On January 1, 2014, Psalm Corporation purchased all the stock of Solomon Corporation for $481,400 when Solomon had capital stock of 180,000 pounds (£) and retained earnings of 90,000£. The book value of Solomon's assets and liabilities represented the fair value, except for equipment with a 5-year life that was undervalued by 15,000£. Any remaining excess is due to a patent with a useful life of 6 years. Solomon's functional currency is the pound. Solomon's books are kept in pounds. Relevant exchange rates for a pound follow:
Required:
1. Determine the equity adjustment on translation of the excess differential assigned to equipment at December 31, 2014.
2. Determine the equity adjustment on translation of the excess differential assigned to patent at December 31, 2014.

Question

On January 1, 2014, Psalm Corporation purchased all the stock of Solomon Corporation for $481,400 when Solomon had capital stock of 180,000 pounds (£) and retained earnings of 90,000£. The book value of Solomon's assets and liabilities represented the fair value, except for equipment with a 5-year life that was undervalued by 15,000£. Any remaining excess is due to a patent with a useful life of 6 years. Solomon's functional currency is the pound. Solomon's books are kept in pounds. Relevant exchange rates for a pound follow:
  Required:
1. Determine the equity adjustment on translation of the excess differential assigned to equipment at December 31, 2014.
2. Determine the equity adjustment on translation of the excess differential assigned to patent at December 31, 2014.

Quizplus · Accepted Answer

The Answer of On January 1, 2014, Psalm Corporation purchased all the stock of Solomon Corporation for $481,400 when Solomon had capital stock of 180,000 pounds (£) and retained earnings of 90,000£. The book value of Solomon's assets and liabilities represented the fair value, except for equipment with a 5-year life that was undervalued by 15,000£. Any remaining excess is due to a patent with a useful life of 6 years. Solomon's functional currency is the pound. Solomon's books are kept in pounds. Relevant exchange rates for a pound follow:
  Required:
1. Determine the equity adjustment on translation of the excess differential assigned to equipment at December 31, 2014.
2. Determine the equity adjustment on translation of the excess differential assigned to patent at December 31, 2014.

On January 1, 2014, Psalm Corporation Purchased All the Stock