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Advanced Accounting Summer 2014

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Details attached,Sub financials before translation/consolidation included. Some mistakes in the question: The ending OCI for 2014 for the parent should be 300 debit NOT 8664 debit. The ending retained earnings for the parent 12/31/14 should be $1,382,271 and the 1/1/14 parent retained earnings should be $997,807.;Problem: On 1/1/13, Polly Corporation purchased 80 percent of Swan Company at a cost of $897,600. Polly is a U.S.-based company and Swan is in Amsterdam, The Netherlands. Polly uses the equity method to account for its investment in Swan. Swan?s book value of equity on 1/1/13 was 700,000 euros. No additional common stock has been issued by Swan since 1/1/13. Any fair value/book value difference is attributable to a patent with a 10 year life.;During 2013, the first year of joint operation, Swan reported income of 200,000 euros which was earned evenly throughout the year. And paid a dividend of 65,000 euros to Polly on June 1.;Swan?s functional currency is the Euro.;The exchange rates for 1 euro are as follows;1/1/13 $1.32;6/1/13 $1.30;Weighted average 2013 $1.345;12/31/13 $1.38;3/1/14 (fixed asset sale date) $1.385;6/1/14 (dividend date) $1.36;Weighted average 2014 $1.355;12/31/14 $1.33;1. Show that the beginning 2014 Investment in Swan balance on Polly?s books is: $1,070,880. (Hint: you will need to translate Swan?s income and dividends as well as compute the change in OCI for the year).;2. Prepare the translated financial statements of Swan;3. Update Polly?s books by preparing financial statements to record income and other entries related to the translation.;4. Prepare the consolidation entries and worksheet for Polly and Swan.;5. Prove the change in OCI that you computed for Polly.;***********************************************************************;Advanced Accounting Summer 2014;On 1/1/13, Polly Corporation purchased 80 percent of Swan Company at a cost of $897,600. Polly is a U.S.-based company and Swan is in Amsterdam, The Netherlands. Polly uses the equity method to account for its investment in Swan. Swan?s book value of equity on 1/1/13 was 700,000 euros. No additional common stock has been issued by Swan since 1/1/13. Any fair value/book value difference is attributable to a patent with a 10 year life.;During 2013, the first year of joint operation, Swan reported income of 200,000 euros which was earned evenly throughout the year. And paid a dividend of 65,000 euros to Polly on June 1.;Swan?s functional currency is the Euro.;The exchange rates for 1 euro are as follows;1/1/13;$1.32;6/1/13;$1.30;Weighted average 2013;$1.345;12/31/13;$1.38;3/1/14 (fixed asset sale date);$1.385;6/1/14 (dividend date);$1.36;Weighted average 2014;$1.355;12/31/14;$1.33;1. Show that the beginning 2014 Investment in Swan balance on Polly?s books is: $1,070,880. (Hint: you will need to translate Swan?s income and dividends as well as compute the change in OCI for the year).;2. Prepare the translated financial statements of Swan;3. Update Polly?s books by preparing financial statements to record income and other entries related to the translation.;4. Prepare the consolidation entries and worksheet for Polly and Swan.;5. Prove the change in OCI that you computed for Polly.;*************************************************************************;Polly/Swan;Pre-translation consolidation financials12/31/14;Polly Swan;($) Euros;Sales 400,000 1,500,000;Cost of goods sold -187,600 -840,000;Salary Expense -38,000 -134,500;Rent Expense -7,000 -84,500;Other Expense -42,000 -100,000;Loss on sale of fixed asset -40,000;Investment Income-Simple ?;Net Income ? 301,000;Retained Earnings 1/1/14 1,006,171 185,000;Net Income ? 301,000;Dividends 50,000 60,000;Retained Earnings 12/31/14 ? 426,000;Cash and Receivables 73,427 292,000;Inventory 98,000 408,800;Prepaid items 30,000 0;Investment in Simple ?;Fixed assets (net) 398,000 769,200;Total Assets ? 1,470,000;Accounts payable 70,000 114,000;Notes payable-due 2017 200,000 280,000;Common stock 120,000 400,000;Additional paid-in capital 100,000 250,000;Retained Earnings ? 426,000;OCI ? 0;Total liabilities & Owners Eq. ? 1,470,000

 

Paper#35262 | Written in 18-Jul-2015

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