On January 1, 2014, Pilgrim Corporation, a U.S. firm, acquired ownership of Settlement Corporation, a foreign company, for $168,000, when Settlement's stockholders' equity consisted of 300,000 local currency units (LCU) and retained earnings of 100,000 LCU. At the time of the acquisition, Settlement's assets and liabilities were fairly valued except for a patent that did not have any recorded book value. All excess purchase cost was attributed to the patent, which had an estimated economic life of 10 years at the date of acquisition. The exchange rate for LCUs on January 1, 2014 was $.40. The functional currency for Settlement is LCU. Settlement's books are maintained in LCU.
A summary of changes in Settlement's stockholders' equity during 2014 and the exchange rates for LCUs are as follows:
Required: Determine the following:
1. Fair value of the patent from Pilgrim's investment in Settlement on January 1, 2014 in U.S. dollars.
2. Patent amortization for 2014 in U.S. dollars.
3. Unamortized patent at December 31, 2014 in U.S. dollars.
4. Equity adjustment from the patent in U.S. dollars.
5. Income from Settlement for 2014 in U.S. dollars.
6. Investment in Settlement balance at December 31, 2014 in U.S. dollars.

Question

On January 1, 2014, Pilgrim Corporation, a U.S. firm, acquired ownership of Settlement Corporation, a foreign company, for $168,000, when Settlement's stockholders' equity consisted of 300,000 local currency units (LCU) and retained earnings of 100,000 LCU. At the time of the acquisition, Settlement's assets and liabilities were fairly valued except for a patent that did not have any recorded book value. All excess purchase cost was attributed to the patent, which had an estimated economic life of 10 years at the date of acquisition. The exchange rate for LCUs on January 1, 2014 was $.40. The functional currency for Settlement is LCU. Settlement's books are maintained in LCU.
A summary of changes in Settlement's stockholders' equity during 2014 and the exchange rates for LCUs are as follows:
  Required: Determine the following:
1. Fair value of the patent from Pilgrim's investment in Settlement on January 1, 2014 in U.S. dollars.
2. Patent amortization for 2014 in U.S. dollars.
3. Unamortized patent at December 31, 2014 in U.S. dollars.
4. Equity adjustment from the patent in U.S. dollars.
5. Income from Settlement for 2014 in U.S. dollars.
6. Investment in Settlement balance at December 31, 2014 in U.S. dollars.

Quizplus · Accepted Answer

The Answer of On January 1, 2014, Pilgrim Corporation, a U.S. firm, acquired ownership of Settlement Corporation, a foreign company, for $168,000, when Settlement's stockholders' equity consisted of 300,000 local currency units (LCU) and retained earnings of 100,000 LCU. At the time of the acquisition, Settlement's assets and liabilities were fairly valued except for a patent that did not have any recorded book value. All excess purchase cost was attributed to the patent, which had an estimated economic life of 10 years at the date of acquisition. The exchange rate for LCUs on January 1, 2014 was $.40. The functional currency for Settlement is LCU. Settlement's books are maintained in LCU.
A summary of changes in Settlement's stockholders' equity during 2014 and the exchange rates for LCUs are as follows:
  Required: Determine the following:
1. Fair value of the patent from Pilgrim's investment in Settlement on January 1, 2014 in U.S. dollars.
2. Patent amortization for 2014 in U.S. dollars.
3. Unamortized patent at December 31, 2014 in U.S. dollars.
4. Equity adjustment from the patent in U.S. dollars.
5. Income from Settlement for 2014 in U.S. dollars.
6. Investment in Settlement balance at December 31, 2014 in U.S. dollars.