Problem 11-3 Equity method
January 1, Year 4
Purchased all outstanding C/S
CV of shareholders' equity (subsite)
FV-CV PP&E (subsite)
depreciated
Trademark Amortized
Year 4
Subsite earned income
December 1, Year 4
declared and paid in dividends
Echange rates
1/1/Year 4 US $ 1 C$
12/1/Year 4 US $ 1 C$
12/31/Year 4 US $ 1 C$
Average for year US $ 1 C$
(a) (i) CS$ is functional currency
At date of acquisition
U.S. C.S
Acquistion cost 480,000 470,400
NBV of net assets 212,000 207,760
Acquisition cost 268,000 262,640
Allocated to:
Plant & equipment 124,000 121,520
Trademark 144,000 141,120
Total allocated 268,000 262,640
(a) (ii)
Equity method income
Investment in Bayshore
(b)(i) U.S. is functional currency
At date of acquisition
Rate C.S
Acquistion cost 0.98 470,400
NBV of net assets 0.98 207,760
Acquisition cost 0.98 262,640
Allocated to:
Plant & equipment 0.98 121,520
Trademark 0.98 141,120
Total allocated 0.98 262,640
(b)(ii)
Equity method income
Investment in Bayshore
OCI-Exhange loss
Investment in Bayshore
US 480,000
US 212,000
US 124,000
10 Years
10 Years
US 248,000
US 82,000
0.98
0.96
0.95
0.97
Changes in Yr4 Balance, end of Year
U.S. C.S U.S. C.S
(12,400) (12,152) 111,600 109,368
(14,400) (14,112) 129,600 127,008
(26,800) (26,264) 241,200 236,376
26,264
26,264
Changes in Yr4 Exchange G/L Balance, end of Year
Rate C.S C.S Rate C.S
0.97 (12,028) (3,472) 0.95 106,020
0.97 (13,968) (4,032) 0.95 123,120
(25,996) (7,504) 229,140
25,996
25,996
7,504
7,504
Problem 11-3 Equity method
January 1, Year 4
Purchased all outstanding C/S
CV of shareholders' equity (subsite)
FV-CV PP&E (subsite)
depreciated
Trademark Amortized
Year 4
Subsite earned income
December 1, Year 4
declared and paid in dividends
Echange rates
1/1/Year 4 US $ 1 C$
12/1/Year 4 US $ 1 C$
12/31/Year 4 US $ 1 C$
Average for year US $ 1 C$
(a) (i) CS$ is functional currency
At date of acquisition
U.S. C.S
Acquistion cost 170,000 168,300
NBV of net assets 130,000 128,700
Acquisition cost 40,000 39,600
Allocated to:
Plant & equipment 15,000 14,850
Trademark 25,000 24,750
Total allocated 40,000 39,600
(a) (ii)
Equity method income
Investment in Bayshore
(b)(i) U.S. is functional currency
At date of acquisition
Rate C.S
Acquistion cost 0.99 168,300
NBV of net assets 0.99 128,700
Acquisition cost 0.99 39,600
Allocated to:
Plant & equipment 0.99 14,850
Trademark 0.99 24,750
Total allocated 0.99 39,600
(b)(ii)
Equity method income
Investment in Bayshore
OCI-Exhange loss
Investment in Bayshore
US 170,000
US 130,000
US 15,000
10 Years
10 Years
US 30,000
US 13,000
0.99
0.96
0.95
0.97
Changes in Yr4 Balance, end of Year
U.S. C.S U.S. C.S
(1,500) (1,485) 13,500 13,365
(2,500) (2,475) 22,500 22,275
(4,000) (3,960) 36,000 35,640
3,960
3,960
Changes in Yr4 Exchange G/L Balance, end of Year
Rate C.S C.S Rate C.S
0.97 (1,455) (570) 0.95 12,825
0.97 (2,425) (950) 0.95 21,375
(3,880) (1,520) 34,200
3,880
3,880
1,520
1,520
