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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
- 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:
Foreign Currency Units (FCU) Cash 40,000 Receivables (net) 150,000 Inventories (FIFO) 500,000 Plant and Equipment (net) 1,500,000 Total 2,190,000 Accounts Payable 200,000 Capital Stock 600,000 Retained Earnings 1,390,000 Total 2,190,000
Perth's income statement for 20X8 is as follows: Foreign Currency Units (FCU) Revenues from Sales 1,010,000 Cost of Goods Sold (590,000) Gross Margin 420,000 Operating Expenses (exclusive of depreciation) (120,000) Depreciation Expense (200,000) Income Taxes (40,000) Net Income 60,000
The balance sheet of Perth at December 31, 20X8, is as follows: Foreign Currency Units (FCU) Cash 180,000 Receivables (net) 210,000 Inventories (FIFO) 520,000 Plant and Equipment (net) 1,300,000 Total 2,210,000 Accounts Payable 180,000 Capital Stock 600,000 Retained Earnings 1,430,000 Total 2,210,000
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 = $1.50 October 1 1 FCU = $1.60 December 31 1 FCU = $1.70 Weighted Average 1 FCU = $1.55
Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8. 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.) $32,000 gain
$36,500 loss
$31,000 gain
$22,000 gain
Foreign Currency Units (FCU) | |
Cash | 40,000 |
Receivables (net) | 150,000 |
Inventories (FIFO) | 500,000 |
Plant and Equipment (net) | 1,500,000 |
Total | 2,190,000 |
Accounts Payable | 200,000 |
Capital Stock | 600,000 |
Retained Earnings | 1,390,000 |
Total | 2,190,000 |
Foreign Currency Units (FCU) | |
Revenues from Sales | 1,010,000 |
Cost of Goods Sold | (590,000) |
Gross Margin | 420,000 |
Operating Expenses (exclusive of depreciation) | (120,000) |
Depreciation Expense | (200,000) |
Income Taxes | (40,000) |
Net Income | 60,000 |
Foreign Currency Units (FCU) | |
Cash | 180,000 |
Receivables (net) | 210,000 |
Inventories (FIFO) | 520,000 |
Plant and Equipment (net) | 1,300,000 |
Total | 2,210,000 |
Accounts Payable | 180,000 |
Capital Stock | 600,000 |
Retained Earnings | 1,430,000 |
Total | 2,210,000 |
January 2 | 1 FCU = $1.50 |
October 1 | 1 FCU = $1.60 |
December 31 | 1 FCU = $1.70 |
Weighted Average | 1 FCU = $1.55 |
$32,000 gain | ||
$36,500 loss | ||
$31,000 gain | ||
$22,000 gain |
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