Consolidation Worksheet after Translation Refer to the information given in Probl...

Consolidation Worksheet after Translation

Refer to the information given in Problems P12-23 and P12-24 for Alamo and its subsidiary, Western Ranching. Assume that the Australian dollar (A$) is the functional currency and that Alamo uses the fully adjusted equity method for accounting for its investment in Western Ranching. A December 31, 20X3, trial balance for Alamo Inc. follows. Use this translated trial balance for completing this problem.

Required

a. Prepare a set of elimination entries, in general journal form, for the entries required to prepare a comprehensive consolidation worksheet (including other comprehensive income) as of December 31, 20X3.

b. Prepare a comprehensive consolidation worksheet as of December 31, 20X3.

Refer P12-23:

Translation

Alamo Inc. purchased 80 percent of the outstanding stock of Western Ranching Company, located in Australia, on January 1, 20X3. The purchase price in Australian dollars (A$) was A$200,000, and A$40,000 of the differential was allocated to plant and equipment, which is amortized over a 10-year period. The remainder of the differential was attributable to a patent. Alamo Inc. amortizes the patent over 10 years. Western Ranching’s trial balance on December 31, 20X3, in Australian dollars is as follows:

Additional Information

1. Western Ranching uses average cost for cost of goods sold. Inventory increased by A$20,000 during the year. Purchases were made uniformly during 20X3. The ending inventory was acquired at the average exchange rate for the year.

2. Plant and equipment were acquired as follows:

3. Plant and equipment are depreciated using the straight-line method and a 10-year life with no residual value.

4. The payable to Alamo is in Australian dollars. Alamo’s books show a receivable from Western Ranching of $6,480.

5. The 10-year bonds were issued on July 1, 20X3, for A$106,000. The premium is amortized on a straight-line basis. The interest is paid on April 1 and October 1.

6. The dividends were declared and paid on April 1.

7. Exchange rates were as follows:

Required

a. Prepare a schedule translating the December 31, 20X3, trial balance of Western Ranching from Australian dollars to U.S. dollars.

b. Prepare a schedule providing a proof of the translation adjustment.

Refer P12-24:

Parent Company Journal Entries and Translation

Refer to the information given in Problem P12-23 for Alamo and its subsidiary, Western Ranching. Assume that the Australian dollar (A$) is the functional currency and that Alamo uses the fully adjusted equity method for accounting for its investment in Western Ranching.

Required

a. Prepare the entries that Alamo would record in 20X3 for its investment in Western Ranching.

Your entries should include the following:

(1) Record the initial investment on January 1, 20X3.

(2) Record the dividend received by the parent company.

(3) Recognize the parent company’s share of the equity income of the subsidiary.

(4) Record the amortizations of the differential.

(5) Recognize the translation adjustment required by the parent from the adjustment of the differential.

(6) Recognize the parent company’s share of the translation adjustment resulting from the translation of the subsidiary’s accounts.

b. Provide the necessary documentation and support for the amounts recorded in the journal entries, including a schedule of the translation adjustment related to the differential.