Advanced Financial Accounting 3

Saudi Electronic University

College of Administrative and Financial Sciences

Department of Accounting

Important Instructions:

· Please fill your Name, ID and Section (CRN) at the place provided below

· Maximum marks of each assignment is 10. Marks of each question is provided with the question.

· Rename the file of your assignment as [ACCT 302 39-40-2nd-CRN-Your Name]

· Assignments should be submitted in MS Word format

· Font should be Times New Roman with 14 points.

· You are required to work in this assignment individually.

· You should submit the assignment via the Blackboard.

· Students who submit assignments after deadline, will get ZERO.

· If you engaged in plagiarism, you will get ZERO marks in the assignment or course

· Attempt all the questions.

· Do not write off questions when answering them.

Q1. The following information provides an overview of the intercompany sale process using land as an example.

On 3/31/X5, Parent Inc. sold land costing $10,000 to its 100% owned subsidiary, Sub Inc., for $15,000. Sale from Sub Inc to outsider for $25,000

Prepare consolidation worksheet entries with and without adjusting the equity method accounts on the following:

1. Consolidation entry(ies) as of 12/31/X5 and 12/31/X6.

2. Consolidation entry at 12/31/X7, assuming that Sub sold the land in 20X7 for $25,000.

Q2. Kline Corporation holds 90 percent ownership of Andrews Company. On July 1, 20X3, Kline sold equipment that it had purchased for $30,000 on January 1, 20X1, to Andrews for $28,000. The equipment’s original six-year estimated total economic life remains unchanged. Both companies use straight-line depreciation. The equipment’s residual value is considered negligible.

Required:

1. Give the eliminating entry or entries in the consolidation worksheet prepared as of December 31, 20X3, to remove the effects of the intercompany sale.

2. Give the eliminating entry or entries in the consolidation worksheet prepared as of December 31, 20X4, to remove the effects of the intercompany sale.

Q3. What factors are used to determine a reporting entity’s functional currency? Provide at least one example for which a company’s local currency may not be its functional currency.

Q4. Assume that the direct foreign exchange rates in U.S dollars are:

1 British pound = $ 1.60

1 Canadian dollar = $ 0.74

Required:

a. What are the indirect exchange rates for the British pound and the Canadian dollar?

b. How many pounds must a British company pay to purchase goods costing $ 8,000 from a U.S. company?

c. How many U.S. dollars must be paid for a purchase costing 4,000 Canadian dollars?

Q5. Explain the differences between translation and remeasurement.