common stock of a German company on January 1, 20X5, for \(\$ 402,000\). The net assets of the German subsidiary amounted to 300,000 euros on the date of acquisition. On January 1, 20X5, the book values of the German subsidiary's identifiable assets and liabilities approximated their fair values. As a result of an analysis of functional currency indicators, Mondell determined that the euro was the functional currency. On December 31, 20X5, the adjusted trial balance of the German subsidiary, translated into U.S. dollars, contained \(\$ 12,000\) more debits than credits. The German subsidiary reported income of 25,000 euros for 20X5 and paid a cash dividend of 5,000 euros on November 30, 20X5. Included on the German subsidiary's income statement was depreciation expense of 2,500 euros. Mondell uses the basic equity method of accounting for its investment in the German subsidiary and determined that goodwill in the first year had an impairment loss of 10 percent of its initial amount. Exchange rates at various dates during 20X5 are presented below:

4. Refer to the above information. What amount should Mondell record as "income from subsidiary" based upon the reported net income of the German subsidiary?

a. \(\$ 31,000\).

b. \(\$ 31,100\).

c. \(\$ 33,000\).

d. \(\$ 30,000\).
5. Refer to the above information. The receipt of the dividend will result in:

a. A credit to the investment account for \(\$ 6,200\).

b. A debit to the income from subsidiary account for \(\$ 6,600\).

c. A credit to the investment account for \(\$ 6,600\).

d. A credit to the investment account for \(\$ 6,500\).
6. Refer to the above information. On Bartell's consolidated balance sheet at December 31, 20X5, what amount should be reported for the goodwill acquired on January 1, 20X5?

a. \(\$ 37,660\)

b. \(\$ 37,800\).

c. \(\$ 41,580\)

d. \(\$ 39,880\)
7. Refer to the above information. In the stockholders' equity section of Bartell's consolidated balance sheet at December 31,20X5, Bartell should report the translation adjustment as a component of other comprehensive income of:

a. \(\$ 12,000\).

b. \(\$ 15,920\)

c. \(\$ 13,400\)

d. \(\$ 8,080\).

Transcribed Image Text:

January 1 December 31 FF 1 = $.21 FF 1 = $.24 Average for 20X5 FF 1 = $.22