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) Foreign Currency Units (FCU)

Cash 40,000 Accounts Payable 200,000

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

Inventories (FIFO) 500,000 Retained Earnings 1,390,000

PPE (net) 1,500,000

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

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

Foreign Currency Units (FCU)

Revenues from Sales 1,010,000

COGS (590,000)

Gross Margin 420,000

Operating Expenses (excl. 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) Foreign Currency Units (FCU)

Cash 180,000 Accounts Payable 180,000

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

Inventories (FIFO) 520,000 Retained Earnings 1,430,000

PPE (net) 1,300,000

Total: 2,210,000 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 1FCU=$1.50

October 1 1FCU=$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.

1. 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?

A. $396,500 debit B. $285,000 credit C. $405,000 credit D. $411,000 credit

2. 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.

A. $11,500 B. $11,884 C. $7,667 D. $9,394

3. Refer to the above information. Assuming Perth's local currency is the functional currency, what is the amount of translation adjustment that appears on Johnson's consolidated financial statements at December 31, 20X8?

A. $419,184 credit B. $416,884 credit C. $405,884 debit D. $398,500 credit

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

A. $3,216,500

B. $3,560,000

C. $3,568,300

D. $3,577,694

5. Refer to the above information. Assuming the U.S. dollar is the functional currency, what is Johnson's re-measurement gain (loss) for 20X8? (Assume the ending inventory was acquired on December 31, 20X8.)

A. $31,000 gain B. $36,500 loss C. $22,000 gain D. $32,000 gain

6. Refer to the above information. Assuming the U.S. dollar is the functional currency, what is the amount of Perth's cost of goods sold re-measured in U.S. dollars?

A. $811,500 B. $843,500 C. $884,500 D. $799,500

7. Refer to the above information. Assuming the U.S. dollar 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? A. $11,884 B. $11,770 C. $12,550 D. $11,500

8. 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)?

A. $238,000 B. $228,000 C. $219,500 D. $202,000

9. 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?

A. $3,303,400

B. $3,294,500

C. $3,323,400

D. $3,314,500