Question
A U.S. parent acquired all of the stock of its British subsidiary at the beginning of 2013, when the exchange rate was $1.70/. The acquisition
A U.S. parent acquired all of the stock of its British subsidiary at the beginning of 2013, when the exchange rate was $1.70/. The acquisition price exceeded the subsidiary's book value, and this excess was attributed to intangibles with a life of 5 years, valued at 350,000, and goodwill. The subsidiary's functional currency is the pound. In 2018, the subsidiary reports net income of 450,000 and pays no dividends. Goodwill impairment is 15,000. The beginning and ending exchange rates for 2018 are $1.80 and $1.90, respectively, and the average rate for 2018 is $1.85. The U.S. parent uses the equity method to account for its investment on its own books. The U.S. parent's 2018 equity in net income of subsidiary is
a.) $739,500.
b.) $848,250.
c.) $804,750.
d.) $832,500.
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