1. Business
  2. Accounting
  3. consolidation of an international subsidiary at date of acquisition fairview...

Question: consolidation of an international subsidiary at date of acquisition fairview...

Question details

Consolidation of an International Subsidiary at Date of Acquisition

Fairview Corporation, a U.S. company, has a wholly-owned subsidiary in Mexico. The subsidary's functional currency is the Mexican peso, and translation to U.S. dollars is appropriate. The subsidiary was acquired for $9,000,000. The balance sheet of the subsidiary on the date of acquisition is as follows:

Mexican Subsidiary
Balance Sheet at Date of Acquisition
Assets
Cash and receivables P7,500,000
Inventories 17,500,000
Noncurrent assets, net 37,500,000
Total assets P62,500,000
Liabilities and stockholders' equity
Liabilities P12,500,000
Capital stock 40,000,000
Retained earnings 10,000,000
Total liabilities and stockholders' equity P62,500,000

The fair values of the subsidiary's inventories are P25,000,000, and the fair values of the subsidiary's noncurrent assets are P35,000,000. All other amounts are reported at approximate fair value. The exchange rate at the date of acquisition is $0.10/peso.

Present a schedule showing the calculation of goodwill for the acquisition, in U.S. dollars, and the entries necessary to consolidate the balance sheets of Fairview and its subsidiary at the date of acquisition.

Instructions:

  • Enter all your answers below in thousands. For example, P90,000,000 equals P90,000 in thousands.
  • Do not use negative signs with any of your answers below.  
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution