Reference no: EM132788476

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: 150,000 FC
Paid-in excess of par value :50,000 FC
Retained earnings: 300,000 FC

total: 500,000 FC

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 $2.50

December 31, 20X1 $2.0

20X1 average $2.45

Required:

Problem (1) prepare all eliminating journal entries for the 20X1 consolidated statements. Assume that the U.S. firm used the simple equity method

Problem (2) What is the CTA balance in the consolidated balance sheet?