Test bank advanced accounting 10e by beams chapter 13

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 13 Test Bank FOREIGN CURRENCY FINANCIAL STATEMENTS Multiple Choice Questions LO1 A US firm has a Belgian subsidiary that uses the British pound as its functional currency Under FASB statement No 52, the US dollar from Belgian unit’s point of view will be a b c d LO1 Selvey Inc is a completely owned subsidiary of Parsfield Incorporated a US firm The country where Selvey operates is deemed to have a highly inflationary economy under FASB statement No 52 Therefore, the functional currency is a b c d LO1 its its the its reporting currency current rate method currency US dollar local currency All of the following factors functional currency, except a b c d LO2 a foreign currency its local currency its current rate method currency its reporting currency would be used to define a high volume of intercompany transactions expenses primarily driven by local factors financing denominated in local currency status as a local tax haven for transfer pricing purposes When the financial statements of a foreign subsidiary one year after acquisition are consolidated with the parent company, Retained Earnings is a b c d translated at the remeasured at the remeasured at the None of the above current exchange rate current exchange rate historical exchange rate answers is correct ©2009 Pearson Education, Inc publishing as Prentice Hall 13-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO2 Peachey has a foreign subsidiary, Schrivener Corporation of Germany, whose functional currency is the euro On December 31, 19X2, Schrivener has an account receivable denominated in British pounds Which one of the following statements is true? a Because all accounts of the subsidiary are translated into US dollars at the current rate, the Account Receivable is not adjusted on the subsidiary’s books before translation b The Account Receivable is remeasured into the functional currency and remeasurement obviates translation c The Account Receivable is first adjusted to reflect the current exchange rates in euros and then translated at the current rate into dollars d The Account Receivable is adjusted to euros at the current exchange rate and any resulting gain or loss is included as a translation adjustment in the stockholders’ equity section of the subsidiary’s separate balance sheet LO2 Paskin’s Corporation’s wholly-owned Canadian subsidiary has a Canadian dollar functional currency In translating its account balances into US dollars for reporting purposes, which one of the following accounts would be translated at historical exchange rates? a b c d LO2 Accounts Receivable Notes Payable Capital Stock Retained Earnings A foreign entity is a subsidiary of a US parent company and has always used the current rate method to translate its foreign financial statements on behalf of its parent company Which one of the following statements is incorrect? a The US dollar will be the functional currency of this company b Changes in exchange rates between the subsidiary’s country and the parent’s country are not expected to affect the foreign entity’s cash flows c Translation adjustments are shown in stockholders’ equity as increases or decreases in other comprehensive income d Translation adjustments are not shown on the income statement ©2009 Pearson Education, Inc publishing as Prentice Hall 13-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO2 The objective of remeasurement is to a produce the same results as if the books were maintained in the currency of the foreign entity’s largest customer b produce the same results as if the books were maintained solely in the local currency c produce the same results as if the books were maintained solely in the functional currency d produce the results reflective of the entity’s economics in the local currency LO2 Which of the following assets and/or liabilities are considered monetary? a b c d LO2 10 Which one of the following accounts would be translated at the historical exchange rate when the local currency is the functional currency? a b c d LO2 11 Intangible Assets and Plant, Property, and Equipment Bonds Payable and Common Stock Cash and Accounts Payable Notes Receivable and Inventories carried at cost Deferred Income Taxes Accumulated Depreciation on Equipment Prepaid Insurance Additional