FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Sullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2017, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2018. The subsidiary then purchased for 200,000 pounds a building that had a 10-year expected life and no salvage value and is to be
Prepare an income statement, statement of
Transcribed Image Text:January 1, 2017 ..
October 1, 2017....
December 31, 2017.
Average for 2017...
$2.00 = 1 pound
2.05 = 1
2.08 = 1
2.04 = 1
%3D
....
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- On January 1, 2017, Fisher Company makes the two following acquisitions: Purchases land habing a fair market value of $800,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,175,464. Purchases equipment by issuing a 4%, 8-year promissory note having a maturity value of $350,000 (interest payable annually). The company has to pay 8% interest for funds from its bank. Instructions: Record the two journal entries that should be recorded by Fisher Company for the two purchases on January 1, 2017. Record the interest at the end of the first year on both notes using the effective-interest method.arrow_forwardLlungby AB spent 1,000,000 krone in 2017 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for five years. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for development costs for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.arrow_forwardSullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 69,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 215,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 4,200 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forward
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- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…arrow_forwardAlankar Ltd. commenced business on 1st January 2018, when they purchased plant and equipment for 9,00,000. They adopted a policy of charging depreciation at 15% per annum on diminishing balance basis and over the years, their purchases of plants have been as follows01/01/2019 - Rs. 3,50,000 01/01/2022 - Rs. 4,00,000 On 1/1/2022 it was decided to change the method and rate of depreciation to straight line basis. On this date remaining useful life was assessed as 6 years for all the assets purchased before 1/1/2022 with no scrap value and 10 years for the asset purchased on 1/1/2022. Prepare depreciation schedule for 5 years. Books of accounts are closed on 31st December every year.arrow_forwardBomarks acquires an equipment from a foreign supplier on credit for $6 million on 31 March 2022, when the exchange rate was $1 = GH¢ 5. The entity incurred other direct costs of GH¢1.5 million in installing the equipment. The estimated useful life of the equipment is 10 years and the entity has obligation to restore the location to its original state after usage. The estimated cost of dismantling and restoration in 10 years is GH¢3.5 million and the entity’s cost of capital is 8%. Although the equipment was available for use from 1 May 2022, the entity did not bring it into use until 1 July, 2022. Bomarks also sold goods to a foreign customer for $3.5 million on 30 April 2022, when the exchange rate was $1 = GH¢5.75. The customer paid $1 million on 1 July when the rates were $1 = GH¢5.60. On that date, Bomarks paid half of the amount owed for the equipment. At the entity’s year-end of 31 December 2022, the closing exchange rate was $1 = GH¢5.9. The entity’s functional currency is the…arrow_forward
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