Translation worksheet, parent accounting, consolidation
San is a 90 percent owned foreign subsidiary of Par, acquired by Par on January 1, 2011, at book value equal to fair value, when the exchange rate for LCUs of San’s home country was $0.24. Sans functional currency is the LCU. Par made a 200,000 LCU loan to San on May 1, 2011, when the exchange rate for LCUs was $0.23. The loan is short term and is denominated at $46,000. Adjusted trial balances of the affiliated companies at year end 2011 are as follows:
|
Par in U.S. Dollars |
San in LCU |
|
|
Debits |
||
|
Cash |
$ 25,100 |
150,000 |
|
Accounts receivable |
90,000 |
180,000 |
|
Short term loan to San |
46,000 |
— |
|
Inventories |
110,000 |
230,000 |
|
Land |
150,000 |
250,000 |
|
Buildings |
300,000 |
600,000 |
|
Equipment |
220,000 |
800,000 |
|
Investment in San (100%) |
230,000 |
— |
|
Cost of sales |
400,000 |
200,000 |
|
Depreciation expense |
81,000 |
100,000 |
|
Other expenses |
200,000 |
120,000 |
|
Exchange loss |
— |
30,000 |
|
Dividends |
100,000 |
100,000 |
|
Equity adjustment |
44,000 |
— |
|
$1,996,100 |
2,760,000 |
|
|
Credits |
||
|
Accumulated depreciation—buildings |
$ 120,000 |
300,000 |
|
Accumulated depreciation—equipment |
60,000 |
400,000 |
|
Accounts payable |
241,100 |
130,000 |
|
Short term loan from Par |
— |
230,000 |
|
Capital stock |
500,000 |
800,000 |
|
Retained earnings January 1 |
220,000 |
200,000 |
|
Sales |
800,000 |
700,000 |
|
Income from San |
55,000 |
— |
|
$1,996,100 |
2,760,000 |
San paid dividends in September, when the exchange rate was $0.21. The exchange rate for LCUs was $0.20 at December 31, 2011, and the average exchange rate for 2011 was $0.22.
REQUIRED
1. Prepare a worksheet to translate San’s adjusted trial balance into U.S. dollars at December 31, 2011.
2. Prepare the necessary journal entries for Par to account for its investment in San for 2011 under the equity method.
3. Prepare consolidation working papers for Par Corporation and Subsidiary for the year ended December 31, 2011.