10.12b

Addltional Information: 1. Salina Ranching uses average cost for cost of goods sold. Inventory Increased by A$20,000 during the year. Purchases were made unlformly during 203. The ending Inventory was acquired at the average exchange rate for the year. 2. Plant and equipment were acquired as follows: 3. Plant and equipment are depreclated using the straight-IIne method and a 10-year life, with no residual value. 4. The payable to Palermo is in Australlan dollars. Palermo's books show a recelvable from Salina Ranching of $6,480. 5. The 10-year bonds were issued on July 1, 20X3, for AS106,000. The premium is amortized on a straight-Iine basis. The interest is pald on Aprll 1 and October 1. 6. The dividends were declared and paid on Aprll 1. 7. Exchange rates were as follows: Assume the U.S. dollar is the functional currency. Palermo uses the fully adjusted equity method for accounting for its Investment in Salna Ranching. Palermo Inc. purchased 80 percent of the outstanding stock of Salina RanchIng Company, located In Australla, on January 1, 20X3. The purchase price in Australlan dollars (A\$) was A$200,000, and A$40,000 of the differentlal was allocated to plant and equipment, which is amortized over a 10-year perlod. The remainder of the differential was attrlbutable to a patent. Palermo Inc. amortizes the patent over 10 years. Salina Ranching's trlal balance on December 31, 20X3, In Australlan dollars Is as follows: Requlred: a. Prepare the entrles that Palermo would record in 203 for its Investment in Salina Ranching. Your entrles should do the following: (If no entry is requlred for a transactlon/event, select "No journal entry requlred" In the flrst account fleld.) A Record the acquisition of the foreign investment. B Record the dividend received. C Record the equity accrual for the percentage of the subsidiary's income. Record the amortization of the differential