Q1. The following information provides an overview of the intercompany sale process using land as an example.

On 3/31/X5, Parent Inc. sold land costing $10,000 to its 100% owned subsidiary, Sub Inc., for $15,000. Sale from Sub Inc to outsider for $25,000

Prepare consolidation worksheet entries with andwithout adjusting the equity method accounts on the following:

1. Consolidation entry(ies) as of 12/31/X5 and 12/31/X6.
2. Consolidation entry at 12/31/X7, assuming that Sub sold the land in 20X7 for $25,000.

Q2. Kline Corporation holds 90 percent ownership of Andrews Company. On July 1, 20X3, Kline sold equipment that it had purchased for $30,000 on January 1, 20X1, to Andrews for $28,000. The equipments original six-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipments residual value is considered negligible.

Required:

1. Give the eliminating entry or entries in the consolidation worksheet prepared as of December 31, 20X3, to remove the effects of the intercompany sale.
2. Give the eliminating entry or entries in the consolidation worksheet prepared as of December 31, 20X4, to remove the effects of the intercompany sale.

Q3. What factors are used to determine a reporting entitys functional currency? Provide at least oneexample for which a companys local currency may not be its functional currency.

Q4. Assume that the direct foreign exchange rates in U.S dollars are:

1 British pound = $ 1.60

1 Canadian dollar = $ 0.74

Required:

1. What are the indirect exchange rates for the British pound and the Canadian dollar?
2. How many pounds must a British company pay to purchase goods costing $ 8,000 from a U.S. company?
3. How many U.S. dollars must be paid for a purchase costing 4,000 Canadian dollars?

Q5. Explain the differences between translation and remeasurement.