Response to the following:
1. Consolidate a foreign subsidiary
Assume that Deepa Corporation has a subsidiary company based in Japan.
2. Accounting for various types of investments
Suppose MyPlace owns the following investments at December 31, 2014:
a. 100% of the common stock of MyPlace United Kingdom, which holds assets of £600,000 and owes a total of £400,000. At December 31, 2014, the current exchange rate of the pound (£) is £1 = $1.97. The translation rate of the pound applicable to stockholders' equity is £1 = $1.63. During 2014, MyPlace United Kingdom earned net income of £75,000, and the average exchange rate for the year was £1 = $1.89. MyPlace United Kingdom declared and paid cash dividends of £40,000 during 2014.
b. Investments that MyPlace is holding to sell beyond the current period. These investments comprise less than 20% of the voting stock in the investee. They cost $550,000 and declined in value by $250,000 during 2014, but they paid cash dividends of $25,000 to MyPlace. One year ago, at December 31, 2013, the fair value of these investments was $900,000.
c. 35% of the common stock of MyPlace Financing Associates. During 2014, MyPlace Financing earned net income of $900,000 and declared and paid cash dividends of $80,000. The carrying amount of this investment was $700,000 at December 31, 2013.