Pew Corporation (a U.S.corporation)acquired all of the stock of Skunk Company (a Brazilian company)on January 1,2011 for $9,300,000 when Skunk had 10,000,000 Brazilian real (BR)capital stock and 5,000,000 BR retained earnings.The book value of Skunk's net assets equaled the fair value on this date,and any cost/book value differential is due to a patent with a 5-year remaining useful life.Skunk's functional currency is the BR.Skunk's books are maintained in the functional currency.The exchange rates for BR's for 2011 are shown below:
Required:
1.Calculate the patent value from the business combination on January 1,2011 in U.S.dollars.
2.Calculate the patent amortization in U.S.dollars for 2011.
3.Prepare the journal entry (in U.S.dollars)required on Pew's books to record the patent amortization for 2011,assuming that Pew accounts for Skunk using the equity method.

Question

Pew Corporation (a U.S.corporation)acquired all of the stock of Skunk Company (a Brazilian company)on January 1,2011 for $9,300,000 when Skunk had 10,000,000 Brazilian real (BR)capital stock and 5,000,000 BR retained earnings.The book value of Skunk's net assets equaled the fair value on this date,and any cost/book value differential is due to a patent with a 5-year remaining useful life.Skunk's functional currency is the BR.Skunk's books are maintained in the functional currency.The exchange rates for BR's for 2011 are shown below:
  Required:
1.Calculate the patent value from the business combination on January 1,2011 in U.S.dollars.
2.Calculate the patent amortization in U.S.dollars for 2011.
3.Prepare the journal entry (in U.S.dollars)required on Pew's books to record the patent amortization for 2011,assuming that Pew accounts for Skunk using the equity method.

Quizplus · Accepted Answer

The Answer of Pew Corporation (a U.S.corporation)acquired all of the stock of Skunk Company (a Brazilian company)on January 1,2011 for $9,300,000 when Skunk had 10,000,000 Brazilian real (BR)capital stock and 5,000,000 BR retained earnings.The book value of Skunk's net assets equaled the fair value on this date,and any cost/book value differential is due to a patent with a 5-year remaining useful life.Skunk's functional currency is the BR.Skunk's books are maintained in the functional currency.The exchange rates for BR's for 2011 are shown below:
  Required:
1.Calculate the patent value from the business combination on January 1,2011 in U.S.dollars.
2.Calculate the patent amortization in U.S.dollars for 2011.
3.Prepare the journal entry (in U.S.dollars)required on Pew's books to record the patent amortization for 2011,assuming that Pew accounts for Skunk using the equity method.

Pew Corporation (A U