Can you explain those answers ?? Topic: Multinational Accounting

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information:

Cash 40,000 A/P 200,000

Receivable (net) 150,000 Capital Stock 600,000

Inventories 500,000 RE 1,390,000

Plant and Equipment 1,500,000

Total 2,190,000 Total 2,190,000

Perth's income statement for 20X8 is as follows:

Revenue from Sales 1,010,000

COGS (590,000)

Gross Margin 420,000

Operating Expenses (120,000)

Depreciation Expense (200,000)

Income Tax (40,000)

Net Income 60,000

The balance sheet of Perth at December 31, 20X8, is as follows:

Cash 180,000 A/P 180,000

Receivable (net) 210,000 Capital Stock 600,000

Inventories 520,000 RE 1,430,000

Plant and Equipment 1,300,000

Total 2210000 Total 2210000

Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow:

January 2 1 FCU = $1.5

October 1 1 FCU = $1.60

December 31 1FCU = $1.70

Weighted Average 1FCU = $1.55

Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8

39. Refer to the above information. Assuming Perth's local currency is the functional currency, what is the amount of translation adjustments that result from translating Perth's trial balance into U.S. dollars at December 31, 20X8? Answer is C. $405,000 credit

40. Refer to the above information. Assuming Perth's local currency is the functional currency, what is the amount of patent amortization for 20X8 that results from Johnson's acquisition of Perth's stock on January 2, 20X8. Round your answer to the nearest dollar. Answer is B. $11,884

42. Refer to the above information. Assuming Perth's local currency is the functional currency, what is the balance in Johnson's investment in foreign subsidiary account at December 31, 2008?

Answer is C. $3,568,300

43. Refer to the above information. Assuming the U.S. dollar is the functional currency, what is Johnson's remeasurement gain (loss) for 20X8? (Assume the ending inventory was acquired on December 31, 20X8.) Answer is D. $32,000 gain

46. Refer to the above information. Assuming the U.S. dollar is the functional currency, what is Perth's net income for 20X8 in U.S. dollars (include the remeasurement gain or loss in Perth's net income)? Answer is A. $238,000

47. Refer to the above information. Assuming the U.S. dollar is the functional currency, what is the balance in Johnson's investment in foreign subsidiary account at December 31, 2008?

Answer is B. $3,294,500