Accounting Question

Assignment Question(s):(10.0 Marks)
1. Write down in front of each item in the table below the appropriate exchange rate required under both current rate method and temporal method using current rate, historical rate, and average rate. (2.5 marks)
Account title
Required Exchange Rateunder current rate method
Required Exchange Rateunder temporalmethod
Cash
Accounts receivable
Inventory
Notes receivable
Plant assets
dividends
Cost of goods sold
Depreciation expense
Other expenses
Sales
Accumulated depreciation
Accounts payable
Notes payable
Common stocks
Retained earnings
Answer:
2. On December 31, 2020, Parent company (A) acquired 80% of Subsidiary (B) outstanding common stocks for SR 368,000, Subsidiary’s fair value of net asserts was SR 460,000. During 2021, subsidiary net income and dividends declared were 100,000 and 50,000 respectively. Begging balance forAccumulated depreciation of subsidiary‘s equipment amounted to SR 50,000. Parent uses non-pushdown accounting and equity method .Subsidiary‘s fair value of net assets were as follows (5 marks)
Book Value Element
Amount in SR
Common Stock
150,000
RetainedEarning
120,000
Total
270,000
Under –Or Over Valuation
Inventory
(10,000)
2 Months
Land
50,000
No Useful Life
Equipment
100,000
4 Years
Total Under –Or Over Valuation
140,000
Good Will
50,000
No Useful Life
Total Under –Or Over Valuation
490,000
Required:
Pass journal entries to record basic elimination entries.
Pass journal entries to record the excess value reclassification entry
Pass journal entries to record the amortized excess value reclassification entry
.Pass journal entries to record the depreciation elimination entry if accumulated depreciation account based on book value of assets is 25,000.
Answer:
3. Compare Arm’s Length Transactions vs Non-Arm’s Length Transactions and explain the necessity of eliminating intercompany transactions (2.5 marks)
Answer:

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