paid-in capital Accounts for dollars at uncollectible accounts are converted into US a historical rates when the US dollar is the functional currency b current rates only when the US dollar is the functional currency c historical rates regardless of the functional currency d current rates regardless of the functional currency ©2009 Pearson Education, Inc publishing as Prentice Hall 13-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO3 12 Lorikeet Corporation has a foreign subsidiary located in a country experiencing high rates of inflation Information concerning this country’s inflation rate experience is given below Date January January January January 1,20X1 1,20X2 1,20X3 1,20X4 Index 90 120 150 210 Change in index 30 30 60 Annual rate of Inflation 30/100 = 30.00% 30/130 = 23.08% 60/160 = 37.50% The inflation rate that is used in determining if the subsidiary is operating in a highly inflationary economy is a 37.50% b 90.58% c 133.33% LO3 13 A US company’s foreign subsidiary has as its functional currency the local currency Year-end financial statements are being consolidated The average rate would be used for which account of the foreign entity? a b c d LO5 14 Depreciation Sales Deferred credits Deferred tax assets When translating foreign subsidiary income statements using the current rate method, why are some accounts translated at an average rate? a This approach improves matching b This approach accentuates the conservatism principle c This approach smoothes out highly volatile exchange rate fluctuations d This approach approximates the effect of transactions which occur continuously during the period ©2009 Pearson Education, Inc publishing as Prentice Hall 13-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 15 The following assets of Oriole Corporation’s Romanian subsidiary have been converted into US dollars at the following exchange rates: Current Historical Rates Rates Accounts receivable $ 850,000 $ 875,000 Trademark 600,000 575,000 Property plant and equipment 1,200,000 900,000 Totals $ 2,650,000 $ 2,350,000 If the functional currency of the subsidiary is the US dollar, the assets should be reported in the consolidated financial statements of Oriole Corporation and Subsidiary in the total amount of a b c d LO5 16 Which of the following foreign subsidiary accounts will have the same value on consolidated financials, regardless of whether the statements are remeasured or translated? a b c d LO6 17 $2,325,000 $2,350,000 $2,375,000 $2,650,000 Trademark Inventory accounts receivable Goodwill Remeasurement exchange gains or losses appear a in the continuing operations section of the consolidated income statement b as an extraordinary item on the consolidated income statement c as other comprehensive income typically reported in a statement of stockholders’ equity d as an adjustment to the beginning balance of retained earnings on the consolidated Statement of retained earnings ©2009 Pearson Education, Inc publishing as Prentice Hall 13-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO7 18 A US parent makes a 1,000,000 krona loan worth $108,250 to its Swedish subsidiary in the current year The loan is denominated in US dollars and the functional currency of the subsidiary is the krona This intercompany transaction is a foreign currency transaction of a neither the subsidiary nor the parent, as it is eliminated as part of the consolidation procedure b the subsidiary but not the parent c both the subsidiary and the parent d the parent but not the subsidiary LO8 19 A foreign subsidiary’s accounts receivable balance should be translated for the consolidated financial statements at a b c d LO9 20 the the the the appropriate historical rate prior year’s forecast rate future rate for the next year spot rate at year-end If a US company wants to hedge a prospective loss in a foreign entity from a foreign currency fluctuation, which of the following actions is recommended? a The US company should purchase a forward to swap currency of the foreign entity’s local country for US currency b The US company should purchase a call option to buy currency of the foreign entity’s local country c The US company should issue a loan the foreign entity’s local country d The US company should borrow money in the foreign entity’s local country ©2009 Pearson Education, Inc publishing as Prentice Hall 