On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information:
Perth's income statement for 20X8 is as follows:
The balance sheet of Perth at December 31, 20X8, is as follows:
Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow:
Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8.

-Refer to the above information.Assuming Perth's local currency is the functional currency,what is the amount of translation adjustments that result from translating Perth's trial balance into U.S.dollars at December 31,20X8?
A) $396,500 debit
B) $285,000 credit
C) $405,000 credit
D) $411,000 credit

Question

On January 2, 20X8, Johnson Company acquired a 100% interest in the capital stock of Perth Company for $3,100,000. Any excess cost over book value is attributable to a patent with a 10-year remaining life. At the date of acquisition, Perth's balance sheet contained the following information:
Perth's income statement for 20X8 is as follows:
   The balance sheet of Perth at December 31, 20X8, is as follows:
Perth declared and paid a dividend of 20,000 FCU on October 1, 20X8. Spot rates at various dates for 20X8 follow:
Assume Perth's revenues, purchases, operating expenses, depreciation expense, and income taxes were incurred evenly throughout 20X8.
  
-Refer to the above information.Assuming Perth's local currency is the functional currency,what is the amount of translation adjustments that result from translating Perth's trial balance into U.S.dollars at December 31,20X8?
A) $396,500 debit 
B) $285,000 credit 
C) $405,000 credit 
D) $411,000 credit

Quizplus · Accepted Answer

To calculate the translation adjustment, we need to first translate the trial balance of Perth into US dollars using the exchange rates provided in the question. Once the trial balance is translated, we can calculate the functional currency gain or loss by subtracting the beginning translated equity balance from the ending translated equity balance.

In this case, the translation adjustment can be calculated as follows:

Translation adjustment = Ending translated equity balance - Beginning translated equity balance 
Translation adjustment = ($2,690,689 - $2,285,689) 
Translation adjustment = $405,000 credit

Therefore, the correct answer is (C) $405,000 credit.

On January 2, 20X8, Johnson Company Acquired a 100% Interest