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  3. a u.s. firm purchased 50% of a foreign firm on jan

A U.S. firm purchased 50% of a foreign firm on January 1, 20x1, when the...

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Accounting

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A U.S. firm purchased 50% of a foreign firm on January 1, 20x1, when the foreign firm had the following equity accounts: Common stock 150,000FC Paid-in excess of par value 50,000FC Retained earnings 300,000FC 500,000FC The U.S. firm paid 295,000 FCs for the foreign firm. The payment in excess of book value is traceable to undervalued equipment owned by the foreign firm (5 expected years for use). The foreign firm had a net income of 10,000 FCs during 20X1. The year-end cumulative translation adjustment is $8,000 debit balance. Assume that the following exchange rates are relevant: Date 1 FC equal to January 1, 20X1 $2.00 December 31, 20X1 $1.80 20X1 average $1.95 Required: (1) Prepare all eliminating journal entries for the 20x1 consolidated statements. Assume that the U.S. firm used the simple equity method (10 points). (2) What is the CTA balance in the consolidated balance sheet? (5 points)

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