13-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO2 Exercise For each of the 12 accounts listed in the table below, select the correct exchange rate to use when either remeasuring or translating a foreign subsidiary for its US parent company Codes C H A = = = Current exchange rate Historical exchange rate Average exchange rate US dollar is the functional currency The foreign currency is the functional currency Accounts receivable Marketable debt securities carried at cost Inventories carried at cost Deferred income Goodwill Other paid-in capital Depreciation Refundable deposits Common stock 10 Accumulated depreciation on buildings 11 Deferred income tax liabilities 12 Accounts payable ©2009 Pearson Education, Inc publishing as Prentice Hall 13-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com LO5 Exercise On January 1, 20X5, Pegler Corporation, a US company, acquired 100% of Selmic Corporation of Canada, paying an excess of 90,000 Canadian dollars over the book value of Selmic’s net assets The excess was allocated to undervalued equipment with a three-year remaining useful life Selmic’s functional currency is the Canadian dollar Exchange rates for Canadian dollars for 20X5 are: January 1, 20X5 Average rate for 20X5 December 31, 20X5 $.77 75 73 Required: Determine the depreciation expense stated in US dollars on the excess allocated to equipment for 20X5 Determine the unamortized December 31, 20X5 excess allocated to equipment on If Selmic’s functional currency was the US dollar, what would be the depreciation expense on the excess allocated to the equipment for 20X5? LO5 Exercise Peake Corporation, a US company, formed a British subsidiary on January 1, 20X5 by investing £450,000 in exchange for all of the subsidiary’s no-par common stock The British subsidiary, Searle Corporation, purchased real property on April 1, 20X5 at a cost of £500,000, with £100,000 allocated to land and £400,000 allocated to a building The building is depreciated over a 40-year estimated useful life on a straight-line basis with no salvage value The British pound is Searle’s functional currency and its reporting currency The British economy does not have high rates of inflation Exchange rates for the pound on various dates were: January 01, 20X5 April 01, 20X5 December 31, 20X5 20X5 average rate = = = = 1£ 1£ 1£ 1£ = = = = $1.50 $1.51 $1.58 $1.56 Searle's adjusted trial balance is presented below for the year ended December 31, 20X5 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com In Pounds Debits: Cash Accounts receivable Inventory Building Land Depreciation expense Other expenses Cost of good sold Total debits Credits Accumulated depreciation Accounts payable Common stock Retained earnings Equity adjustment Sales revenue Total credits £ £ £ £ 220,000 52,000 59,000 400,000 100,000 7,500 110,000 220,000 1,168,500 7,500 111,000 450,000 0 600,000 1,168,500 Required: Prepare Searle's: Translation working papers; Translated income statement; and Translated balance sheet LO5 Exercise Note to Instructor: This exam item is a continuation of Exercise and proceeds forward with Searle’s second year of operations Searle Corporation, a British subsidiary of Peake Corporation (a US company) was formed by Peake on January 1, 20X5 in exchange for all of the subsidiary's common stock Searle has now ended its second year of operations on December 31, 20X6 Relevant exchange rates are: January 01, 20X5 = 1£ = $1.50 December 31, 20X6 = 1£ = $1.65 20X6 average rate = 1£ = $1.63 Searle's adjusted trial balance is presented below for the calendar year 20X6 The amount of equity adjustment carried over from 20X5 is a credit balance of $41,250 (in dollars) ©2009 Pearson Education, Inc publishing as Prentice Hall 13-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com In Pounds Debits: Cash Accounts receivable Inventory Building Land Depreciation expense Other expenses Cost of good sold Total debits Credits Accumulated depreciation Accounts payable Common stock Retained earnings Sales revenue Total credits £ £ £ £ 75,000 362,000 41,000 400,000 100,000 10,000 133,000 380,000 1,501,000 17,500 154,750 450,000 262,500 616,250 1,501,000 Required: For Searle's second year of operations, prepare the: Translation working papers; Translated income statement; and Translated balance sheet LO5 Exercise Note to Instructor: This exam item is similar