Acquisition—excess allocation
Pac of the United States purchased all the outstanding stock of Swi of Switzerland for $1,350,000 cash on January 1, 2011. The book values of Swi’s assets and liabilities were equal to fair values on this date except for land, which was valued at 1,000,000 euros. Summarized balance sheet information in euros at January 1, 2011, is as follows:
|
Current assets |
Eu 800,000 |
Current liabilities |
Eu 400,000 |
|
Land |
600,000 |
Bonds payable |
500,000 |
|
Buildings—net |
400,000 |
Capital stock |
1,000,000 |
|
Equipment—net |
500,000 |
Retained earnings |
400,000 |
|
Eu 2,300,000 |
Eu 2,300,000 |
The functional currency of Swi is the euro. Exchange rates for euros for 2011 are as follows:
|
Spot rate January 1, 2011 |
$0.75 |
|
Average rate 2011 |
0.76 |
|
Current rate December 31, 2011 |
0.77 |
REQUIRED: Determine the unrealized translation gain or loss at December 31, 2011, relating to the excess allocated to the undervalued land.