Problem 11-3 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet with excess of cost over book value traceable to equipment. Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson?s equity consisted of the following:

Common stock...................................... 3,000,000FC

Paid-in capital in excess of par...............2,000,000

Retained earnings . . . . . . . . . . . . . . . . . . 4,200,000

Total.............................................. 9,200,000FC

On the date of acquisition, equipment with a 10-year life was undervalued by 500,000 FC. Any remaining excess of cost over book value is attributable to additional equipment with a 20-year life. The trial balances for Pueblo and Sorenson as of December 31, 2018, are as follows:

Pueblo Corporation Sorenson Company

Cash 4,050,000 2,840,000 FC

A/R 5,270,000 3,990,000

Inventory 5,540,000 5,800,000

Investment in Sorenson 20,969,000

Fixed Assets 21,000,000 15,000,000

Accum. Depreciation (12,560,000) (6,800,000)

A/P (3,450,000) (1,580,000)

Long-term debt (10,000,000) (5,000,000)

Common Stock (4,000,000) (3,000,000)

Pd. In capital in excess of par (6,500,000) (2,000,000)

R/E January 1, 2018 (12,180,000) (7,950,000)

Sales (26,000,000) (10,000,000)

COGS 16,380,000 7,500,000

Operating Expense 3,210,000 1,200,000

Subsidiary Income (1,729,000)

Totals 0 0 FC

The investment in Sorenson consists of the following:

Initial investment (12,000,000 FC x $1.20) $14,400,000

2016 income (1,750,000 FC x $1.28) 2,240,000

2017 income (2,000,000 FC x $1.30) 2,600,000

2018 income 1,729,000

Total $20,969,000

Relevant Exchange Rates are: 1FC =

January 1, 2016 $1.20

2016 Average 1.28

January 1, 2017 1.25

2017 Average 1.30

December 31, 2018 1.31

2018 Average 1.33

Assuming the FC is Sorenson?s functional currency, prepare a consolidated worksheet.

The attached spreadsheet was provided.

Problem 11-1 -1 Entries to record transactionsDebit (Credit): In FCA Account Titles Debit Credit Trial balance: Trial Balance: In FCA Debit Credit Rate DR (CR) FCB/FCA In FCB Receivable....................... Inventory.................. Land....................... Common Stock............ Sales........................ Cost of Sales................... Exchange (Gain) or Loss............. Remeasurement (Gain) or Loss........... Translation Adjustment.................. Total................................. Net Income................ -2 Remeasurement and translation of trial balance: DR (CR) Trial Balance: Receivable....................... In FCA Inventory.................. Land....................... Common Stock............ Sales........................ Cost of Sales................... Exchange Gain............. Remeasurement Loss.............. Translation Adjustment....... Total...................... Net Income (Loss)................ -3 Translation adjustment traceable to the current year: -4 In FCB Debit Credit In FCB Debit Credit Rate DR (CR_ U.S.$/FCB In U.S.$ Year A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 B C D Problem 11-3 Sorenson Company Trial Balance Translation 31-Dec-18 Account Cash Accounts Receivable Inventory Fixed Assets Accumulated Depreciation Accounts Payable Long-Term Debt Common Stock Paid-In Capital in Excess of Par Retained Earnings, January 1, 20X8 Sales Cost of Goods Sold Operating Expenses Cumulative Translation Adjustment Totals Relevant Exchange Rate Balance in FC 2,840,000 3,990,000 5,800,000 15,000,000 (6,800,000) (1,580,000) (5,000,000) (3,000,000) (2,000,000) (7,950,000) (10,000,000) 7,500,000 1,200,000 Translate the balance of Retained Earnings below: 0 Balance in Dollars E F G H I A 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 B C D E F G H I Pueblo Corporation and Sorenson Company Worksheet for Consolidated Financial Statements (in dollars) For Year Ended December 31, 2018 Consolidated Pueblo Cash Accounts Receivable Inventory Investment in Sorenson Fixed Assets Accumulated Depreciation Additional Equipment Accounts Payable Long-Term Debt Common Stock - Parent Common Stock - Subsidiary Paid-In Capital in Excess of Par- Parent Paid-In Capital in Excess of Par - Subsidiary Retained Earnings, 1/1/18- Parent Retained Earnings, 1/1/18 Subsidiary Sales Cost of Goods Sold Operating Expenses Subsidiary Income Total Trial Balance Sorenson 4,050,000 5,270,000 5,540,000 20,969,000 Key Eliminations and Adjustments Dr. Key Income Cr. Statement 21,000,000 (12,560,000) (3,450,000) (10,000,000) (4,000,000) (6,500,000) (12,180,000) (26,000,000) 16,380,000 3,210,000 (1,729,000) 0 0 0 0 Consolidated Balance Sheet A 69 Consolidated Net Income 70 71 72 Eliminations and Adjustments: 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 B C D E F G H I 0 0