to Exercise except that the exchange rates have been changed and the temporal method is used instead of the current rate method The Pearce Corporation, a US corporation, formed a British subsidiary on January 1, 20X7 by investing £550,000 in exchange for all of the subsidiary’s no-par common stock The British subsidiary, Seakam Corporation, purchased real property on April 1, 20X7 at a cost of £500,000, with £100,000 allocated to land and £400,000 allocated to the building The building is depreciated over a 40-year estimated useful life on a straight-line basis with no salvage value The US dollar is Seakam’s functional currency, but it keeps its records in pounds The British economy does not experience high rates of inflation Exchange rates for the pound on various dates are: ©2009 Pearson Education, Inc publishing as Prentice Hall 13-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com SOLUTIONS Multiple Choice Questions d c d d c c a c c 10 d 11 d 12 c 13 b 14 d 15 a 16 c 17 a 18 b 19 d 20 d {(210 – 90)/90} x 100% = 133% Acc Rec $850,000 + Trademark $575,000 + Plant $900,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-17 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise US dollar is the functional currency The foreign Currency is the functional currency Accounts receivable C C Marketable debt securities carried at cost H C Inventories carried at cost H C Deferred income H C Goodwill H C Other paid-in capital H H Depreciation H C Refundable deposits C C Common stock H H H C 11 Deferred income tax liabilities C C 12 Accounts payable C C 10 Accumulated depreciation on buildings ©2009 Pearson Education, Inc publishing as Prentice Hall 13-18 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Requirement Depreciation expense in 20X5 C$90,000/3 years x $.75/C$ = $22,500 depreciation expense Requirement Unamortized excess at December 31, 20X5 C$90,000 x 2/3 x $.73/C$ = $43,800 unamortized excess on equipment Requirement Remeasured depreciation expense C$90,000 x $.77/C$ = $69,300 excess $69,300/3 years = $23,100 depreciation expense ©2009 Pearson Education, Inc publishing as Prentice Hall 13-19 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Requirement Searle Corporation Translation Working Papers Debits Cash Accounts receivable Inventory Building Land Depreciation expense Other expenses Cost of goods sold 220,000 52,000 59,000 400,000 100,000 7,500 110,000 220,000 x x x x x x x x $1.58 $1.58 $1.58 $1.58 $1.58 $1.56 $1.56 $1.56 = = = = = = = = Total debits Credits Accumulated depreciation Accounts payable Common stock Sales revenue Retained earnings Total credits 7,500 111,000 450,000 600,000 x x x x $1.58 $1.58 $1.50 $1.56 = = = = Credit differential $ 347,600 82,160 93,220 632,000 158,000 11,700 171,600 343,200 $ 1,839,480 $ $ 11,850 175,380 675,000 936,000 1,798,230 $ 41,250 $ 936,000 Requirement Searle Corporation Translated Income Statement For the Year Ended December 31, 20X5 Sales revenue Expenses: Cost of goods sold Depreciation expense Other expenses Net income ( ( ( $ 343,200 ) 11,700 ) 171,600 ) 409,500 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-20 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Requirement Searle Corporation Translated Balance Sheet December 31, 20X5 Cash Accounts receivable Inventory Building-net Land Total assets Accounts payable Common stock Retained earnings Accumulated comprehensive income Total liabilities & equities $ $ $ $ 347,600 82,160 93,220 620,150 158,000 1,301,130 175,380 675,000 409,500 41,250 1,301,130 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-21 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Requirement Searle Corporation Translation Working Papers Debits Cash Accounts receivable Inventory Building Land Depreciation expense Other expenses Cost of goods sold 75,000 362,000 41,000 400,000 100,000 10,000 133,000 380,000 x x x x x x x x $1.65 $1.65 $1.65 $1.65 $1.65 $1.63 $1.63 $1.63 = = = = = = = = Total debits Credits Accumulated depreciation Accounts payable Common stock Sales revenue Retained earnings Accumulated comprehensive income Total credits 17,500 154,750 450,000 616,250 262,500 x x x x $1.65 $1.65 $1.50 $1.63 = = = = Credit differential $ 123,750 597,300 67,650 660,000 165,000 16,300 216,790 619,400 $ 2,466,190 $ 28,875 255,338 675,000 1,004,487 409,500 $ 41,250 2,414,450 $ 51,740 $ 1,004,487 Requirement