Question
Shames Company is located in London, England. The local currency is the British pound (). On January 1, 20X8, Pit Company purchased an 70 percent
Shames Company is located in London, England. The local currency is the British pound (). On January 1, 20X8, Pit Company purchased an 70 percent interest in Shames for $413,000, which resulted in an excess of cost-over-book value of $80,000 due solely to a trademark having a remaining life of 10 years. Pit uses the equity method to account for its investment. Shamess December 31, 20X8, trial balance has been translated into U.S. dollars, requiring a translation adjustment debit of $6,500. Shamess net income translated into U.S. dollars is $61,000. It declared and paid a 23,000 dividend on May 1, 20X8. Relevant exchange rates are as follows:
$ | ||||||
January 1, 20X8 | 1 | = | 1.60 | |||
May 1, 20X8 | 1 | = | 1.64 | |||
December 31, 20X8 | 1 | = | 1.65 | |||
Average for 20X8 | 1 | = | 1.63 | |||
d. Record the amortization of the trademark on Pits books. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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