On January 1, Year 4, Par Company purchased all the outstanding common shares of Bayshore Company, located in California, for US$320,000. The carrying amount of Bayshores shareholders equity on January 1, Year 4, was US$250,000. The fair value of Bayshores plant and equipment was US$30,000 more than carrying amount, and the plant and equipment are being depreciated over 10 years, with no salvage value. The remainder of the acquisition differential is attributable to a trademark, which will be amortized over 10 years.
During Year 4, Bayshore earned US$60,000 in income and declared and paid US$28,000 in dividends on December 1, Year 4. Par uses the equity method to account for its investment in Bayshore. Management has determined that the Canadian dollar is the recording, functional and presentation currency for Par Company.
The exchange rates were as follows throughout the year:
| | |
| Jan. 1, Year 4 | US$1 = C$0.99 |
| Dec. 1, Year 4 | US$1 = C$0.96 |
| Dec. 31, Year 4 | US$1 = C$0.95 |
| Average for year | US$1 = C$0.97 |
| |
Required:
(a) Assume that the Canadian dollar is the functional currency for Bayshore Company. (Negative amounts and deductions should be indicated by a minus sign. Omit $ sign in your response.)
(i) Prepare a schedule showing the differential allocation and amortization for Year 4. The schedule should present both Canadian dollars and U.S. dollars.
(ii) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4.
(b) Assume that the U.S. dollar is the functional currency for Bayshore Company.
(i) Prepare a schedule showing the differential allocation and amortization for Year 4. The schedule should present both Canadian dollars and U.S. dollars. (Negative amounts and deductions should be indicated by a minus sign. Round final answers to nearest whole number. Omit $ sign in your response.)
(ii) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4.
C$ US$ C$ US$ C$ US$ At date of acquisition $ Cost of acquisition NBV of net assets Acquisition differential Allocated to: Plant & equipment Trademarks Changes in Year 4 Balance, end of year Total allocated Credit General Journal Debit To record Par's share of changes to acquisition differential for Year 4. (Click to select) (Click to select) (ii) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4. Credit General Journal Debit To record Par's share of changes to acquisition differential for Year 4. Click to select). (Click to select) (Click to select) Plant & equipment (b) A Common shares is the functional currency for Bayshore Company. y the differential allocation and amortization for Year 4. The schedule should present both Canadi Dividends dolle Equity method income tive amounts and deductions should be indicated by a minus sign. Round final answers to nea who Depreciation expense your response.) Investment in Bayshore Retained earnings US$ C$ At date of acquisition (i) P. Trademarks US$ C$ US$ C$ US$ C$ US$ At date of acquisition $ $ Cost of acquisition NBV of net assets Acquisition differential Allocated to: Plant & equipment Trademarks Changes in Year 4 Balance, end of year Total allocated (II) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4. Credit Event (1) General Journal Debit To record Par's share of changes to acquisition differential for Year 4. (Click to select) (Click to select) (2) To record Par's share of exchange loss from translating at closing rate. (Click to select) (Click to select) (ii) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4. Credit Event General Journal Debit (1) Jo.cssord.Paris..share...9f...changes. to...asquisition differential for Year 4. Investment in Bayshore (Click to select) Investment in Bayshore (2) To Trademarks nslating at closing rate. Plant & equipment Retained earnings Equity method income Depreciation expense Dividends Common shares C$ US$ C$ US$ C$ US$ At date of acquisition $ Cost of acquisition NBV of net assets Acquisition differential Allocated to: Plant & equipment Trademarks Changes in Year 4 Balance, end of year Total allocated Credit General Journal Debit To record Par's share of changes to acquisition differential for Year 4. (Click to select) (Click to select) (ii) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4. Credit General Journal Debit To record Par's share of changes to acquisition differential for Year 4. Click to select). (Click to select) (Click to select) Plant & equipment (b) A Common shares is the functional currency for Bayshore Company. y the differential allocation and amortization for Year 4. The schedule should present both Canadi Dividends dolle Equity method income tive amounts and deductions should be indicated by a minus sign. Round final answers to nea who Depreciation expense your response.) Investment in Bayshore Retained earnings US$ C$ At date of acquisition (i) P. Trademarks US$ C$ US$ C$ US$ C$ US$ At date of acquisition $ $ Cost of acquisition NBV of net assets Acquisition differential Allocated to: Plant & equipment Trademarks Changes in Year 4 Balance, end of year Total allocated (II) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4. Credit Event (1) General Journal Debit To record Par's share of changes to acquisition differential for Year 4. (Click to select) (Click to select) (2) To record Par's share of exchange loss from translating at closing rate. (Click to select) (Click to select) (ii) Prepare Par Company's journal entry for adjustments pertaining to the changes to the acquisition differential for Year 4. Credit Event General Journal Debit (1) Jo.cssord.Paris..share...9f...changes. to...asquisition differential for Year 4. Investment in Bayshore (Click to select) Investment in Bayshore (2) To Trademarks nslating at closing rate. Plant & equipment Retained earnings Equity method income Depreciation expense Dividends Common shares