Searle Corporation Translated Income Statement for the year ended December 31, 20X6 Sales revenue Expenses: Cost of goods sold Depreciation expense Other expenses Net income Retained earnings, January 1, 20X6 Retained earnings, December 31, 20X6 ( ( ( $ $ 619,400 ) 16,300 ) 216,790 ) 151,997 409,500 561,497 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-22 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Requirement Searle Corporation Translated Balance Sheet December 31, 20X6 Cash Accounts receivable Inventory Building-net Land Total assets $ $ 123,750 597,300 67,650 631,125 165,000 1,584,825 Accounts payable $ Common stock Retained earnings Accumulated comprehensive income ($41,250 + $51,740) Total liabilities & equities $ 255,338 675,000 561,497 92,990 1,584,825 Exercise Requirement Seakam Corporation Translation Working Papers Debits Cash Accounts receivable Notes receivable Building Land Depreciation expense Other expenses Salary expense Total debits 200,000 72,000 99,000 400,000 100,000 7,500 115,000 208,000 x x x x x x x x $1.45 $1.45 $1.45 $1.42 $1.42 $1.42 $1.44 $1.44 = = = = = = = = $ 290,000 104,400 143,550 568,000 142,000 10,650 165,600 299,520 $ 1,723,720 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-23 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Credits Accumulated depreciation Accounts payable Common stock Sales revenue Retained earnings Total credits 7,500 100,000 550,000 544,000 x x x x $1.42 $1.45 $1.40 $1.44 = = = = Credit differential $ $ 10,650 145,000 770,000 783,360 1,709,010 $ 14,710 $ 783,360 Requirement Seakam Corporation Translated Income Statement For the Year Ended December 31, 20X7 Sales revenue Expenses: Salary expense Depreciation expense Other expenses Income before exchange gains or losses Exchange gains Net income Retained earnings, January 1, 20X7 Retained earnings, December 31, 20X7 ( ( ( $ $ $ 299,520 ) 10,650 ) 165,600 ) 307,590 14,710 322,300 322,300 Requirement Seakam Corporation Translated Balance Sheet December 31, 20X7 Cash Accounts receivable Notes receivable Building-net Land Total assets Accounts payable Common stock Retained earnings Total liabilities & equities $ $ $ $ 290,000 104,400 143,550 557,350 142,000 1,237,300 145,000 770,000 322,300 1,237,300 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-24 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Seakam Corporation Translation Working Papers Debits Cash Accounts receivable Notes receivable Building Land Depreciation expense Other expenses Salary expense 172,000 308,000 98,000 400,000 100,000 10,000 117,000 376,000 x x x x x x x x $1.37 $1.37 $1.37 $1.42 $1.42 $1.42 $1.36 $1.36 = = = = = = = = Total debits Credits Accumulated depreciation Accounts payable Common stock Sales revenue Retained earnings Total credits 17,500 200,000 550,000 600,000 213,500 x x x x $1.42 $1.37 $1.40 $1.36 = = = = Debit differential $ 235,640 421,960 134,260 568,000 142,000 14,200 159,120 511,360 $ 2,186,540 $ $ 24,850 274,000 770,000 816,000 322,300 2,207,150 $ 20,610 $ 816,000 Requirement Seakam Corporation Translated Income Statement For the Year Ended December 31, 20X8 Sales revenue Expenses: Salary expense Depreciation expense Other expenses Income before exchange gains or losses Exchange loss Net income Retained earnings, January 1, 20X8 Retained earnings, December 31, 20X8 ( ( ( $ ( $ $ 511,360 14,200 159,120 131,320 20,610 110,710 322,300 433,010 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-25 ) ) ) ) To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Requirement Seakam Corporation Translated Balance Sheet December 31, 20X8 Cash Accounts receivable Notes receivable Building-net Land Total assets Accounts payable Common stock Retained earnings Total liabilities & equities $ 235,640 421,960 134,260 543,150 142,000 1,477,010 $ $ 274,000 770,000 433,010 1,477,010 $ Exercise Requirement Patent Fair Value Cost of 70% interest Book value acquired 400,000 LCU x $.40 x 70% = Patent in dollars $ ( $ Patent in LCU = $8,000/$.40 per LCU = 120,000 112,000 ) 8,000 20,000 Requirement Patent amortization for 20X4 Patent: 20,000 LCU/10 years = 2,000 LCU per year 2,000 LCU per year x $.42 equals amortization of: $ 840 $ 7,920 Requirement Unamortized patent Patent (20,000 LCU – 2,000 LCU) x $.44 = ©2009 Pearson Education, Inc publishing as Prentice Hall 13-26 