Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, located in Australia, on January 1, 20X3. The purchase price in Australian dollars (AS) was A$200,000, and A$40,000 of the differential was allocated to plant and equipment, which is amortized over a 10-year period. The remainder of the differential was attributable to a patent. Palermo Inc. amortizes the patent over 10 years. Salina Ranching's trial balance on December 31, 20X3, in Australian dollars is as follows Debits Credits Cash Accounts Receivable (net) Inventory Plant and Equipment Accumulated Depreciation Accounts Payable Payable to Palermo Inc. Interest Payable 12% Bonds Payable Premium on Bonds Common Stock A$ 44,100 72,000 86,000 240,000 A$ 60,000 53,800 10,800 3, 000 100,000 5,700 90,000 40,000 579,000 Retained Earnings Sales Cost of Goods Sold Depreciation Expense Operating Expenses Interest Expense Dividends Paid 330,000 24,000 131,500 5,700 9,000 A$942,300 Total A$942, 300 Additional Information 1. Salina Ranching uses average cost for cost of goods sold. Inventory increased by A$20,000 during the year. Purchases were made uniformly during 20X3. The ending inventory was acquired at the average exchange rate for the year 2. Plant and equipment were acquired as follows Date January 20x1 January 1, 20x3 Cost A$180,000 60,000 3. Plant and equipment are depreciated using the straight-line method and a 10-year life, with no residual value 4. The payable to Palermo is in Australian dollars. Palermo's books show a receivable from Salina Ranching of $6,480 5. The 10-year bonds were issued on July 1, 20X3, for A$106,000. The premium is amortized on a straight-line basis. The interest is paid on April 1 and October 1 6. The dividends were declared and paid on April 1 7, Exchange rates were as follows A$ January 20x1 August 20x1 anuary 1, 20X:3 April 1, 20x3 July 1, 20X3 December 31, 20x3 20x3 average 1 -0.93 1 -0.88 1 -0.70 1 -0.67 1 -0.64 1 -0.60 1 -0.65 Assume the U.S. dollar is the functional currency. Palermo uses the fully adjusted equity method for accounting for its investment in Salina Ranching Required a. Prepare the entries that Palermo would record in 20X3 for its investment in Salina Ranching. Your entries should do the following: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the acquisition of the foreign investment Note: Enter debits before credits. Event General Journal Debit Credit View transaction list Journal entry worksheet Record the dividend received. Note: Enter debits before credits. Event General Journal Debit Credit 2 Record entry Clear entry View general journal View transaction list Journal entry worksheet Record the equity accrual for the percentage of the subsidiary's income Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal View transaction list Journal entry worksheet Record the amortization of the differential. Note: Enter debits before credits. Event General Journal Debit Credit 4 Record entry Clear entry View general journal