Problem 11-3 (LO 3, 5) Translate a trial balance and prepare a consolidation wor
ID: 2489406 • Letter: P
Question
Problem 11-3 (LO 3, 5) Translate a trial balance and prepare a consolidation worksheet with excess of cost over book value traceable to equipment.
Due to increasing pressures to expand globally, Pueblo Corporation acquired a 100% interest in Sorenson Company, a foreign company, on January 1, 2016. Pueblo paid 12,000,000 FC, and Sorenson’s equity consisted of the following:
Common stock
3,000,000 FC
Paid-in capital in excess of par
2,000,000
Retained earnings
4,200,000
Total
9,200,000 FC
On the date of acquisition, equipment with a 10-year life was undervalued by 500,000 FC. Any remaining excess of cost over book value is attributable to additional equipment with a 20-year life. The trial balances for Pueblo and Sorenson as of December 31, 2018, are as follows:
Pueblo Corporation
Sorenson Company
Cash
4,050,000
2,840,000 FC
Accounts Receivable
5,270,000
3,990,000
Inventory
5,540,000
5,800,000
Investment in Sorenson
20,969,000
Fixed Assets
21,000,000
15,000,000
Accumulated Depreciation
(12,560,000)
(6,800,000)
Accounts Payable
(3,450,000)
(1,580,000)
Long-Term Debt
(10,000,000)
(5,000,000)
Common Stock
(4,000,000)
(3,000,000)
Paid-In Capital in Excess of Par
(6,500,000)
(2,000,000)
Retained Earnings, January 1, 2018
(12,180,000)
(7,950,000)
Sales
(26,000,000)
(10,000,000)
Cost of Goods Sold
16,380,000
7,500,000
Operating Expenses
3,210,000
1,200,000
Subsidiary Income
(1,729,000)
Totals
0
0 FC
The investment in Sorenson consists of the following:
Initial investment (12,000,000 FC × $1.20)
$14,400,000
2016 Income (1,750,000 FC × $1.28)
2,240,000
2017 Income (2,000,000 FC × $1.30)
2,600,000
2018 Income
1,729,000
Total
$20,969,000
Relevant exchange rates are as follows:
1 FC =
January 1, 2016
$1.20
2016 Average
1.28
January 1, 2017
1.25
2017 Average
1.30
December 31, 2018
1.31
2018 Average
1.33
Assuming the FC is Sorenson’s functional currency, prepare a consolidated worksheet.
Common stock
3,000,000 FC
Paid-in capital in excess of par
2,000,000
Retained earnings
4,200,000
Total
9,200,000 FC
Explanation / Answer
Answer Consolidate Worksheet December, 31, 2018 Cash 7,770,400 Accounts Receivable 10,576,700 Inventory 13,254,000 Fixed Assets 34,884,300 Accumalted Depreciation (21,604,000) Account Payable (5,551,400) Long Term debt (16,650,000) Common Stock (4,000,000) Paid in capital in excess of Par (6,500,000) Retained Earning (12,180,000) Sales (39,300,000) Cost of Goods Sold 26,355,000 Operating Expenses 4,806,000 Subsidiary Income (2,299,570)