Problem set 1:

Use the following information for questions 1 and 2. A wholly owned subsidiary of a U.S. parent company has certain expense accounts for the year ended December 31, 2012, stated in local currency units, EUR, as follows:

EUR

Depreciation of equipment (related assets were purchased January 1, 2008) 100,000

Salaries 120,000

Rent 110,000

The exchange rates were as follows: US Dollars per 1 EUR

December 31, 2012 $.50

Average for year ended 12/31/12 $.55

January 1, 2008 $.40

1. Assume that the EUR is the subsidiary's functional currency and that the charges to the expense accounts occurred approximately evenly during the year. What total dollar amount should be included in the translated income statement to reflect these expenses?

2. Assume that the US Dollar is the subsidiary's functional currency and that the charges to the expense accounts occurred approximately evenly during the year. What total dollar amount should be included in the translated income statement to reflect these expenses?

Problem set 2:

Use the information below to answer questions 3 and 4.

P acquired 90% of S on January 1, 2011. P has a December 31st year end. At acquisition, the implied value of S was higher than its book value. The difference was allocated as follows:

Land $32,000

Equipment $50,000 with a 5 year useful life and zero salvage value all sold during 2011

Inventory $4,000

Goodwill $110,000

3. S's reported net income of $100,000 during 2011 to P. What was the income attributable to the non-controlling interest in consolidation?

4. In 2012, the total amount of the adjustments to S's net income based on the differences at acquisition would

Problem set 3:

5. P company acquired a 60% interest in S company on January 1, 2011 for $270,000 cash when S company had common stock of $90,000 and retained earnings of $210,000. All excess was attributable to plant assets with a 10 year life. Additional depreciation expense in 2011 was:

6. P company acquired a 60% interest in S Company on January 1, 2011 for $270,000 cash when S company had common stock of $150,000 and retained earnings of $150,000. The excess of the implied value over the fair value of identifiable net assets was partially to plant assets with a 10 year life. Excess depreciation expense in 2011 was $40,0000 on the plant assets. S company made $20,000 in 2011 and paid no dividends. P Company's separate income before consolidation in 2011 was $375,000. Controlling interest in consolidated net income for 2011 is: