Question
Parkin Industries, a U.S. company, acquired a wholly-owned subsidiary, located in Italy, at the beginning of the current year, for 200,000. The subsidiarys functional currency
Parkin Industries, a U.S. company, acquired a wholly-owned subsidiary, located in Italy, at the beginning of the current year, for 200,000. The subsidiarys functional currency is the euro. The balance sheet of the subsidiary at the date of acquisition was as follows:
Assets | |
Current assets | 50,000 |
Plant and equipment, net | 200,000 |
Total assets | 250,000 |
Liabilities and Equity | |
Liabilities | 160,000 |
Capital stock | 20,000 |
Retained earnings | 70,000 |
Total liabilities and equity | 250,000 |
Appropriate revaluations of the subsidiarys assets at the date of acquisition are as follows:
Inventories are undervalued by 1,000. The subsidiary sold the inventory during the current year. |
Equipment is undervalued by 15,000. The equipment has a 10-year remaining life, straight-line. |
Identifiable indefinite life intangible assets, previously unreported, have a fair value of 40,000. |
During the current year, there was no impairment of either identifiable intangible assets or goodwill. The exchange rate at the beginning of the year was $1.20/. The average rate for the year was $1.22/, and the rate at the end of the year was $1.25/. At the end of the year, consolidation eliminating entry (O) includes a debit to depreciation expense in the amount of:
Select one:
a. $1,500
b. $1,875
c. $1,800
d. $1,830
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