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Requirement Equity adjustment from patent Beginning patent (from Req 1) Patent amortization (from Req 2) Subtotal Ending goodwill 18,000 LCU x $.44 = Equity adjustment $ ( $ 8,000 840 ) 7,160 7,920 760 Requirement Income from Segar Equity in income ($42,000 x 70%) Less: Patent amortization Income from Segar $ ( $ 29,400 840 ) 28,560 Requirement Investment in Segar balance at December 31, 20X4 Cost, January 1, 20X4 Add: Income for 20X4 (from Req 5) Less: Dividends ($21,500 x 70%) Add: Equity adjustment from patent (from Req 4) Add: Equity adjustment from translation ($17,500 x 70%) Investment balance, December 31, 20X4 Check: Book value: $198,000 x 70% = Unamortized patent (from Req 3) Investment balance $ ( $ $ $ 120,000 28,560 15,050 ) 760 12,250 146,520 138,600 7,920 146,520 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-27 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Requirement Trademark Cost of 30% interest Book value acquired 10,000,000 x $.66 x 30% = Fair value of trademark in dollars $ ( $ Trademark in $1,320,000/$.66 = 3,300,000 1,980,000 ) 1,320,000 2,000,000 Requirement Trademark amortization for 20X3 Trademark: 2,000,000/40 yr x $.65 average rate = $ 32,500 $ 1,248,000 Requirement Unamortized trademark Trademark (2,000,000 – 50,000SF) x $.64 exchange rate Requirement Equity adjustment from trademark Beginning trademark (from Req 1) Trademark amortization (from Req 2) Less: Ending trademark (1,950,000 x $.64) Equity adjustment $ ( ( 1,320,000 32,500 ) 1,248,000 ) 39,500 ( 487,500 32,500 ) 455,000 $ Requirement Income from Selby Equity in income ($1,625,000 x 30%) Less: Trademark amortization Income from Selby $ $ ©2009 Pearson Education, Inc publishing as Prentice Hall 13-28 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Requirement Investment in Segar balance at December 31, 20X3 Cost, January 1, 20X3 $ Add: Income from Selby (from Req 5) Less: Dividends ($645,000 x 30%) ( Less: Equity adjustment from translation ($220,000 x 30%) ( Less: Equity adjustment from trademark (from Req 4) ( Investment balance, December 31, 20X3 $ 66,000 ) 39,500 ) 3,456,000 Check: Share of Selby’s equity $7,360,000 x 30% Add: Unamortized trademark (from Req 3) Investment balance, December 31, 20X3 2,208,000 1,248,000 3,456,000 $ $ 3,300,000 455,000 193,500 ) ©2009 Pearson Education, Inc publishing as Prentice Hall 13-29 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise Requirement Equipment: Jul 01, 20X1 (A$80,000 x $.520/A$) = $41,600 Jan 01, 20X2 (A$50,000 x $.530/A$) = 26,500 Total $68,100 Requirement Depreciation expense: {(A$40,000 x 1/5 x yr.)x ($.500/A$)} = $ 2,000 {(A$80,000 x 1/5 x yr.)x($.520/A$)} = 8,320 {(A$50,000 x 1/5 x yr.)x($.530/A$)} = 5,300 Total $15,620 Requirement Equipment sold: (A$40,000 x $.500/A$) = Accumulated Depreciation on equipment sold: {(A$40,000 x 1/5 x 1.5 yrs.)x($.500/A$)} = Net book value of equipment sold Cash received on July 1, 20X2: (A$35,000 x $.505/A$) = Gain on sale of equipment $20,000 6,000 $14,000 17,675 $ 3,675 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-30 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Exercise 10 Requirement Equipment: Jul 01, 20X1 (NZ$80,000 x $.490/NZ$) = $39,200 Jan 01, 20X2 (NZ$50,000 x $.490/NZ$) = 24,500 Total $63,700 Requirement Depreciation expense: {(NZ$40,000 x 1/5 x yr.)x($.510/NZ$)} = $ 2,040 {(NZ$80,000 x 1/5 x yr.)x($.510/NZ$)} = 8,160 {(NZ$50,000 x 1/5 x yr.)x($.510/NZ$)} = 5,100 Total $15,300 Requirement Equipment sold Accumulated Depreciation on sold equipment (NZ$40,000 x 1/5 x 1.5 yr.) Net book value of equipment sold Cash received on July 1, 20X2 Gain on sale of equipment Gain in US$: (NZ$7,000 x $.510/NZ$) = NZ$40,000 12,000 NZ$28,000 35,000 NZ$ 7,000 $ 3,570 ©2009 Pearson Education, Inc publishing as Prentice Hall 13-31 ... Inc publishing as Prentice Hall 13- 13 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com A summary of changes in Selby’s stockholders’ equity during... 620,150 158,000 1,301 ,130 175,380 675,000 409,500 41,250 1,301 ,130 ©2009 Pearson Education, Inc publishing as Prentice Hall 13- 21 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... x 100% = 133 % Acc Rec $850,000 + Trademark $575,000 + Plant $900,000 ©2009 Pearson Education, Inc publishing as Prentice Hall 13- 17 To download more slides, ebook, solutions and test bank, visit