Question
On January 1, 2016, Pai, a U.S. firm, purchases all the outstanding capital stock of Sta, a British firm, for $880,000, when the exchange rate
On January 1, 2016, Pai, a U.S. firm, purchases all the outstanding capital stock of Sta, a British firm, for $880,000, when
the exchange rate for British pounds is $1.55. The book values of Sta's assets and liabilities are equal to fair values on
this date, except for land that has a fair value of 200,000 and equipment with a fair value of 100,000.
Summarized balance sheet information for Pai in U.S. dollars and for Sta in pounds just before the business combination
is as follows:
Pai Sta
Current assets $3,000,000 100,000
Land 800,000 100,000
Buildingsnet 1,200,000 250,000
Equipmentnet 1,000,000 50,000
$6,000,000 500,000
Current liabilities $600,000 50,000
Notes payable 1,000,000 150,000
Capital stock 3,000,000 200,000
Retained earnings 1,400,000 100,000
$6,000,000 500,000
REQUIRED: Prepare consolidated balance sheet for Pai and Subsidiary at January 1, 2016, immediately
after the business combination
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