1) Park Company acquired an 80% interest in the common stock of Southdale Company
for $1,540,000 on July 1, 201 Southdale Company’s stockholders’ equity on that date
consisted of:
Common stock$800,000
Other contributed capital400,000
Retained earnings330,000
Required:
Compute the total noncontrolling interest to be reported in the consolidated balance
sheet assuming the:
(1)parent company concept.
(2)economic unit concept.
2) How should nonconsolidated subsidiaries be re-ported reported in consolidated
financial statements?
3) In an installment liquidation, why should the partners view each cash distribution as
if it were the final distribution?
Dakota, Inc. owns a company that operates in France. Account balances in francs for
the subsidiary are shown below:4) 2014
January 1December 31
Cash and Receivables24,00026,000
Supplies1,000500
Property, Plant, and Equipment52,50049,000
Accounts Payable(11,500)(5,500)
Long-term Notes Payable(19,000)(11,000)
Common Stock(30,000)(30,000)
Retained Earnings(17,000)(17,000)
Dividends-Declared & Paid on Dec 31—-3,000
Revenues—-(30,000)
Operating Expenses —- 15,000
Totals -0- -0
Exchange rates for 2014 were as follows:
January 1$0.22
Average for the year0.19
December 310.18
Revenues were earned and operating expenses, except for depreciation and supplies
used, were incurred evenly throughout the year. No purchases of supplies or plant assets
were made during the year.
Required:
APrepare a schedule to compute the translation adjustment for the year, assuming the
subsidiary’s functional currency is the franc.
BPrepare a schedule to compute the translation gain or loss, assuming the subsidiary’s
functional currency is the U.S. dollar.
5) Is the year-end balance in the Reserve for En-cumbrances account a liability?
Explain.
6) Identify and describe four types of interfund activities.
7) Assuming that the temporal method is used, how are revenue and expense items in
foreign currency financial statements converted?